Grupo Bimbo: It All Starts With Understanding The Consumer

Daniel Servitje, CEO Grupo Bimbo

Bimbo S.A. was founded in Mexico in 1945, just as the world was starting to emerge from World War II. Today it boasts operations in 19 countries (including China), with 153 production plants (42 in Mexico, 111 abroad), 103 registered trademarks, and 127,000 full-time employees.

According to Latin Trade’s Latin 500 rankings, in 2011 Bimbo posted revenue of $9,586 billion and profits of $382.1 million.

Grupo Bimbo’s management sees 2011 as a year of great transformation, led by three strategic acquisitions to enhance its international position: it bought Sara Lee North American Fresh Bakery in the United States, and Sara Lee’s businesses in Spain and Portugal, as well as the traditional Argentine company, Fargo.

Daniel Servitje is CEO of Grupo Bimbo and a member of its founding family. In conversation with Latin Trade he explains how the family firm has arrived at the kitchen table of millions of people and become the successful multilatina it is today.

When did the company decide to take its operations into the  international market?
The international expansion of Grupo Bimbo began in the 1980s, when we started exporting our products to the United States, to the Hispanic population of Mexican origin.Then we entered Latin America, which presents different challenges.

An Ad from the 1950's

How do you win a new market in the bread-making sector, which  at first glance appears to be an area closely tied to the unique character of a country?
Bread is one of the products that make up part of the basic food basket of the majority of a population, so we think the challenge lies in finding a way to satisfy the palates of consumers, adapting our products to their tastes and trends, both at the local and world levels. Some products can be successful in several markets. It all starts with understanding the consumer.

How do you study local tastes in different markets before  launching new products?
We consider global trends in nutrition, local tastes, as well as consumer preferences in general, through a series of studies. These include anthropology, population, preferences, which enables us to concentrate on offering alternatives to their daily needs.

How much time do you need to  design a new product?
It depends on the product, but generally it takes six months to one year. However, projects that involve new production processes can lengthen the time to two years or more.

What is the secret of success for a new product in a foreign market?
Mainly, it’s whatever pleases the consumer… good flavor that meets high standards of quality as well as expectations. One important factor is that it must represent a value offer for the consumer.

The effort to reach every Mexican town by road...

How has the company adapted through the years to shifting trends in eating habits? For  example, the promotion of low-calorie foods and the demonization of flour in some circles.
We are in the vanguard of the new consumer trends. Specifically, we have worked intensely to improve the nutritional profiles of our products. In 2005, Grupo Bimbo launched a campaign to promote consumption of whole grains, offering enriched products which had the seal of approval of the Whole Grains Council, a non-profit consumer defense group that works to improve health by promoting consumption of grains.

...and river

Food security is a new concept in which you are involved.
Grupo Bimbo has stated its commitment regarding one of the most difficult issues that faces the world since the beginning of this century by joining forces with other global companies, including the large players, to analyze and find solutions through the Food and Nutrition Security Group of the B20*. The recommendations of the Food and Nutrition Security Group have as a common goal to encourage the participation of the private sector and to achieve better coordination among all interested parties, to accelerate and apply national security programs in diet and nutrition.

Exactly what do these programs do?
We have been working on this issue, analyzing causes and effects, since 2011. This year, as CEO of Grupo Bimbo, I was invited to be co-president of the B20’s Food and Nutritional Security Working Group. We have placed real commitments on the table through which the sectors represented by the working group plan to increase investments in agriculture and also help attain the objective of raising production and productivity by as much as 50 percent by 2030. (NB: The B20 believes agricultural productivity must increase by 50 percent by this date to be able to respond to the challenges of nutritional security).
The increase in productivity must offer food and nutrition security for everyone in a way that is environmentally sustainable, ensures economic growth and improves the means of subsistence and revenue for producers.

Founding fathers: R.Servitje, J.Jorba, L. Servitje, J. Sendra and J. Mata.

Returning to the markets you’re operating in, which region of the world do you expect will provide the greatest sales growth in the medium term?
In percentage terms, Latin America is the region that will provide the highest growth as a result of our initiatives to increase penetration and distribution, mainly through traditional channels. In Mexico we hope to continue the growth trend of the last two years. In the United States, the results will reflect the incorporation of recent acquisitions.

Do you anticipate more purchases following the buyout of Sara Lee in the United States and its operations in Spain and Portugal? Which markets interest you?
We will focus more on the integration of Sara Lee over the next few years. We need to achieve the synergies that we’re anticipating from the new Bimbo Bakeries USA. We want to strengthen profits in the markets in which we currently have a presence.

What is Bimbo’s management structure in the different  countries where you operate?
We operate through eight organizations, which are: Bimbo SA, Barcel SA, Bimbo Bakeries USA, El Globo, Latinoamerica Sur, Latinoamerica Centro, Bimbo Asia, and most recently Bimbo Iberia. The management committee of each country is made up of local and international teams.

What surprises did you come across in the China operation?
Grupo Bimbo entered the Chinese market in May 2006. Our objective in that country consists of a long-term plan that represents a source of important growth for the group.
We are learning as quickly as we can how to influence Chinese consumers and convince them to try new products and consume them. We want to become a relevant player for packaged bread in China, increasing per capita consumption and enhancing penetration of our products. So far our efforts have been fruitful.

What was the key to entering China?
Entering China was undoubtedly a huge challenge for our company. Right from the start we took into account the natural differences that exist between one country and the other, including language and culture, so as to adapt our ways of working.
Our long-term vision and openness to change were among the most important factors. We were firm in remaining faithful to our values and philosophy while being flexible in adapting to a new culture that we are constantly learning. The local leadership and talent have been essential to our development in that country. The mixing of, and interaction between, the two cultures has been a mutual learning process that enables us to understand the market and facilitate problem solving.

And in terms of processes?
In terms of processes and methods, we have followed the same plan we use in other regions, adapting to the language and ways of communicating. I’m referring to the IT systems, enterprise resource planning, reports, crucial processes of methodology in marketing, operations and administration. We have been adapting while respecting the local standards and laws.

Bimbo has a plan to generate 100 percent of the energy it consumes in Mexico. How is this project coming along?  Do you have similar plans  in other countries?
We hope to start up operations at the Parque Eolico Piedra Larga (Piedra Larga Wind Park) in the second half of 2012, depending on climate conditions and the physical progress of the works.  The park will comprise 45 wind generators with an installed wind potential of 90 MW. The wind energy we generate there will supply the annual electrical consumption of 65 Grupo Bimbo installations (production plants and other operating centers). It will be the highest conversion of renewable energy in the food industry in the world.

* B20 refers to the Business 20 conference that meets at the G20 summits. It promotes dialogue among business leaders and governments and has various working groups on issues like food security, ecology and the fight against corruption.