Grupo Bimbo 'cautious and concerned' in run-up to Mexico general election

By Kacey Culliney

- Last updated on GMT

Grupo Bimbo 'cautious and concerned' in run-up to Mexico general election
Grupo Bimbo has started 2018 extremely strong in Mexico but its CEO says there are concerns around potential volatility and change in the market in light of the significant, upcoming general election.

The bakery major posted an 11% rise in sales in Mexico for Q1 2018 – growth CEO Daniel Servitje said was an “outstanding feat by any measure” ​in its recent investor earnings call. The strong performance, he said, had been driven by better customer penetration thanks to new product launches like Rye Bimbo bread and Pinguinos Cookies and Cream and general strong performances in cookies, cakes, salty and confectionery categories.

However, Servitje said Grupo Bimbo would continue into 2018 with caution.

“I would like to emphasize that although we continue to be positive about the global outlook for the year, we are at the same time cautious and concerned about the potential volatility and change in the direction of our country,”​ he told investors in the call.

“As you know, we will have the largest electoral process ever in July 1st​. These are not 'business as usual' times; there's much at stake for Mexico in this election.”

'Biggest election in Mexican history'

Mexico Flag © Getty Images MiroNovak
Grupo Bimbo is watching very closely what happens at the July 1st General Election in Mexico. “There's much at stake for Mexico in this election,” said CEO Daniel Servitje. Image © Getty Images / MiroNovak

On July 1, Mexico will hold a general election to vote in a new president to serve a six-year term, 128 members of the Senate in for six years, and 500 members of the Chamber of Deputies for three years. On the same day, there will be local elections in 30 out of the 32 states.

The National Electoral Institute (INE) has described it as “the biggest election in Mexican history”​ due to the number of public issues being debated, including energy, security, trade and economic development.

Whilst Grupo Bimbo had a strong geographic reach, Servitje said the current situation in Mexico with the run-up to these elections, demanded “a cautious stance”.

Responding to an analyst's question about whether the company remained positive it could maintain a strong performance in the coming months and year ahead in Mexico, he said: “From the market perspective, we have our engines lit up... We're bringing a lot of innovation; a lot of marketing programs, and for now that's what we can do. We don't know what's going to be the consumer appetite and the election obviously brings volatility, and that's why we're, in this case, being more prudent because it could change the direction of our business in the near future.”

Clever spending, tightening costs

The CEO said Grupo Bimbo had already started to work on different strategies that would position the company for the potential rocky road ahead.

Amongst other things, it was reviewing and delaying its capital expenditure and tightening its cost structure, he said, although final decisions on some CapEx spending would have to be made post-election.

“Nobody knows what's going to happen after the elections. And we don't have an idea if there is going to be less or more volatility. What we're basically doing is being more cautious and planning our spend depending on what the outcome of the election in terms of CapEx, not only here, but in the whole company as the importance of the Mexican operations for our company is relevant,” ​he told an analyst in the call.

In the meantime, the company would also follow closely the presidential candidate campaigns and take “every measure to face the possible challenges ahead”,​ he said. “As a Mexican company, we remain committed to our country, our communities and our associates.”

Mexico and Brazil 'sizable' Bimbo markets

Mexico and Brazil represent sizable markets for Grupo Bimbo in Latin America – a region that generated 10% of its Mex$267.5bn (US$14.7BN) sales in 2017.

Grupo Bimbo previously told FoodNavigator-LATAM​ that whilst every market in Latin America was important, Brazil was an “interesting”​ market with “a lot of value and opportunity” ​given its size. Brazil has a population of around 210.8 million versus Mexico's 130.8 million, according to Worldometers data.

For the past few years, however, Brazil has been a tough market for bakery​ after tumbling into an economic crisis in 2014 although Grupo Bimbo managed to maintain strong sales, even growth, during these years.

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