“In globalization, you participate or become a victim”

Interview with Daniel Servitje, CEO of Grupo Bimbo

05/04/2013 Sao Paulo

Daniel Servitje and Pankaj Ghemawat

Grupo Bimbo has come a long way since CEO Daniel Servitje’s grandfather emigrated from Catalonia, Spain, to Mexico in 1928 and opened his own bakery there. Servitje’s father, together with four partners, later founded Bimbo in 1945. Initially, they had just five trucks to deliver their bread and baked goods to Mexico City grocery stores. Today, Grupo Bimbo has more than 126,000 employees, a presence in 19 countries and more than two million sales points. Servitje grew up with the business. As a teenager in the ’70s, he helped out in the plants during school breaks. He has now been full-time with the family firm for more than 30 years, having earned a bachelor’s degree in business administration from Ibero-American University and an MBA from Stanford.

PANKAJ GHEMAWAT– Grupo Bimbo is unusual among Latin American multinationals in that it has expanded its position north of the border into the United States. How do you decide which markets to get into, and where do you see Grupo Bimbo going in the future?

DANIEL SERVITJE– For us, it was a defensive/offensive strategy. First, we went after Mexican consumers who were already in the United States and who knew our products. For a while, this was very profitable. But then we realized that we needed to be a local player, too, and take on the American brands. After all, the border was open, and if we didn’t go to the United States, U.S. companies would end up coming into our market.

Our strategy for Latin America is quite different. In a sense, we have replicated, country by country, the strategy that we had in Mexico many years ago: It’s about small businesses with low per capita consumption. From a profitability perspective, Latin America has not always been as positive as we would have liked. But as we continue to mature our distribution networks, it will become a very strong market for us. For the future, we are keeping our options open, but mostly we will be focusing on emerging markets.

PG– Given your status as an emerging market company, Grupo Bimbo is competing both in emerging markets and in the United States, in an area where brands and differentiation are very important. How have you managed to make that work?

DS– We have always been a branded company, and we value brands. However, in the packaged food industry, the name of the game is low cost. We have to fight, not only against our competitors’ branded goods, but also against private labels. As such, we need to be very efficient in whatever we do, so we are investing to become an even lower cost provider.

Where I think we have succeeded, and where we really add value for our shareholders, is by knowing our customers better than our competitors do. Every year, I spend time going to the homes of consumers, wandering the supermarket aisles with them and asking them questions about why and how they make the choices they do. By doing this, we believe that we can create distinctive products that consumers will appreciate more than the alternatives in that particular market.

I think it is essential for companies to have this culture of connecting with consumers – to get out into the field in order to understand what is happening in different markets. We found that there are subtle cultural differences throughout Latin America. In Mexico, for example, packaged bread is much more popular than fresh bread, but this is not true for the rest of Latin America. We also found that, whereas in Mexico people tend to buy their bread in small mom-and-pop corner stores, the Argentines buy theirs in large supermarkets. We had to adjust our distribution strategy accordingly. Local knowledge is essential.

PG–Do all these cultural differences across the markets you work in make it difficult to have a global strategy?

DS– First, baking is a very local business. From a freshness standpoint and a manufacturing standpoint, we cannot travel far with our own products. Second, in my view, the food industry is not a global industry. What works in one market might not necessarily work in another. A value chain can be global in some respects, systems can be global, but when you really get down to it, customers in different countries don’t all like the same things.

For that reason, we don’t dictate a global strategy. We have products that would be a complete failure in the United States but are a success in China, and others that work well in Guatemala but not in Mexico. In each particular market, we offer the teams a portfolio of products and examples of what has worked well elsewhere. But ultimately, the decisions are made locally. For example, with the 70 baking plants we have in the United States, we want each of them to be run according to the market realities of their location, rather than according to what we might say in Mexico City.

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Read full article on the IESE Insight website.