Industry conditions for the baking industry varied significantly by country. In Mexico, Grupo Bimbo enjoyed a strong market position in a growing market but, as seen in Exhibit 1, most other markets in which it participated were highly competitive, and in many markets the consumer demand for white andwheat bread was disappointing compared with Mexico and the U.S. The U.S. market was particularly fragmented, and consequently, a recent Bear Stearns report argued that the baking producers were being stymied by a combination of changing consumer demand patterns and low manufacturer pricing power for bread products.2 The industry had been hurt by the advent of low-carbohydrate and related diets inthe U.S., which, while not as popular in 2007 as a few years earlier, were still causing some reduction in total U.S. consumer demand for bread products. One of the challenges for the industry was the advent of diets that made people avoid both trans fats and carbohydrates. In response, Grupo Bimbo led the industry in eliminating trans fats and using more whole grains in its products. The industrywas also seeing higher ingredient costs, since corn in
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In early 2007 Daniel Servitje, CEO of Mexico-based Grupo Bimbo, sat at his desk eating one of many sweet bread products his company produced and which he had learned tolove while working in one of the family owned plants as a boy. He looked out his window toward a growing business district just outside of Mexico City, and wondered how far he could take his dream of one day leading the premier baking company in the world in terms of both size and quality. He had recently told a group of business students interested in Latin America that “our company might have afunnysounding name in English, but it is an icon brand in Latin America and is starting to become one in the U.S. too.”1 He thought about whether it made sense to become one of the first Latin American consumer product companies in any industry to set up a large production business in China and try to dominate the emerging Chinese consumer market for industrial-made breads and sweet goods. Healso thought about his company’s decade-long attempt to become both large and highly profitable in the U.S. market. The U.S. business, through a series of operational improvements, had only recently become profitable. He wondered what further strategic changes were needed to become highly profitable in the world’s largest bread market. How to make these two global strategy initiatives succeed in theU.S. and China were the focus as he sought to implement his company’s Vision 2010—to make Grupo Bimbo the world leader in the baking industry.
Major Bread and Sweet-Goods Competitors in 2006
Sara Lee The company had $15.9 billion in sales in fiscal year 2006, of which 16.4% came from its bakery business and 13.7% from...