Grupo Industrial Bimbo

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Grupo Industrial Bimbo

Etienne Cabet 1000
Colonia Santa Fe Zedec
Delegacion Alvaro Obregon
01210 Mexico City, D.F.
Mexico
(525) 229-6600
Fax: (525) 229-6640

Public Company
Founded: 1965
Employees: 44,087
Sales: 10.16 billion pesos ($1.49 billion, 1995)
Stock Exchanges: Mexico City
SICs: 2024 Ice Cream & Frozen Desserts; 2033 Canned Fruits, Vegetables, Preserves, Jams & Jellies; 2034 Dried & Dehydrated Fruits, Vegetables & Soup Mixes; 2041 Flour & Other Grain Mill Products; 2051 Bread, Cake & Related Products; 2066 Chocolate & Cocoa Products; 2086 Salted & Roasted Nuts & Seeds; 2096 Potato Chips, Corn Chips & Similar Snacks; 2099 Food Preparations, Not Elsewhere Classified; 5149 Groceries & Related Products, Not Elsewhere Classified

Mexico’s biggest baker and food company, Grupo Industrial Bimbo, is a Mexican multinational conglomerate that derives about two-thirds to four-fifths of its revenue from bakery products, of which it had 94 by 1992. It controls 85 to 95 percent of the commercial bread market in Mexico. Bimbo also produces a variety of other baked goods and has broadened its base to include salted snacks, tortillas, and deli and frozen foods. The company’s scope of operations has expanded to take in the United States and Latin American countries as distant as Chile and Argentina. Bimbo, which means “child” in Italian, is the name for the company’s cartoon-character mascot, a little white bear, and is almost synonymous with bread in Mexico. The company’s products are oriented toward families with children.

Bimbo Before the 1970s

The founder of Grupo Industrial Bimbo, Lorenzo Servitje Sendra, was born in Mexico City in 1918, the son of immigrants from Spain’s Catalonian region. When his father died in 1936 he had to abandon his studies and become patron of “El Molino,” his father’s cake shop. In 1938 he opened his own bakery with his cousin, Jaime Jorba, and Jose T. Mata. Seven years later he started Panificadora Bimbo with Jorba, Jose Torrallardona and Alfonso Velasco, his brother Roberto, and his uncle Jaime Sendra.

The entrepreneurs began with 38 or 39 employees, five vehicles, and four types of bread. At the prompting of Velasco, the technical director, they adopted as their symbol the Bimbo little white bear to stand for the whiteness of their bread. For the first decade the bakery operated exclusively in Mexico City. In 1956 or 1957 the company opened its first Productos Marinela plant to make cakes and pastries and also began operations in Guadalajara. It founded Bimbo, subsequently Spain’s largest baker, in 1965 and later operated it as a joint venture with Dallas-based Campbell Taggart, Inc. for several years before selling it to this firm.

Bimbo’s first northern Mexico plant opened in 1960, in Monterrey. The company began operations in the northeast, at Hermosillo, in 1966, and in the Gulf of Mexico region, at Veracruz, in 1970. A second Mexico City plant opened in 1972. The company added to its line by introducing a division for sweets and chocolates in 1971.

Expansion in the 1970s and 1980s

The growth of Bimbo continued unabated through the 1970s and early 1980s. New Bimbo plants opened at Guanajuato in 1977, Villahermosa in 1978, Mazatlan in 1981, and Chihuahua and Toluca in 1982. Other divisions opened plants at Queretaro in 1978, Gomez Palacio in 1982, and Mexico City in 1983 and 1985. By 1988 Bimbo had three more factories in operation. It entered the U.S. market in 1984 by shipping cake products with a long shelf life under the Suandy label. Soon after it purchased the Wonder bread operation in Mexico from its American owner and thereby entered the milling business for the first time.

In 1988 Bimbo was producing bread and sponge cake under the names Bimbo, Sunbeam, Suandy, and Tia Rosa; cakes and cookies under the name Miranela; sweets and chocolates under the Ricolino name; snacks under the Barcel name; and jams under the name Carmel. The company also was producing machines for the food industry and employing more than 25,000 people. It opened the first of its overseas Bimbo operations in Guatemala in 1989 by purchasing a small bakery outside Guatemala City. About this time the company built a $14 million factory to make hamburger buns for McDonald’s Corp.

By not going into debt Bimbo emerged from the 1982 Mexican economic crisis without major problems. Nevertheless, it avoided further expansion until 1987, when it began work on a $25 million Toluca plant to produce its Tia Rosa line. At this time the firm also had joint ventures with the U.S. subsidiary of the French firm SIAS to produce food preservatives and with Celanese to make wrapping material. It also began selling bread in Los Angeles and Houston in 1987.

Bimbo in the 1990s

Profiled by the Wall Street Journal in 1991, Grupo Industrial Bimbo was described as a pillar of conservatism with no corporate offices and no annual report but unlimited ambitions. In that year it was completing a four-year, $400 million investment program, opening plants in ten cities and upgrading those in five others. A flour mill built that year was described by the company’s Swiss technical advisers as the most advanced on the continent. Most of these projects were funded internally, without taking on debt. One of the company’s most potent assets was its distribution system, consisting in Mexico of 11,000 delivery trucks making 75 to 80 percent of its sales to 200,000 mom-and-pop stores.

In 1993 Grupo Industrial Bimbo (formed in 1966) was divided into eight divisions, each a subsidiary. Bimbo itself, the bread division, had 16 plants. Despite its predominance in the Mexican bread market, Bimbo was hardly a staple of the Mexican diet. Only about 20 percent of Mexican families were buying commercial bread, considered something of a luxury, regularly—and “regularly” was defined to mean as little as two loaves a month. Instead, most Mexicans consumed either tortillas or rolls called bolillos produced by thousands of small bakeries.

The Marinela division was producing and distributing cookies, pastries, and baked snacks under the brand names Marinela, Tia Rosa, Skandia, and Lara from six Mexican plants. It ranked second in this field to Gamesa with a market share of 20 percent. Lara also was producing and distributing salads and pastas. The Wonder division was established after Bimbo acquired the Mexican subsidiary of Continental Baking Co., producer of Wonder bread, in 1986. In addition to this product, the Wonder division was making a Party line of lower-end cookies and snack cakes and a Suandy line of pastries, pound cakes, and coffee cakes. It also had a line of products under the Trigoro name.

Ricolino, with three plants, was producing and distributing sweets, chocolates, and chewing gum to more than 240,000 customers. It had the exclusive right to distribute Wrigley’s chewing gum in Mexico. Barcel was making and distributing snacks under the names Barcel and Chip’s. These were potato chips, corn products, dried fruit, and seeds. This division’s products were being made in three plants. Alpre was a new division producing and distributing three main products: Paty-Lu (baked goods and confections), Lonchibon (prepared foods), and Milpa Real (corn tortillas).

Altex was Bimbo’s service agency, acquiring the raw materials, machinery, other equipment, supplies, and services the company needed to assure uniform quality. It consisted of 11 subsidiaries. Among its holdings were mills in Mexico City, Toluca, and Veracruz providing about half the parent corporation’s flour needs. It also had agreements for joint venture manufacturing operations and transfer of technology with several baking equipment manufacturers in the United States and Europe.

The International division became increasingly important. In Guatemala Bimbo’s subsidiary was producing bread, doughnuts, cakes, cookies, pastries, processed fruits, and tortillas under several names, including Bimbo, Marinela, and Ricolino. In Chile a subsidiary made bread, rolls, small cakes, and snack salads under the brand names Ideal, Cena, and Barcel. A Venezuelan subsidiary produced small cakes, sweet breads, cookies, and Twinkies under the brand names Marinela, Taoro, and Twinkies. In El Salvador a subsidiary produced bread and small cakes under the Bimbo, Marinela, and Ricolino names. Bimbo later established operations in Costa Rica and in 1994 was building a $30 million plant in Argentina to produce bread, rolls, and cakes.

Bimbo also was exporting goods to many U.S. cities in the early 1990s, including New York, Los Angeles, Chicago, Houston, Dallas, San Antonio, and Miami. Under a joint venture with Sara Lee Corp., it was distributing Sara Lee products in refrigerated trucks to stores in Mexico. Bimar Foods Inc., the Texas-based Bimbo subsidiary through which this joint venture was established, also entered the U.S. tortilla market by acquiring six plants and building a new one in Houston. By the end of 1994 Bimbo was exporting 23 different products and operating 100 routes in California alone.

Bimbo found that the market for its mass-produced, packaged tortillas under the Tia Rosa label was much larger in the United States than in Mexico, where small shops licensed and subsidized by the government remained dominant, selling fresh tortillas. In 1994 Bimbo and a competitor, Grupo Industrial Maseca S.A. (Gruma), combined sold more than $400 million worth of packaged corn and flour tortilla in the United States—quadruple their tortilla sales in Mexico, even though Mexicans were eating ten times as many tortillas per capita as Americans.

In 1996 Bimbo made its first venture into bread baking in the United States by acquiring Pacific Pride Bakeries, the San Diego area’s largest independent baking company. That year Bimbo received $130 million in financing from the International Finance Corp., representing seven institutions. In 1997 the company began construction of its first Mexican plant to produce flour and corn tortillas, at Atitalaquia, Hidalgo.

Bimbo entered the ice cream field at the end of 1993 by acquiring a 40 percent stake in Grupo Quan, the leader in Mexico and Central America in the production and distribution of ice cream and popsicles. Grupo Quan and Bimbo formed a joint venture with Unilever for this purpose in 1997.

Bimbo survived the peso crisis of 1994 and its aftermath without falling into the red, although net income fell in 1994 and 1995, especially in terms of the dollar equivalent. In 1995 the company earned 265 million pesos ($39 million) on net sales of 10.16 billion pesos ($ 1.49 billion). Of its sales that year, Mexico accounted for 89 percent, Central and South America accounted for nine percent, and the United States accounted for two percent. The company’s long-term debt was 443.5 million pesos ($65.2 million). At the end of the year Bimbo owned 47 processing plants in 14 Mexican cities and was operating processing plants in seven other countries.

During 1995–1996 Bimbo adopted a ten-point program to reorganize its operations. One of these steps was a simplification of its distribution routes. Traditionally, Bimbo owed much of its success to a superior distribution system that delivered fresh products to the consumer. For example, bread delivered to retailers on Monday and not sold by the end of Wednesday was returned to the distributor. This system was recalculated by Bimbo on a refined just-in-time basis. Bimbo also made available to some of its distributors a computerized system to help them manage their operations in a more efficient manner.

Lorenzo Servitje Sendra was chairman of Grupo Industrial Bimbo and Roberto Servitje Sendra was president and chief executive officer in the early 1990s. Lorenzo retired in 1994. His son Daniel was president of Marinela and overseer of the group’s Latin American operations at this time, while Roberto’s son Roberto Servitje Achutegui was president of Altex and chairman of several companies partially or wholly owned by Bimbo. Grupo Industrial Bimbo went public in 1980. According to a 1989 account, its major stockholders were the Servitje family (41 percent), Mata family (25 percent), Sendra family (13 percent), and the Banco Nacional de Mexico (Banamex). About ten percent of the stock was owned by an employee trust in 1991.

Principal Subsidiaries

Organizacion Altex; Organizacion Barcel; Organizacion Bimbo; Organizacion Internacional; Organizacion Marinela; Organizacion Ricolino; Organizacion Wonder-Suandy.