Bimbo Bakeries meets increased demand for record Q3, but worries about impact of second COVID-19 wave

By Elizabeth Crawford contact

- Last updated on GMT

Source: Grupo Bimbo
Source: Grupo Bimbo

Related tags: Grupo bimbo, coronavirus, Innovation, Marketing

While Grupo Bimbo has managed to stay on top of and benefit from increased demand for its baked goods and snacks in the US during the pandemic so far, executives are weary of any additional strain on capacity and employee safety posed by a potential second wave of the virus.

“If run rates and the demand stay in the ranges they’ve been in Q3, I think we can serve the market fully,”​ Alfred Penny, president of Bimbo Bakeries USA, told analysts earlier this week during the company’s third quarter earnings call.

But, he cautioned, he is “concerned about the spikes we’re seeing [in COVID-19 cases], the discussions and the forecasts of a second wave, and what that all means in terms of our ability to keep all of our associates safe and execute every day.”

Bimbo Bakeries ability to meet demand to date for its sweet baked goods, buns and rolls sold under the Entenmann’s, Sara Lee, Thomas and Oroweat brands among others is notable given net sales in North America increased a whopping 23.5% to 46,360m pesos ($2.2b) in the third quarter year-over-year— primarily reflecting strong volume growth and a boost in foreign exchange rates, according to the company’s third quarter earnings report.

North America’s strong performance helped lift the company’s overall net sales 14.6% in the quarter compared to the same time last year. Profit for the company also increased 16.9% and operating income was up 46.8% in the quarter year-over-year.

“Our results demonstrate an exceptional quarter reaching record profit levels; we continue to experience high demand and strong performance in the retail channel where consumers are returning to reliable brands,”​ CEO Daniel Servitje said in the report. “Now more than ever we appreciate the efforts of our frontline associates who have continued to maintain momentum and perform with excellence at the point of sale.”

One way the company was able to balance increased demand with capacity without shorting any given region, channel or customer was to tightly control promotional activity and pricing, Penny told analysts.

“We’ve really been focused heavily on ensuring that we can meet market demand across all of our categories. Our capacity capabilities are not equal across all categories. Some are more restricted than others. And so, we have done our best to manage production capacity with promotional activities to ensure that we’re meeting market demand as best we can,”​ added Servitje.

Given the uncertainty about future demand and production capabilities if another wave of COVID-19 hits, he added that he didn’t want to speculate on the company’s forward pricing or promotion strategy.

However, he noted, the company is “investing incremental marketing support”​ and “fine-tuning our marketing investments” ​to retain as many of the “large number of new consumers and new households”​ who have discovered or returned to the Grupo Bimbo brands during the pandemic.

Rather than relying on promos and pricing, much of this investment will be in “upping our game in quality and innovation, so that these new households can stay longer with us,”​ Servitje said.

While Penny confirmed that product innovation and expansion helped drive “to some degree”​ the company’s success so far in 2020 and earn “some shelf space gains​,” he added that he thinks the business’ success rests “in large part”​ on “the strength of the brands and the portfolios with really solid execution by our frontline.”

He added: “Hopefully, we’ll see that continue.”

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