Grupo Bimbo has bought Brazilian bread maker Plus Vita. It’s not a bad move, giving Bimbo a foothold in Latin America’s largest market. But it looks like a second prize deal following Bimbo’s failure to buy Bestfoods’ US baking operations. Bimbo must now decide whether to stick mostly to Latin America, or be a major player in the US. If Bimbo does go north, Interstate Bakeries could be an attractive target.
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Mexican food group Grupo Bimbo yesterday agreed to buy Brazilian bread firm Plus Vita from US agribusiness firm Bunge for $63.5 million. Plus Vita has 21% of the Brazilian packaged bread market, with 2000 sales of $72.4 million.
It’s not a highly surprising move – Bimbo has been trying to build its operations outside its core Mexican market for some time, and Brazil was the only market in Latin America where Bimbo didn’t have a presence. Moreover, international diversification does look like Bimbo’s best bet. It’s got 90% of the Mexican packaged bread market, providing it with a large and reliable revenue stream, but limiting growth prospects domestically.
However, Plus Vita looks like something of a consolation prize. Bimbo was hotly tipped to buy the Bestfoods bakery interests from Unilever earlier this year, which would have built on its existing US operation Mrs Baird’s to establish it as a major player in North America. Such a move would have given Bimbo strong US brands and substantially improved its distribution and delivery capacities. But in the end, Canada’s George Weston won out with a $1.7 billion cash offer.
Without Bestfoods, Bimbo is faced with a dilemma. The US baking market is consolidating rapidly. Already, George Weston/Bestfoods has bread revenues of $2.7 billion per year in the US alone, whilst US number one Interstate Bakeries has annual revenues of $3.5 billion. These figures are in the same ballpark as Bimbo’s $3.3 billion global annual sales, dwarfing its current US revenues.
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By GlobalDataSo what should the Mexican firm do? One possibility would be an ambitious push into the US market. While there are few medium-sized players left to add scale to Bimbo’s operations, Interstate Bakeries has been languishing lately following terrible financial results. A Bimbo bid for the US firm would be a surprise, but not unthinkable. The alternative is another decade of gradual growth through small acquisitions like Plus Vita, focusing on the core Latin American market.
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