MEXICO CITY — Even with potential US tariffs looming, top executives at Grupo Bimbo SAB de CV expect lackluster financial results in North America to improve as 2025 progresses and strategic initiatives take hold.

For fiscal 2024, North America net sales declined 1.7% to 189.33 billion pesos ($9.25 billion) and were down 4.6% excluding the impact of foreign exchange, Mexico City-based Grupo Bimbo reported at the end of last week. The region accounted for 46.4% of the baked foods company’s full-year sales. The net sales performance in the North America unit — covering the United States and Canada — was stronger in the fourth quarter, up 7.1% to 53.01 billion pesos ($2.59 billion), yet experienced a bigger currency impact, as sales were down 5.7% excluding foreign exchange.

“Consumption environment remains soft, as consumers seek value as they have faced prolonged inflationary pressures,” Rafael Pamias, chief executive officer, said in a Feb. 28 conference call, noting that North America results also reflect the strategic exit of certain non-branded business. “On the other hand, we saw market share gains across our snacking category, which includes sweet baked goods, salty snacks and cookies.”

In the United States, the share growth spanned segments such as salty snacks, cakes, muffins, brownies and cookies, according to Grupo Bimbo.

“We continue to assess promotions and the overall value equation as we pursue innovation targeting key consumer demographics,” Pamias said. “We will remain competitive in the marketplace, balancing the right volume/price equation, while driving consumer engagement and market penetration. We’re also working to expand our distribution to meet consumers where they shop and deliver the right value through a price-pack structure tailored to each channel.”

“Bifurcation” of US consumers

Mark Bendix, executive vice president of North America and QSR at Grupo Bimbo, cited a “bifurcation of consumers” in the US market, explaining that “economically stressed consumers are moving down the private label or other value offerings, while more affluent customers are moving towards more premium products.”

“The benefit that we’ve seen at Grupo Bimbo is our Bimbo sliced spread was up 18%, so it’s resonating with consumers,” he said in the call. “Artesano, our premium mainstream offering, was up 3%. And Rustik, our newest premium bread offering, is up 31%. The challenge here is that we’re the largest player, and we have an oversized exposure to the largest segment of the category in the middle, which is where the bulk of the category declines are occurring right now. And we’ve got to find a way to mitigate those, because the businesses with momentum do not have sufficient enough size to offset those losses.”

Grupo Bimbo sees a variety of ways to lift its US performance, Bendix said.

“We’re focused on expanding our offerings in the value segment,” he said. “We just introduced Sara Lee half loaves. We’ve got Bimbo bread distribution. It’s not everywhere, but we expect it to go everywhere and expand that distribution. And Bimbo buns are also for mainstream consumers.

“In this premium segment, an expanded distribution of Rustik and the introduction of focused products on protein. We all know what’s going on with the GLP-1 (weight-loss and diabetes) drugs, and you’ll see in second quarter that we’ll be introducing high-protein products in the bagel segment and also in sliced bread.”

Products oriented toward health and wellness stand to resonate with US shoppers in particular, Bendix said, pointing to the “Make America Healthy Again” movement that highlights foods with healthier, simpler ingredients.

“What we’re expecting in the US is really a health- and ingredient-conscious consumer, and then our changes in policies are reflecting the broader consumer demand for healthier options with the whole Make America Healthy Again initiative,” he said. “So you’re going to see an increased demand for high protein from consumers, and they’re prioritizing protein sources, including plant-based alternatives and high-protein snacks. So we’re looking to those areas for growth.”

Across Grupo Bimbo’s global markets, consumer shopping patterns “continue to evolve in today’s environment,” Pamias observed.

“We have been leveraging innovation to address our consumer needs and consumption occasions to further enhance our market position in key categories,” he said. “We also leverage the strength of our beloved brands to provide differentiated products with a favorable value equation, like Bimbo bread and Sara Lee half loaf offerings. Additionally, we are excited about Rustik and Artesano, our product offerings to capitalize on the growth in the premium artisan packaged bread segment. Moreover, we are penetrating other emerging categories, such as flatbreads with our Rapiditas brand in some regions.”

Operational improvements expected

Long-term investments in the North America value chain were the chief factor behind an almost 20% overall bottom-line decrease for 2024, Grupo Bimbo said.

“In North America, despite a continued challenging consumer environment, we embarked on an exciting project, which we expect to gradually yield benefits in the second half of 2025,” Pamias said.

The value chain investments and one-time costs from the closure of 11 bakeries globally weighed on Grupo Bimbo’s operating income — down by 6.5% overall and by 47% in North America for the year — and trimmed the company’s adjusted EBITDA margin.

Pamias said the strategic investments are “aimed at improving value chain capabilities and increasing saturation to enable growth” by serving customers and consumers more effectively.

“Moving forward, we will remain focused on proactively seeking opportunities to improve productivity, expand distribution and grow market share by connecting with consumers at every shopping opportunity,” he added.

In the call, Bendix shed more light on the value chain initiatives in North America.

“As part of our transformation that we’re working on and the investments that we’re making, we’re adding capacity and routes to increase household penetration and points of sale,” he said. “We’re also reconfiguring routes to simplify the customer experience. We’re adding capabilities to our bakery and our DC (distribution center) automation. We’ve got integrated systems and processes and alternative distribution methods.

“And then looking at rationalizing our asset base, we closed five older and capex-intensive bakeries last year. We didn’t lose that volume; we actually just integrated it into the existing footprint that we had in other bakeries. So that’s where we’re looking for growth. We’re excited about the investments that we’re making and our ability to get to all consumers everywhere in the US.”

Tariffs not huge concern

Grupo Bimbo forecasts low-double-digit net sales growth for fiscal 2025 “as we capitalize on our revenue growth management initiatives, innovation and excellence at the point of sale,” Diego Gaxiola, chief financial officer, told analysts. “We also foresee a gradual and moderate improvement in the consumer environment, particularly in North America, along with a positive effect from the Mexican peso depreciation.”

The company also expects slight margin expansion — mainly from operational leverage and the North America project — “starting to gradually materialize in the second half of the year,” Gaxiola said, adding that raw material costs look to be stable.

“We anticipate that the first half of 2025 will remain challenging due to ongoing investments in North America transformational projects, coupled with a strained consumer environment in the region,” he explained. “It’s important to note that the majority of those investments started in the second half of 2024, which means we will face a tough comparison in this first semester. By the second half, we expect to see benefits from this project improving the conditions and will have a lower rate of comparison.”

Gaxiola noted that Grupo Bimbo’s outlook doesn’t factor in the effect of potential tariffs on US imports from Mexico. The Trump administration has said tariffs of 25% on Mexico and Canada are slated to go into effect this week, but that may not be the final word on tariffs, as negotiations are pending.

“While this could present an additional challenge for the business, the timing remains uncertain and it’s changing quickly, making it hard to provide a reliable estimate of the impact in the year,” Gaxiola said.

Pamias also described the tariff situation as “not completely clear” but said Grupo Bimbo is “taking measures to prepare for any contingency.”

“We have 114 bakeries across the three countries (US, Mexico and Canada), 60 bakeries in the US, which give us a certain margin of action that not all companies have,” he said. “The products are being produced mostly locally in each country, allowing us to shift production if necessary and ensuring business continuity and minimizing the potential (tariff) impact.

“We have some scenario analysis with what would it mean (with) tariffs effectively imposed and having an effect on our production and export to the US. But, definitely, we have many ways to minimize the impact. And this will go in a combination of actions: maximizing local sourcing and production; stressing productivity; having ready PPA (price-pack architecture) initiatives; but, most importantly, producing locally in the US. That is something that we’re going to be doing, if that is the case (with tariffs). So we feel comfortable that we can mitigate the impact.”

Gaxiola pegged potential tariffs as impacting less than 10% of Grupo Bimbo’s revenue stream from products imported to the United States from Mexico.

“There are many initiatives and alternatives that we can implement to offset the impact,” he said of the possibility of 25% tariffs. “But without doing nothing, the impact will be less than a percentage point on our EBITDA margin at the Grupo Bimbo.”