PEOPLE HAVE to eat, so food firms the world over give reassuringly consistent profits, even in lean times. Mexico is no different. The country’s 126m people buy $55bn-worth of packaged food annually. Sales of such fare have been growing quickly, notes Euromonitor, a research firm. Between 2015 and 2020 they expanded by 6.9% a year, compared with 4% in America.
This trend should have lifted the likes of Bimbo, the world’s largest baker, and Gruma, its biggest maker of tortillas. Instead, like many Mexican businesses in recent years of sluggish economic growth, they have fallen out of favour with investors. Stable profits notwithstanding, their market capitalisations are well below their peaks in the mid-2010s.
To whet the stockmarket’s appetite for their shares, both firms are doubling down on foreign markets. America’s packaged-food market alone is nearly ten times the size of Mexico’s. 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.
These investments may at last be paying off, partly thanks to the pandemicinspired rush to comfort food. In 2020 Bimbo’s sales in America and Canada rose by 22%; operating profits in the region shot up by 84%. IRI, a data firm, puts it among the fastest-growing big consumer-goods companies in the United States. Revenues north of the Rio Grande helped push Bimbo’s total sales to a record $16bn. Operating profit hit $1.2bn. Gruma attributed its own strong results last year to a growing fondness for tortillas among Hispanic and non-Hispanic Americans alike.
Further expansion will not be a cakewalk. Bimbo’s bread and butter is simple fare that legions of poor Mexicans can afford. To succeed in richer places like America the company will have to cater to more upper-crust consumers with varied tastes. It is now experimenting with niche and premium products. Last year the Bimbo-owned New York Bakery launched gluten-free breads. Gruma has introduced naan and pita breads in some markets. Lala, a dairy company that is Mexico’s third-biggest food firm, has got into organic milks.
Some of those innovations may come in handy at home, too. As the share of Mexican who are obese has hit one-third, up from one-fifth in 1996, Mexico’s government has developed a growing distaste for unhealthy food. In October it introduced a law forcing firms to label foods high in calories, sugars, salt or bad fats. Both bread and tortillas qualify. ■
This article appeared in the Business section of the print edition under the headline “Breadwinners”