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Bimbo case

3. Sector profitability:

3.1 Is packaged bread and sweet snacks sectors global or multi local?

Both the packaged bread and the sweet snacks sectors are multi-local.

The main reason is that there is a big difference in consumer buying decisions in each country, since each has different cultures and product preferences. Each market has different inclinations ranging from  specific flavors or ingredients used up to the sugar level, meaning the sweetness of the product. Which is very different in each country, for example, in Mexico, the packaged bread is salty, meanwhile in China, this same product is sweet.

These differences make it difficult for the company to have a global strategy, a product that is attractive in one country, may not be in another. For this reason, the companies dedicated to this industry become the need to modify their products for each country and to be able to satisfy their needs. In the same way the competition of this industry is local, which forces international companies to adapt to the markets of each country in which they are established.

Bimbo takes very into account the culture of each country, its preferences and consumption patterns, which has contributed to its success, even after integrating a product into a new market, continue to adjust to the needs of the consumer after receiving Feedback of the same.

The company has a distribution network adapted to each market, however, in each country in which it has been established, bimbo uses the global standards in the areas of technology and logistics, adapting its business model but including its distribution system, marketing and product to the local economic, social, geographic and society environment.

3.2 Why are packaged bread and sweet snacks profitability much lower in Brazil and in the U.S.A in comparison to Mexico? 

The biggest challenge in these countries is the cultural differences, since preferences for packaged bread and sweet bread differ widely.

Brazil

There is no competition because Bimbo controls almost the entire Mexican market, being almost a monopoly, and in addition to having a low entry of new companies to the industry, it does not have to deal with competitors. This means a distribution network and logistics that allows to reduce costs and a high level of availability.

• Level of demand. The conflict in Brazil is that there is great competition and low demand, for that reason, Brazilian companies are forced to offer their products at very low prices; Compared to Mexico, where the price of bread is $ 3.20, while in Brazil it is $ 1.50.

• Distribution network. When Bimbo arrived in Brazil, he uses a strategy similar to that used in Mexico: to distribute the products in small local stores, which did not work and that in Brazil, consumers prefer to buy in bread packaged in hypermarkets, which represents a greater power of Negotiation in Mexico.

• Suppliers. As there is no high level of demand, no suppliers of quality exist since none have the experience, in addition to that Brazilian consumers prefer fresh bread to the packaging.

The increase in the purchasing power of Brazilian consumers has also increased the consumption of sweet products. However, in 2012 Bimbo tried to replicate the logistics and distribution network of Mexico by opening a new plant in Brazil and has followed a strategy to consolidate its operations in order to position itself and make the business profitable in Brazil.