Packaged food

Breadwinners


Mexicanbakers look north

 



Mar 6th2021 | words 428

 

 

PEOPLE HAVE to eat, so food firms the world over give reassuringly consistent profits,even in lean times. Mexico is no different. The countrys 126m people buy$55bn-worth of packaged food annually. Sales of such fare have been growingquickly, notes Euromonitor, a research firm. Between 2015 and 2020 theyexpanded by 6.9% a year, compared with 4% in America.

 

Thistrend should have lifted the likes of Bimbo, the worlds largest baker, andGruma, its biggest maker of tortillas. Instead, like many Mexican businesses inrecent years of sluggish economic growth, they have fallen out of favour withinvestors. Stable profits notwithstanding, their market capitalisations arewell below their peaks in the mid-2010s.

 

To whetthe stockmarkets appetite for their shares, both firms are doubling down onforeign markets. Americas packaged-food market alone is nearly ten times thesize of Mexicos. A loaf of Bimbo bread that costs $1.76 in Mexico sells for$2.77 north of the border. Bimbo has also acquired several big American brands,most notably Sara Lee, a maker of poundcakes and cream pies, in 2010.

 

Theseinvestments may at last be paying off, partly thanks to the pandemicinspiredrush to comfort food. In 2020 Bimbos sales in America and Canada rose by 22%;operating profits in the region shot up by 84%. IRI, a data firm, puts it amongthe fastest-growing big consumer-goods companies in the United States. Revenuesnorth of the Rio Grande helped push Bimbos total sales to a record $16bn.Operating profit hit $1.2bn. Gruma attributed its own strong results last yearto a growing fondness for tortillas among Hispanic and non-Hispanic Americansalike.

 

Furtherexpansion will not be a cakewalk. Bimbos bread and butter is simple fare thatlegions of poor Mexicans can afford. To succeed in richer places like Americathe company will have to cater to more upper-crust consumers with variedtastes. It is now experimenting with niche and premium products. Last year theBimbo-owned New York Bakery launched gluten-free breads. Gruma has introducednaan and pita breads in some markets. Lala, a dairy company that is Mexicosthird-biggest food firm, has got into organic milks.

 

Some ofthose innovations may come in handy at home, too. As the share of Mexican whoare obese has hit one-third, up from one-fifth in 1996, Mexicos government hasdeveloped a growing distaste for unhealthy food. In October it introduced a lawforcing firms to label foods high in calories, sugars, salt or bad fats. Bothbread and tortillas qualify.








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Economist | Breadwinners

 

 

Packaged food

Breadwinners


Mexicanbakers look north

 



Mar 6th2021 | words 428

 

 

PEOPLE HAVE to eat, so food firms the world over give reassuringly consistent profits,even in lean times. Mexico is no different. The countrys 126m people buy$55bn-worth of packaged food annually. Sales of such fare have been growingquickly, notes Euromonitor, a research firm. Between 2015 and 2020 theyexpanded by 6.9% a year, compared with 4% in America.

 

Thistrend should have lifted the likes of Bimbo, the worlds largest baker, andGruma, its biggest maker of tortillas. Instead, like many Mexican businesses inrecent years of sluggish economic growth, they have fallen out of favour withinvestors. Stable profits notwithstanding, their market capitalisations arewell below their peaks in the mid-2010s.

 

To whetthe stockmarkets appetite for their shares, both firms are doubling down onforeign markets. Americas packaged-food market alone is nearly ten times thesize of Mexicos. A loaf of Bimbo bread that costs $1.76 in Mexico sells for$2.77 north of the border. Bimbo has also acquired several big American brands,most notably Sara Lee, a maker of poundcakes and cream pies, in 2010.

 

Theseinvestments may at last be paying off, partly thanks to the pandemicinspiredrush to comfort food. In 2020 Bimbos sales in America and Canada rose by 22%;operating profits in the region shot up by 84%. IRI, a data firm, puts it amongthe fastest-growing big consumer-goods companies in the United States. Revenuesnorth of the Rio Grande helped push Bimbos total sales to a record $16bn.Operating profit hit $1.2bn. Gruma attributed its own strong results last yearto a growing fondness for tortillas among Hispanic and non-Hispanic Americansalike.

 

Furtherexpansion will not be a cakewalk. Bimbos bread and butter is simple fare thatlegions of poor Mexicans can afford. To succeed in richer places like Americathe company will have to cater to more upper-crust consumers with variedtastes. It is now experimenting with niche and premium products. Last year theBimbo-owned New York Bakery launched gluten-free breads. Gruma has introducednaan and pita breads in some markets. Lala, a dairy company that is Mexicosthird-biggest food firm, has got into organic milks.

 

Some ofthose innovations may come in handy at home, too. As the share of Mexican whoare obese has hit one-third, up from one-fifth in 1996, Mexicos government hasdeveloped a growing distaste for unhealthy food. In October it introduced a lawforcing firms to label foods high in calories, sugars, salt or bad fats. Bothbread and tortillas qualify.








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