How the World’s Largest Bakery Puts Execution Before Strategy
by Peter Bijkerk
In today’s world, all companies need to be able to function in chaotic, unpredictable business environments. Emerging multinationals already know how to do that — it’s what they’re used to. Take Bimbo, the world’s largest bread baker. The company, founded in 1945 by a Spanish immigrant to Mexico, uses execution excellence to adapt to rapidly changing circumstances and customer preferences.
Initially seeking low-cost and relatively unsophisticated ways to grow, the firm expanded its operations throughout Latin America in subsequent decades. It made its first U.S. acquisition in 1996, thanks in large part to a focus on optimal efficiency in oven utilization and delivery routes. By 2012 it had swallowed up more than a dozen U.S. firms, including the bakery divisions of Weston Foods and Sara Lee.
Bimbo’s executives understand that in a low-margin business like theirs, execution is crucial. Profits depend heavily on getting the right amount of highly perishable products to stores at the right moment and at a reasonable cost. In many markets, “stores” are mainly mom-and-pop outlets scattered many miles from one another over poor roads. To make such customers profitable, Bimbo searches relentlessly for ways to eliminate waste and increase the efficiency of its operations.
The same approach served Bimbo well when it acquired the bakery division of Sara Lee, the huge U.S. food, beverage, and personal-care company. For years, sales for Sara Lee’s bread business had been declining because of what we see as a lack of focus on maintaining high standards in execution. Success would have entailed continual improvements in production and distribution efficiency, but the company did not choose to pursue that approach. In 2010 Sara Lee sold the bread business to Bimbo, which applied its execution focus to the business.
Bimbo’s leaders are continually on the road, looking for ways to improve the productivity of its 100 plants on three continents, its huge truck fleet, and other operational elements. For instance, it uses tricycle delivery bikes in urban areas of China where streets are too narrow for trucks, a practice it first implemented in Latin America. At the same time, all of its trucks are equipped with sophisticated computer systems to optimize delivery routes.
As Bimbo has expanded, it has adapted to consumer trends and local preferences, creating niches all over the world. Even in China, a country in which bread is little more than a culinary footnote, Bimbo has found a responsive customer base among young, urban consumers, successfully offering individually wrapped snacks such as beef rolled in bread.
If there is a vision at Bimbo, it’s chief executive Daniel Servitje’s insistence on keeping “a firm grip on the day-to-day realities” of operations. Many emerging multinationals maintain a similar focus on execution. Often, the only way for those companies to compete with their better-capitalized rivals in the developed world is to keep costs very low through a combination of operational excellence and cheap labor. Bimbo’s choice to focus more intently on execution than on detailed planning suggests that the company’s leaders understand the danger of becoming encumbered by rigid internal rules about which markets to target and how — rules that have prevented developed-world multinationals from moving more quickly into the booming markets of the developing world. Instead of getting bogged down in planning, Bimbo takes chances, experiments, gets market feedback quickly, and does what’s needed to improve its value proposition to customers.
Bimbo is just one example of an emerging-market multinational that is demonstrating a surprising ability to surmount business challenges that developed-world companies have avoided or given up on. Unencumbered by complicated or calcified rules about which markets to focus on and how to grow, these firms are achieving success by executing first and analyzing later, pursuing headlong expansion, and embracing turbulent markets.