Baking&Snack - July 2012 - 22

EXCLUSIVE REPORT

With more than 100 umbrella brands, Grupo Bimbo has a strong presence on supermarket shelves in 19 countries, including its native Mexico.

low-dividend policy. It allows us to grow beyond our borders. At the end of the day, it has been very good for shareholders. The company they own is certainly much larger, even with the ups and downs we have experienced. If you measure return on investment, we’ve come out positively overall, even if there are times we have not produced great short-term results.” Even though Grupo Bimbo continues to pursue a global expansion strategy as part of its objective to become the world’s best baking company, Mr. Servitje said it has not lost sight of basic truisms about the baking industry vs. other segments of the food business.

“It is true,” he said, “that baking is a local business. That’s why we need to be careful about how we manage our businesses and rely on regional and local teams empowered to make decisions. It varies by country. In some countries, we have more authority pushed even to the city level. From the Grupo Bimbo view, most of the marketing decisions are local. In that sense, we have to be careful not to manage from the top. But we also have developed a breadth of knowledge in many different baking categories that allows the local businesses to gain from being part of Grupo Bimbo. They are able to gain knowledge and take advantage of eyes of many

Bimbo gains important foothold in Europe

Against the background of its transformational acquisition of the North American Sara Lee fresh baking business, Grupo Bimbo SAB de CV, Mexico City, Mexico, completed a second transaction that received far less attention: the late-2011 acquisition of the Sara Lee’s baking business in Spain and Portugal for about $154 million. Together with its move into China in recent years, the purchase offers insights into Grupo Bimbo’s approach to worldwide growth. The transaction in Spain was no shock given Grupo Bimbo’s historical ties to the business and its position as the world’s largest baking company, and because Sara Lee had telegraphed a willingness to sell the struggling Iberian business. Still, Daniel Servitje, CEO of Grupo Bimbo, said the acquisition was not a foregone conclusion. “We looked at that opportunity for many years, he said. “The baking business in Spain was a company ” that was established [in 1964] by one of our founding shareholders, Jaime Jorba. ” Not only did he establish the business in Spain, Mr. Jorba consciously tried to replicate the business model of Grupo Bimbo’s Mexican business, using the same brand name, symbols and philosophy. During the 1970s, the Spain-based business was sold to Campbell Taggart Associated Bakeries, the company that — after an acquisition by Anheuser-Busch and a spinoff into The Earthgrains Co. — Sara Lee acquired in 2001. “We didn’t do the [Spain-based] transaction with Sara Lee at first, Mr. Servitje said. “We took a very ” detached look at the business. It was not until around a year afterward. We hadn’t finished the transaction with Sara Lee due to the Department of Justice analysis, and that’s when we agreed to take a second look when Sara Lee said they would sell the unit. ” According to filings with the Securities and Exchange Commission, Sara Lee had taken a $400 million charge against the Spanish baking business before the Bimbo acquisition and wrote off another $371 million in losses afterward. So clearly the business had not been thriving. Still, Mr. Servitje said several positives were identified when Bimbo chose to take it over, generating considerable enthusiasm about long-term prospects. “We presented a financial case to the board, he said. “Yes, the brand helps. It allows us to reunite our ” largest brand on a global basis. We found there are opportunities to add value in Spain and Portugal and get new ideas from the Spanish team for other markets. It’s a terrific team, open to learning new things. “We’ve always invested with a long-term perspective in each market. Spain is in a tough spot right now. We are committed and believe we will create economic value in the coming years. It will not be profitable from day one. The business includes more than 1,900 employees, seven production facilities and more ” than 800 distribution routes. “It will be good for us to have a direct look at the European market, Mr. Servitje said. “If we want to be an ” international company, having a foot in Europe is important for us. ”

/ Baking & Snack / July 2012

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Baking&Snack - July 2012

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