Servitje says global reach only a part of Bimbo’s ambitions
BakingBusiness.com, July 13, 2012
by Josh Sosland

Even as major food processing companies worldwide place an ever increasing emphasis on achieving a global reach, the trend toward internationalization mostly has eluded the wholesale baking industry. Among major U.S. baking companies, few have any presence beyond the nation’s borders. The principal exception is Grupo Bimbo S.A.B. de C.V., Mexico’s largest baking company and now the largest baker in the United States.

Grupo Bimbo today has a presence in 19 countries, operating 153 baking plants, marketing 103 brands, and 10,000 stock-keeping units. Its products may be found at more than 2 million different points of sale, representing markets serving roughly 1.5 billion consumers.

During the 1990s, Grupo Bimbo made no secret of its ambitions to be the largest baking company in the United States, but as that objective became reality the company has shifted its focus. In recent years Grupo Bimbo adopted what it calls Vision 2015 with a stated mission that does not deal with scale but instead seeks for the company to become the “best baking company in the world and a leader in the food industry.”

This shift was evident in a recent interview with Daniel Servitje, the company’s 53-year-old chief executive officer, conducted at the Mexico City headquarters. When asked why Grupo Bimbo has chosen to venture internationally when other bakers worldwide had not, Mr. Servitje insisted his company has no magical advantage or know-how allowing it to venture into markets other bakers avoid.

To the contrary, he insisted Grupo Bimbo in so many ways is exactly like other baking companies and has not had an easy time in any of the new international markets where it has established a presence. Becoming the world’s best baking company will be hard earned and will require patience, Mr. Servitje said.

“We aren’t better than anyone else,” he said. “We are bakers. We started from a humble, small business. The difference in our case is that there is a great deal of patience on the board and among shareholders about what we should be doing with the company. So we are where we are right now because the shareholders have been willing to let the company grow as much as the company can grow.

Mr. Servitje explained that “share-holders apparently take a back seat in terms of allocations of funds.”

He continued, “That has allowed Grupo Bimbo for many years to keep growing. We have had more or less 10% sales CAGR (compounded annual growth rate) in real terms for the past five years. That reflects a high reinvestment policy, 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 strategic objective to become the world’s best baking company, Mr. Servitje said it has not lost sight of basic truisms about baking, versus 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 different people around the world, spotting trends and opportunities for growth in our business.

“We have strong culture that I believe is a strength of ours. We try to share our culture with our teams in the different companies that are integrated into Bimbo. We focus on the industry.”

Bringing that strong culture and stability to companies Grupo Bimbo acquires sets it apart from many players in the baking industry over the last several years, Mr. Servitje said.

“Baking has been for many U.S. companies an industry the parent company did not expect to be operating in,” he said. “So in many cases of companies we acquire we have been the fifth, sixth or seventh parent. We tell them now this is a safe harbor. It’s motivating because people understand we are a committed parent. It’s another reason we believe we add value to the U.S. or other countries.”

The fact Grupo Bimbo believes it has resources to help enhance how its global operations do business should not be construed to mean its headquarters is the only source on best practices, Mr. Servitje said.

“I don’t think it’s a one-way view, Grupo Bimbo out,” he said. “It’s a two-way interaction. We want to learn as much as we can from the various businesses and see what could be applied elsewhere. I want to avoid the ‘not invented here’ syndrome or being very selective in applying best practices. We give awards to plants that have adopted best practices.”

For his part, Mr. Servitje has been with the company for longer than 30 years on a full-time basis.

Even earlier, while in school, Mr. Servitje worked at baking plants during the summer. He spent another summer in a Dallas plant of Campbell Taggart Associated Bakeries, Inc.

“I recently went back there again,” he said. “It’s a Sara Lee plant now. There was a relationship. We knew the c.e.o. because of the business in Spain (see related story on Page 24). I even worked in Spain for a few weeks when I was a young teenager.”

The full-time work at Grupo Bimbo began after Mr. Servitje graduated from Stanford University in the United States with an M.B.A.

“I got back into the business, first in the northwest part in Hermosillo, the farthest reach of G.B. at that time. My interest has been more on the sales side.

“I like the plants and the operations, but I enjoy more being at the market, visiting customers and with our sales teams and marketing teams. I like traveling to our new businesses, which are quite enriching, the challenges we face, and we face a lot, and the opportunities which are considerable.”

If Mr. Servitje expressed a personal bias in favor of marketing versus operations, he also described himself as someone more grounded in tactical details than strategy.

“I do like to think strategically, and I believe I do, but I also believe we need to submerge into details of the business,” he said. “Otherwise you lose perspective and become framed in things that are not reality. I once had the experience of interviewing Jack Welch, the former General Electric chief executive, for four hours. He made the point that in business, anchoring in reality is key. That’s why sometimes I can be very specific about the details of the business. That’s how you can understand strategy. That’s also the way you can understand what it is the people on the front lines need from you.”

While Grupo Bimbo was established by a group including his father Lorenzo, Mr. Servitje said the expression “family business” would at best be an oversimplification as a descriptor of the company.

“This is not necessarily a family business,” he said. “From day one in 1945, this business was formed by four partners with equal shares. A few months later, Roberto Servitje, brother of my father, joined the company. He was c.eo. of the company and has been chairman now for the past 18 years. It always has been a partnership. Many of the founding families are participating on the board. We have been a public company for more than 30 years. It is a company with a larger percentage of stock in firm hands of different families. Some are now in the second generation or third generation.”

Just as Mr. Servitje takes a modest attitude toward becoming the world’s largest baking company, he tempers his optimism with the blunt realities that the industry in which his company competes is a very challenging one. As a result, the company operates with a “take nothing for granted” attitude, even in Mexico where Grupo Bimbo’s baked goods market share is commanding.

“What I say frequently is the higher you go the more it hurts if you fall,” he said. “The heights we have reached are due to the great work of all of the associates of Grupo Bimbo. but we must be wary of our future and the things we do. We can’t take anything for granted.”