Interview with Grupo Bimbo CEO ASIA
Bakery Industry Analysis
Entering china
Adapt in China
GRUPO BIMBO IN CHINA
WAY FORWARD
If you want to be in Asia you have to be in China
GRUPO BIMBO
Grupo Bimbo was established in Mexico City in 1945, and is considered today as one of the most important bakeries in the world due to its production volume, sales and brand positioning. The company is currently #4 among the
BRIEFING Grupo Bimbo
largest food corporations in the world, just behind Unilever, Kraft Foods and Nestlé. The company became the world's largest bread manufacturing company in 2010 reporting $8.9 billion in sales
Jorge Zarate CEO Asia Pacific Grupo Bimbo
Being one of the pioneers who came to China seeking to introduce a Mexican product into the Chinese market, what were your first feelings about the country referring to food, dealing with people, customs and language? Without doubt the first feeling was to realize the great cultural barrier between the two cultures; this barrier is not only the language but also habits, perceptions and values of Chinese consumers. Food is a vital element in Chinese culture; this is What do you think has been the key of the success of Bimbo to inextremely diverse, regional and traditional. The way people
troduce the products to a market as competitive and complex as the
treat foreigners is very friendly, perhaps it is one of the greatest Chinese market? similarities with Mexico (family, friendship and cordiality).
For Bimbo the introduction of the product to the Chinese market has been full of learning, unlearning, experiences, challenges, successes and
What was the most important barrier that you had to over- failures. I believe that we still have a long way to go and many things to come in order to get used to live in this Asian country?
discover. However, within the great successes that Bimbo have had so
The cultural barrier, as I mentioned above, and from a group of far include: The ability to adapt business models to local idiosyncrasies, elements, without fear I would say the language, which by the adapting our products to the local flavors, the logistic of distribution that way, I have realized that once you learn the language, it helps
allows consumers to find products in different kinds of convenient stores
you to have a better understanding of traditions, ways of think- according to their time and form of consumption, the philosophy and ing and perceiving life by Chinese citizens. Each country is characterized by its unique flavors, talking about introducing new products with a Mexican taste such as Bimbo products, what adjustments were made to the
corporate culture of Bimbo based on universal values, focusing on respect for each person. Respect has also been important pillar for people to believe in us and help us create the company we want to be in the future.
product in order for it to be accepted by Chinese consumers? There have been many. Since our products do not seek to position as Mexican products for Chinese consumers. We are looking forward to be the National Bread, the “mianshi“, (wheat derivates), brand. Generally we use local flavors such as sweet beans, spicy meat, and sweet fillings as strawberry, apple and chocolate. A particularity between the two cultures is the desired level of sweetness; Mexicans taste is used to sweeter products. Another remarkable thing is that Chinese do not like mixing flavors like Mexicans do (for ex. sweet, sour and chocolate).
Jorge Zarate Lupercio is the CEO for Grupo Bimbo Asia Division since August 2006. Majored as a Biochemical Engineer at Tecnologico de Monterrey, Mexico, he attended the Baking Science & Technology program at AIB, in U.S.A. and obtained his post graduate in the Higher Management Program at Austral University in Argentina, Jorge further pursed his postgraduate degree in Strategic Marketing at Argentine Catholic University (UCA) and completed his MBA at EDDE also in Argentina.
BRIEFING Bakery Industry
The bakery business is booming in wealthy China, especially in large cities in the provinces of Guangdong and Fujian. Specifically, large China cities such as Guangzhou, Shenzhen, Dongguan and Foshan are the big engines of higher end bakery growth. Industry sources believe that the industry enjoyed two-digit percentage annual growth in recent years, despite unavailable official statistics.
THE FINAL FRONTIER: Make some dough _ CHINA
COMPETITION: ...and your enemies closer
The due to its requirement of product freshness, meaning baked products can’t be delivered too far from where it’s produced, given the requirement of freshness. Therefore, there is uneven development of the industry in various areas as well as subtle differences of consumers’ taste in each province. Therefore, each area has its dominant bakery chains. Meanwhile, high-end bakeries are eager to differentiate themselves from competitors, and a focus of their strategy is on product quality and innovation. The lucrative business has attracted both foreign and domestic bakery operators. While veteran chain stores, for example, Maxim’s Traders categorize bakeries in general as: Group and Queens Cake Shops enjoy consumer loyalty, thanks to their consistently high product quality, upscale newcomers like 1. High-end with large international Bread Talk , Yamazaki are trying to gain market share by introducchains, high volume and high quality ing innovative flavors, interesting product names, on-site baking, and 2. Small chains that target high-end cuscatchy store images. tomers, have high quality, but low vol3.
Small chains such as those located in supermarkets that have sizeable business, high volume, but not necessarily high-end products CUSTOMERS: The Rich Buy Bread
Middle to high-income urban families and well-educated young generation are key consumers. Consumers of bakery products in China mostly consist of middle to high-income urban families. Parents in this group of families are usually born in the 1960’s or later. Baked products, especially breads, with milk or yogurt, are regular breakfast items in such families, as they are considered more nutritious and convenient than the popular Chinese style breakfast, such as congee (rice “gruel” or thick soup), rice noodle, steamed bun and Chinese fry bread. Well-educated young urbanites, especially ladies, drive consumption of pricey items. High priced cakes and desserts, such as cheesecake, tiramisu and desserts featured with fresh fruit or costly nuts, have become more popular in recent years, as this group of consumers enjoys such products as a symbol of westernized and healthy lifestyle. These consumers also buy pastries or cakes for gift giving or celebration. The RECENT GLOBAL FINANCIAL crisis and slow growth of China’s economy have had minimal impact on this fast growing industry, though sales of very pricey items ever slightly slowed. No adverse impact has been placed on those items at moderate or lower prices. Baking business investors tended to hold their expansion plans in 2008 given the uncertainty from the global economic crisis, but have reignited the investment in 2009 and 2010 as they believe the economy growth in China continues.
In the year 2005, Bimbo acquired a Spanish bakery company for a
BRIEFING Entering China
price of 9.2 million euros. After operating for 1 year under the acquired company’s brand, it changed the name to Bimbo.
BIMBO STRATEGY: Give them what they want
Cesar Cruz who was the Bimbo executive in-charge of the bimbo operation described the challenge of starting up the brand in China: “The Chinese do not have a tradition of eating bread for breakfast. But the core product of Bimbo has long been bread, cake and other bakeries. And its previous expansion has been in Europe and America, where bread is a staple for consumers.” How did Bimbo tackle this challenge? By adapting their products to the local tastes. Bimbo stayed away from its traditional breads and developed “rolling style breads” (janggu) at type of traditional Chinese bread with layers of beef as well as different kinds of steamed buns. LEASONS LEARNED: The Brazil Example
While entering the China market posed a new set of challenges, Bimbo did not have to entirely re-invent the wheel. A few years earlier, Mexico had entered the Brazilian market assuming that it would be a very similar market from Mexico and used the similar marketing and product development strategy it had used successfully in Mexico and other neighbouring Central American countries. Bimbo quickly r ealized that Brazil was a totally different market. For one thing, Brazilians bread consumption was much lower than in Mexico. Bread consumption in Brazil in the mid 2000’s was 2.5 kg per capita vs 7.5 for Mexico. This quantity was more than 3 times less the amount. Another crucial mistake was to distribute the products through small grocery stores, which is the main channel in Mexico. In Brazil large Hypermarkets accounted for more than 75% of sales for bread and baked goods. Bimbo was able to apply the lessons it learned from its expansion in to Latin America which paved the way to a more successful entry. One such instance was with their advertisement campaigns. In Latin America as in China, family meals play a crucial role in society. In Latin America the advertisement always focused on showing families eating Bimbo’s bread and baked goods together at home.
In March 2011, Bimbo group announced its intentions to continue to grow in China. Since entering in 2006, its sales have tripled. Even though at present China sales account for less than 10% of Bimbo total sales, the company realizes the great potential of the Chinese market and it is prepared to increase its in vestment. Its strategy will be to continue to acquire small regional market players to expand geographically.
Branding The Bimbo bear is magical; the phenomenon created in other countries by this bear was no exception in China. The white bear in-
BRIEFING Adapt in China
spires security, confidence, softness and kindness, achieving the creation of emotional connections with consumers, as it also creates a bond with children, mothers and young people. Bimbo’s Chinese name 宾堡 means ‘guest castle’, carries auspicious meaning.
TASTE: Adapt or Die
Bimbo’s operations in China are focused on understanding the tastes and preferences of Chinese consumers. Bimbo does not seek to position as Mexican products for Chinese consumers but to be the National Bread, the “mianshi, 面食 “, (wheat derivates), brand. While traditional foods such as mantou and baozi (steamed buns) are still the dominant staples, bread and its derivates are not part of the local diet and culture. However, the Chinese consumers are open to adopt new things if those products satRed Bean Sliced Bread
isfy them in taste, quality and price. Over the last 4 years, Bimbo has succeeded in developing its products catering t o local taste. For example, Bimbo uses local flavors such as sweet beans, spicy meat, and sweet fillings as strawberry, chocolate, red bean paste, and even tropical ingredients such as coconut. Chinese are also not used to the level of sweetness as Mexicans and therefore this was taken into consideration in the production process. Chinese also do not like mixing flavors like Mexicans do (for example mixing sweet, sour and ch ocolate in one product). Another remarkable thing
Wasabi Chocolate Bars
is that Chinese experts for Chinese market did not choose tortillas for the local market but instead focusing on packaged breads, buns, croissants and sweet rolls.
Up to twenty different truck models have been used as Bimbo delivery trucks since the late 1930s. These include 1960s Ford vans, 1990s Chevrolet,Renault, Dodge and Nissan. Mercedes Sprinter delivery vans are currently used. While Bimbo's vehicles were beige by the 1950s, Wonder, Marinela, Barcel and Bimbo trucks have been white since the 1960s, with Tía Rosa trucks re-
maining beige. Ricolino started using small leisure activity vehicles
POINT A TO POINT B: Distribution & Logistics
Bimbo as a foreign company chose to enter into Chinese market through acquiring local company. The immediate goal is to gain a better understanding of this vital market and develop appropriate growth strategies, while applying the systems and processes that have proven successful in other core markets. In 2006, it acquired Beijing Pan Rico Food Processing Center in China. Pan Rico specializes in baked goods in the local markets of Beijing and Tianjing, with 108 urban distribution routes. Bimbo localized its distribution structure in order to reach out to undeveloped area. To date, Bimbo China served a regional area of 40 million people with 4,000 point of sales. Its 186 routes are linked by a combination of trucks and bicycles. It also has a customized agreement with large multinational hypermarket to reach out to a diverse group of customers.
BRIEFING Way Forward
Has no specific meaning in Sp anish; thus, the name has not caused significant uproar as it would in the United St ates, where the word "bimbo" has a negative connotation. The official theory believes that the name Bimbo, coined in 1945 when the company was rebranded from its previous name, Super Pan S.A., is the mixing of the words "bingo" and "Bambi".
A SUCCESS STORY: The Unique Chinese Way
Bimbo has developed a foothold in China, it has got over the initial hurdle that so many western firms fall at: the issue of gaining the interest of the Chinese consumer. By entering the market with products that were adapted to meet the tastes and needs of the Chinese consumer, and developing an appropriate distribution network, it has managed to enter in an efficient way. Bimbo made an initial investment of 10 million USD in 2006, and it is already producing annual net revenues of more than 10 million USD. We believe the success Bimbo has achieved in China can be attributed to the lessons learned from other expansions – mostly notably Brazil. This resulted in Bimbo making sure they understood the Chinese consumers’ tastes and needs, and produced products to meet these, rather than trying to sell what is popular in Mexico. Bimbo seems to have a good understanding of the Chinese marketplace; it has created an expansion strategy based around buying existing bakeries in China. This gives Bimbo the knowledge and the connections of the existing companies and it also takes them out of the market: making the competition less fierce for Bimbo. The prospects for Bimbo in China look bright and any company interested in entering into China, should take the lessons Bimbo learned, that you
need to adapt your operations and products to the unique Chinese way.
JUNE 2011
