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Baking in Beijing rises for Mexico's Bimbo

10 Jul 2012

We have a five-year plan for our business,

taking a lesson from China actually

Date: 2012-06-20
Author: Zhang Yuwei
Source: China Daily

Right after Daniel Servitje attends the G20 summit in his - and his company's - native Mexico, he will fly to China to inspect local operations of baking giant Grupo Bimbo.

"China is a good way to refresh our minds to become more aware of the big world in which we live", the Grupo Bimbo CEO said.

Alongside the meeting of world leaders in Los Cabos was a gathering of business leaders known as B20, at which Servitje was co-chairman of the food and security task force.

In 2006, Mexico City-based Bimbo entered the Chinese market by purchasing the Beijing-based operations of Spanish baker Panrico SAU for about $11 million. The investment, though small in scale, was a major milestone for the company that Servitje's father, Lorenzo, co-founded in 1945.

"From my perspective, if you want to be in any business today, you have to be close to what's happening in China. If we have global aspirations, we have to be in China", said Servitje, who is 53 and the sixth-richest person in Mexico, according to Forbes (No 310 in the magazine's list of the world's billionaires).

Six years after baking its first loaf of bread in China, Bimbo has established a small growth platform in the country's market for bakery products, generating some $35 million in sales in 2010. China contributes just 2 percent of Bimbo's total annual revenue, in contrast to the United States and Europe, where the company operates on a larger scale.

But Bimbo's growth rate in China outpaces those of the US and other countries, he said, because China continues to provide opportunities.

"Although it is not a large part of our current business, we obviously see huge potential in the country and the market", Servitje said, adding that the company is looking into further investment in China.

The Chinese bakery products market is expected to grow by a compounded annual growth rate of 7 percent between 2011 and 2016 and gain $7.9 billion in absolute retail value, according to Euromonitor International, a strategy research firm for consumer markets.

Although Grupo Bimbo operates in 19 countries, it always uses what Servitje calls a "national strategy".

"At the end of the day we connect to (local) consumers' needs and we have to have a local perspective when dealing with local customers", he said.

Hiring about 1,500 associates (99 percent of them are Chinese) and having two plants near Beijing, the company now has presence in 17 cities in northern China serving local customers with Grupo Bimbo-branded baking products, including bread and even tortillas, a new product the company wants to try to sell in the Chinese market.

The bread market is "highly fragmented" in China, although it has witnessed some consolidation in recent years, because rapid economic growth has attracted rising levels of foreign investment, says Euromonitor International.

"We have a five-year plan for our business, taking a lesson from China actually", Servitje said, referring to China's Five-Year Plans.

"What we hope to achieve in China by 2015 is to have a larger coverage (of consumers) in the coastal area", the CEO said.

"As for the opportunities for our industry and all the players in the industry, it is important to be connected to the customers and consumers in China".

Bimbo's long-term strategy for China also means gradually scaling up to serve more of the country's huge potential market, he said.

"The China market is very positive. It is very dynamic and it is a market that demands a lot of flexibility. It also changes rapidly. We need to adapt our views more to the reality of the Chinese market".

Recalling the acquisition that brought Bimbo to the country in 2006, Servitje said it wasn't completely accidental, because his ties to China date back to 1982 when he traveled there as a college student.

"Even though it is a small operation now, I try to spend at least one week every year in China because of its importance", he said.