Grupo Bimbo lost a bit of its DNA when it re-entered Brazil because there was too much focus on immediate growth, its CEO admits.
Daniel Servitje made his frank remarks on Brazil business during the company’s second quarter (Q2) earnings call last week.
“While over the years we have gained market share and brand recognition and we have a solid number one position [in Latin America], at some point after re-entering the Brazilian market (…) I think we lost a bit of the Grupo Bimbo DNA.
“We put too much focus on capturing immediate growth and losing sight of building a round business for the long run,” Servitje said.
The CEO said this manifested in several ways, including a move away from the company’s original distribution model and never having a strong intellectual property (IP) backbone to sustain the operation.
Brazil is full of opportunities and remains a ‘number one top priority’ for Bimbo
However, Grupo Bimbo is prepared to work hard to secure better business in the market, he said, particularly given the level of opportunity.
“It’s a market with a lot of opportunities… We’re gradually growing with good success in the regions where we have a market already. We’re also expanding our manufacturing footprint even as we do the restructuring,” he said.
Servitje identified particular opportunities for expansion in small stores on a regional basis throughout Brazil.
However, strengthening hold in the country will not come easily, he said. “We need to make sure we have the right systems in place to allow us to have transparency given the complex nature of our organizations in Brazil. It’s larger and more difficult than what we have in the West.”
“…This has the full focus of Grupo Bimbo’s top management and is the number one top priority for those in the Brazilian and South American markets,” he said.
The company spent $60m in Brazil during Q2.
The multi-million cash investment has been pumped into a three-pronged strategy to strengthen Brazil business. The three focus areas are revenue growth, supply chain restructuring to curb costs and implementing an enterprise resource planning (ERP) system.
Servitje said Bimbo is working on new product development (NPD) to drive revenue. Supply chain restructuring efforts will include purchasing, production, labeling and logistics, he said and the ERP system, a business tracking software, will be scaled up as business grows.
“We’re making good progress on the restructuring and are determined to get it finished this year,” he said. The ERP system should be implemented by the year-end too, he added.