Why Grupo Bimbo is buying Canada Bread

Mexico’s baking giant is just one emerging-market company snapping up mature properties abroad

Richard Warnica 1 Premium content image
Driver unloading a truck

A Grupo Bimbo driver making deliveries in Chicago. (Scott Olson/Getty)

Grupo Bimbo built its Mexican baking empire with an army of white delivery trucks and a reputation for sterling service. But it became the world’s largest baked-goods company on the back of billion-dollar acquisitions, the latest being its $1.8-billion takeover of Canada Bread Co.

That makes Bimbo part of a growing trend in international commerce. Around the world, companies from emerging economies are scooping up assets in the wealthy West. In the process they’re buying market share and management know-how. But they’re also rewriting the rules of international business.

Its purchase of Canada Bread from a retrenching Maple Leaf Foods in February gives Bimbo a market-share lead in Canada and a big presence in the United Kingdom. It also continues the company’s decades-long march to the top of the global bread pile.

Founded in 1945 in Mexico City, Bimbo—the name is a play on Bambi, the Disney character—began expanding aggressively in Latin America in the 1990s. A decade later it started looking north. After a series of smaller partnerships and takeovers, Bimbo bought George Weston’s American baking division in 2009 for US$2.4 billion. A year later, it bought Sara Lee’s baked goods arm for US$960 million. By 2013, with properties all over the Americas as well as in China, Spain and Portugal, Bimbo was banking sales of US$13.8 billion a year.

Bimbo, though, is far from the only emerging-world company throwing its weight around. Last year, JBS, a Brazilian beef giant, bought two meat-packing plants in Alberta, including Canada’s largest. In January, Chinese electronics company Lenovo bought Motorola from Google for US$2.9 billion. In 2007 GE sold its plastics unit to Saudi Arabia Basic Industries Corp.

For emerging-market companies, the benefits of buying into the West are many, says Andreas Schotter, a professor of global strategy at the Ivey Business School. Mature markets—where growth is slower but steadier than in many developing countries—offer a hedge against volatility. And buying existing brands in those markets is often easier than breaking in from nothing. Existing companies also often come with significant market knowledge. “At first it was just about acquiring market access,” Schotter says of the buying spree. “But now it’s also about acquiring competencies that help them become global players.”

For Grupo Bimbo, Canada Bread offers another side benefit: the name. Bimbo doesn’t mean anything in Spanish. But in English, it does, and it doesn’t connote anything good. So Schotter thinks the company may be hoping to leverage the “Canada” brand in English markets as it plays down the “Bimbo” name. “Essentially, they bought two brands at once,” he says, “the corporate brand and the ‘nation’ brand.”

One comment on “Why Grupo Bimbo is buying Canada Bread

  1. when will the bakery in St. Andre, Grand Falls, N.B. reopen under the new company Grupo Bimbo for jobs?

    Reply

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