CEO of the Year: Daniel Servitje – Baker to the World

MEXICO CITY – Walk a block in Mexico and you are likely to see the white teddy bear logo of Mexico’s Grupo Bimbo, splashed on the sides of delivery trucks, emblazoned on billboards or stamped on snack food packages. Watch a local soccer game and you cannot miss the same logo on the jerseys of three major teams sponsored by Bimbo.

The Mexican baked-goods giant now is on its way to becoming just as ubiquitous around the world. A bold U.S. acquisition in December 2008 – undertaken when international credit was tight – built on Bimbo’s regional dominance in Latin America and its firm foothold in China.

These achievements belie the down-to-earth demeanor of CEO Daniel Servitje.

“I believe in hard work, humility and leaders who have their ear to the ground and understand the nitty-gritty of their operations and markets,” Servitje told latin trade in a recent interview at company headquarters in Mexico City.

“Conditions are constantly changing, so it’s very important to keep a firm grip on the day-to-day realities,” he added.
For Mexican companies, those conditions have been dire. The global economic downturn has hit harder here than elsewhere in Latin America, plunging Mexico into its worst recession in seven decades. For many consumers, that has made scrimping the norm. For some creditors, it’s meant closing their doors.

The recession did not keep Servitje from pushing ahead with an ambitious corporate move in January: the $2.4 billion purchase of the U.S. bread-making unit of Canada’s George Weston Ltd. The acquisition cemented Bimbo’s presence in the United States.

“It was a risky decision in this economy,” Servitje acknowledged. “We did it because we thought it was important to consolidate our operations and become more international.”

To pay for the Weston unit, Bimbo secured more than $2.3 billion in loans from a group of global banks that included Bank of America, BBVA, Banamex/Citi, HSBC, ING and Santander.

Some Bimbo shareholders and credit rating agencies were initially uneasy about the deal, fearing it would load the company with too much debt. But Servitje’s instincts have been confirmed. A local bond sale has allowed Bimbo to roll over a large chunk of the debt, and profits have soared this year due to increased sales from the Weston acquisition.

Bimbo not only makes bread and pastries; it also commands a major share of the snack food market. Its substantial marketing and advertising activities include the sponsorships of the Mexican national team, América, the Chivas of Guadalajara and the Rayados of Monterrey.

For Servitje, a trim 50-year old with graying hair, the Weston deal was just the latest of many high-yielding risks he has taken since becoming CEO in 1997. He spent summers as an intern under the tutelage of his father Lorenzo Servitje, who co-founded Bimbo more than 60 years ago and retired as its chairman in 1994.

Some of Servitje’s earliest memories are the smell of baking bread at the Mexico City plant. At one time he worked cutting dough on a production line to learn the business from the bottom up. But he readily admits to knowing far more about selling bread than baking it.

Servitje studied business administration at Stanford University and says living outside Mexico gave him a new perspective on business and the world.

He vividly recalled his first major challenge as CEO – an expensive technology overhaul during the middle of an economic slump. Some older board members were skeptical about the need for modernization. Servitje says those members now agree the move was vital to the company’s growth.

“I believe in creating new challenges and pushing ourselves further, rather than savoring our successes,” he said.

That’s a philosophy he wishes Mexico policy makers would take to heart.

“Our economy has taken steps toward modernity but we still have a long way to go,” he said. “In a global economy with such agile players, we’re not moving forward fast enough.”

With a few exceptions, Servitje asserts, much of Latin America is quarreling over politics when it should be concentrating on reducing poverty and promoting trade and investment.

“Left? Right? It’s not that important,” he says, before paraphrasing Deng Xiaoping, the late Communist leader who helped usher in market reforms to China.

“It doesn’t matter what color the cat is, as long as it catches mice.”