H A R V A R D I B U S I N E S S / S C H O O L

Grupo Bimbo: Growth and Social Responsibility

TIzr ~ r ~ u s t importa~it ! ! r i i ~ ~ i r ~ o f i r r r ~ is its p~op lc , bccarrse L P I Z ~ ~ S ~ D I ' S x i i ' t q 71lIinf the!/ imr:r, bill peoplr ~ i v r ndrut fhry arc.

- Lorenzo Servltje, Lrupn Bimbo founding partner

By 2008, Grupr) Bimbil rvas the leading baking company In the Americas and one of tlie largest in the world. It h ~ c i ru~t~iial sales of over $7.4 bilhon, mote than IOU L)r,~r~cls and more than 97,000 worldwide associate-as Bimbo liked to call its employees It matli~las tiirr:d more than 5,000 SKUs ( s twk keeplng units) from 83 plants located in Mexico, the Unit+ Statcs, C c n t r ~ l and South America, Europe and Asia. Bimbo distributed 11s products to more than pillion sales outlets in 18 countr~es. E ~ r h of these points of sale was visited by morr than 36:000 ro& salespcrsons. Its products ranged from s l~ced bread, buns, cookies, snack cakes, pastries, sweet baked goods, packaged food. tortillds, salted sndcks, confectionary goods and goat m~lk sweet or "cajeta," among other products. Bimbo L\~LIS the largest Latin American-based fond company and the second largest bread coml3;rny u l the cvcl t Id h)

For eight years in a row, Bimbo hdd been%irorcd with the Socially Responsible Enterprise Award froin CEMEFI, the hlex~can Center for Philanthropy. Moreover, Griipo Bimbo w.is r&~t~kcd 111 the 9"' position of the R~putabon institute for best$orporatc replita ti011 in tlie r ~ ~ ) ~ . l d . ' The next Mexic;u~ ranked firms in the study were Grupo ad& and Cemex in the 112"' and 7 19'l'spot, respectively.

Grupo B~rnb~) had set ambitious growth objectives beyond 2I31r3. I t wanted to become the world lender in the baking industry and one of the best food companies in the world. In order tn ncl-ti~vc those object:~,es, i t had etnbarked on an aggressive prrlgram nt a c q u ~ s ~ t ~ o n s in overseas markets, starting 1~1th the United Stdtes across the border, and going 211 the way to China. "Even as we pursue ;In ambitious growth agenda, we cannot forget our core valucs 'md ivl-tlc) we are as a company," stntcd Voi-i Lorenza Servitje, the now retired 90 year old founder of the company. As Figure 1 shows, Bin~bt, captured its core values along the seven ;r ttribr~ tt.s o f passion, profitability, ~ffectiveness, team work, trust, quality, with the "person" coming a t the ccnter. Under its second CFC), llobertn Srn-itit. (now chairman of the board) and its current CEO, Daniel Servitje, the company lind gruwn spcitacr~lnrly ~ n d gained an international footprint. Scc Exhibit 1 for its revenue growth. "Yes, indccd wc linvc ~ ~ L ~ L \ ~ I I O L I ~ business, not at the cost of our respal~sibility to society, but because of n u r ~nvcstmci~ts in it. L i n g forward, however, we arc a far tnoce complex company than the one frl~untled illid

'"The World's %Imt I<~spected C<rrnpm~ic.s 2008: a s t ~ ~ d y of corporntc rcputdtiuns ill 27 ccluntrtrs." I<eputaIinn lnstlt~ltc. Glt~h,jl rcsults, 2008.

Copyr~yllt d 2OW Presidc~u A I I I F~-ll<ws t,f Ilamard C{>llrgt.. Ttr order c11p1r.c :lr rL?lur,st rtLtn?l\\<rlll t o rr.producc inatcrinls, ~'111 1-600-5-15-76,hr,. 7% ~ i t c HJI-VJI~ B~15il?ess Scho~ll Ptlblll~tnll~, Rostnn, MA 021fi3, cir go trr i vn H I I L ~ ~ F I ~ r t ~ r d C ~ I I J ~~ducatr)r%. Tlu- yuhl~catirm may not be dig~turd. l>!~s,tucupicd, or othcrwise rrproducrd, pa~strd, or tmnsjnit~cd, without tllc pcrnu-rloll rai 1 I.LLV.LLL~ Hnsuurss Sd~r~ul.

Grupo Bimbo: Growth and Social Responsibility

sl~epl~erded by my father and unclc, and yet we have to ensure that ou r values and strategy are in alignment," asserted Daniel Servitje.

Figure 1

#om and i:lur~orar. Pir 'Rfe bu>ll a? ~vhrih ?ti? o~yge17 rhur n l k r ~ a j l h r n g d r e ~ s M r -,

ocr cvfrlpony tn

Source CC:rtpo Hiltitlo. (ILL the figure above, the express io~~ "efforts and illusions" under "profitabil~ty" is best interpreted ns 'ettt~rkl; .~nd ~piraticms.")

Mexico Ily 2013s hfexica was the second most populated cotuntry in Latin America (behind Brazil) wit11

I U5.7 ~nl l l io&-~.bit~nts, ?hut, of them living in urban arens.2 In 2007 Mexico's Gross Domcstic l'roduct (GBP) was $893.4 billion -the second largest in Latin America behind Brazil's GDI' r)f $1,286.7 billion but ahead of Argentina's $262.3 billioil, Venezuela's $228 1 billion and Colombia's

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? Ii~stituto Narionnl de Hstariistica, Geografia e ~nforrnihca, INEG1. w w n int.gi.goh, List viewed August 1 I . ZUOH

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Grupo Bimbo: Growth and Social Responsibility 39-025

51 7 2 bllllo~i. Mexlco was the 14"' largest economy in the Wilrlci.' Mex~co's GDP per head in 2007 1,-as >S,719 However, Mexlco was a country of contrasts: the lowest 2C)"t' of the population accounted for o n l ~ . 3 YX af total income and the Gini coefficient was 0.508." Forty percent of Mexico's population was cullsidered puor, and 18% lived in extreme pove~ ty .~ Due to deficiencies in the public education sys tern, the unsk~lled and low skilled labor pool was large and aroui-td 40%, to 60'1/0 @$he wtlrkforce wurked in the infonnal sector.

Mexlco was ruled for 71 years by one single party, the Partido Revolucioiinrro Iiwitucionnl, or PRI. Thc PRI led Mexico through a stabilizing development from 1958 to 1971 where the country it~cl~~striahzed and GDP grew at a n n ~ ~ n l mtes of 4'Yu. Frum the 1970's ts-the end uf the 1950's the J'RT polliirs became very nationalistic and interventionist. This period w r.1tc.s and frequent financial crises, where GDP plummeted, real ed, with high r1trrn;ll debt and suaring rnterest rates. During this period, Mexico's ec vily deyendent on o ~ l exports In the 1990's the PRI embraced free market and ol~cres th,a t i n i l ~ d r d pnvatiza hun of hundreds of state-owned firms, trade ~iberal i ia t i~n that culminnter-l rn the hlortli American Free Trade Agreement, NAFTA, in 1994, of various ~ndustries After NAFTA, Mexico's economy diversified and chan ependent nn otl exports tr, manufactured p o d s exported mainly to t l ~ e Unite Teq111li1 crisls that started in 1994-where GDP plummeted 6.2'L in real terms rose abo1.e S2"-tIie PR[ was his tor~c~l ly defeated in the year 2000, and since t dents trot11 the l',irt~da Acc~dn Nacioi~al (PAN) had been in power: President Fox by 2008 was ~n h ~ s second year of presidency. Dc.s esirlrnt Fox's administrahun, his poii tical effect ~veness was se\ erelv hindered by a divided cnngress, anii ccnniirnlr: ret'orrns that were needed to improve the rumpehtiveness of the co~u-rtry, such as fiscal and energy retornis, wcrc not A l e to pass through Congress.

Fclipc Caldertjn, at h ~ s second year uf term, faced similar obstacles. He proved to be a better ~legotintnr than President Fox. His-Administration had been able to pass pension reform and J mild fiscal refrrm. However, one of the most important reforms needed for boosting Mexico's ct>mpctitiveness and srowth-+~~ergy reform-had not been able to pass. High energy costs-along wi tli l i~gh labor costs-were limiting Mexico's ability to compete with other exporting countries such ns China. Strengtl~et~ing ot fiscal and monetary policies since the end of the last century had tr,>nsl.ltril into nia~rozconornlc'stability but growth was not catching u p with the country's nccds. Average a ~ u a l growtll rates since year 2000 had been 3%, insufficient to allcvintc poverty and reduce inequality." C'o~straints tor growth wcre high-cost labor and energy inputs, a wrak non-oil tax base, continued dependqce an US markets for exports, weak skill base and n shallow crcdit mnrkvt Calderbn was strugglingTta yass the energy reform but it was hard to boost growth given high input costs and Mexico'sdependence on the slowing US economy.

World development lndlcators database, World Bank, Julv OOS, rr.rrrrrr worltlbank.ur~, Lst viewed August 12. ZllUX

I Sol~rce: World d&loprnwt ~ndicators, w~r.~rv.worldb;u~k.ui K, last r,le1vr4 fi/l3i2(lOH . l r d hlpuiro County Frnhtc. E m i ~ o n ~ i > t I ~ ~ t e l l i g ~ n c e Un~t. A high Gini rrotfficient indicates a high level vf lnionw ~nequa l ib . 11 curicsyv~lrl~ to perfect equality a n d I ttl

perfect inequalit$ with one person havnlg all Ulc Inct,rnc Wurldwiclr G ~ n l C O P ~ ~ I E I ~ ~ ~ G ranjic. horn 0.249 in Japan t t l 0.707 in N,~mibia (www.wikipidin.org last viewed 8/13/2flnU)

"Mexico Country Brief, World Bank, w~w.%\~~)r ldbank org, lnst I'IPIVF~ A ~ ~ g u s t 11, 2008

Source: nallco dc Mviixico, www.banxico.gob, last wewed Aup,n\f 13.

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Grupo Bimbo: Cruwth and Social Responsibility

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%@ G rupo Bimbo: History

Thc Servitje family started doing business in the baking iildustry early in the 20"' century. When T.oren;.o Servitje was 18 years old, his father-who had a well-known bakery called El from n stroke. Lorenzo had to leave behind his accounting career in order to attend bakery. 0 1 1 taking over, Lorenzo wanted to make the bakery something big&%-and,more , ," , ambitious.

, * A + + F , He wished to start a bread production and distribution business. ,+yA

O n December 2,1945, Bimbo was founded. It had five founding shareholder T..urenzo Servitje and his youi~ger brother Roberto Servitje among them. The was drawn by the wife of oiw of the founders. Bimbo started wit11 only one brand, 38 workers, and 10 trucks to deliver the bread made in one plant in Mexico City. The first products were white boxed bread and toasted white bread. The production process was completely mnnunl and rudimentary. Bimbo bread was quickly accepted by Mexico's households bccau$e it was packed in transparent cellophane paper-instead of the traditional wax paper-which kb$t it fresh and also because its quality was easily seen. Another key to Bimbo's success was its huge publicity campaign in iielvspapers, radio and the movies. Never before had so much been paid to publicize bread.7

&j* 111 the next few years, Bimbo quickly incorporated more prciducts into its product Irne, such as

whole wheat bread, sweet breads, cakes and sweet loafs. Its distributinil network, 11owe-c-er, only reached Mexico City and cities nearby. To reach other cities Bimbo expanded its distribution system in a way similar to how newspapers were distributed at thz&e. By 1956, Bimbo had cornmissinneci its first plant outside Mexico City. %+

Having successfully built the company from scratch, in 1963, Don Lorenzo Servitje took on the ~wle of CECl of Grupo Bimbo and his brother, Roberto Servitje, became CEO of Bimbo breads division. Clver the next 15 years, the two brothers rapidly grew Bimbo's sales to $425 million and 16,125 nssocintes. At the beginning of the 1970's, Bimbo opened the largest bread factory in Mexico and Latin America and one of the 1U largest the world. In this factory, bread production was completciy automatic. The factory big boxed bread, per second, which was completely unprecedented in Latin

In 1979, Lorenzo Servitje handed over Grupo Bimbo's presidency to his brother liobcrto and he assumed the chairmanship of the board. In 1980, Bimbo went public with 15'%# of ~ t s stcjck in the Mexican stock exchange. The company was then valued at $12.5 million dollars. The successful l P 0 gnvc the company confidence to expand into the United States. Bimbo sent its first trucks with bread to the U.S. to explore the possibility of catering to a burgeoning populatic~n of Hispaiuc consumers just north of its border. Satisfied with the existence of demand for its products, in 1 987 Bimbo started to d ~stribr~te products in Houston and Los Angeles. By the end of the decade, Bimbo had expanded to Central and Latin America as well. In 1997, Daniel Servitje, Lorenzo's son, at thv age of 39 with an MEA from Stanford University, became CEO of the group and continued to lead Bimbo's i~lternationalization effort through important acquisitions. Roberto Servitje took un the chilirmt>n's positir~n and Lorenzo stepped down from all formal positions. Daniel Servitje continued with the growth strategy of his predecessors, and in the year ZUUO, Grupo Bimbo expnilded to Europe by acquiring two plants -one in Austria and the other in the Czech Rep~~blic- and in 2001 it expanded i11tc1 Brazil. See Exhibits 2 and 3 for the company's historical financial performance, and regional i~tdicators. By 2007, the company had a sales turnover of Ps 72,294 million (or $6.65 billion) and a net

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' "l5imbp: A 611-year History of Bclieve and Create" SOIITCP: www.prup~~bimb~~.~0m,m~/,~d1ni1~/~0nIe~1Li~1~~l0r7df~1~I-iist~~rir7~~~ 20r,1 ~~h; ;V 'U~~~imbu.pdf . Last viewed July 8th. 2UOH.

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Crnpu Bimbo: Growth and Social Responsibility 509-025

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profit of Ps 3,914 million (or $360 m i l l i ~ n ) . ~ Of its total sales, 67'5 were in Mexico, 22'X irk@ US, and -I I'X, from twehe Latin American countries. While Roberto Servitje at age 88 served, he chairman %A, of thc board, Lorenzo Servitje at age YO was still active in its social responsibility affd?s.

Products and Brands

Through the years, Bimbo grew in its bread productioi~ and also added many new products and brands. With nearly 5,000 items in its portfolio, and the nearly 100 new prod ilcts being added every year, the company offered somethh~g for every taste and every occasion. Many of tl~esc ndditioils came t l ~ r o u g l ~ acquisitions of different firms and brands. Its Bimbo bread division was ~ i i i d ~ ~ b t ~ ' J l y the flagship of the company, accounting for nearly 50'L of all its rexques. Of its main brands, Mnritzrla produced all sweet breads, buns and cakes. Its star p w s the "gansito" or "little ,"$ duck," which was a cake filled with marmalade and covered colate. By 1975, one million "g~nsi tcd ' were sold daily. Barcel started off by producing c ~t by I977 it 11ad begun to produce a wide range of salted snacks. Production of candies w;d?f&'i~sferred to a new firm called K L C O ~ ~ P I O . By 2007, Bimbo dominated the market in the packaged bread segment in Mexico. In the sal ty si~ack category, B a w l was second to its main competitor Sabritns, owned by PepsiCo. Other- important brands were Tia Rosu, w h i c h produced specialty sweet brcads and flour tnrtillas, Milpn Keul, which produced corn tortillas and Lonchibon, which rnadqady-to-eat food and snacks.

Most uf Bimbo's internationalizations efforts were carried u tlirough lucnl acquisitions. Rimbo i looked to acquire firms in regions and segments that provided a platform for growth. It also looked for strong brands that were complementary to its existing portfolio of products and brands, and also 1.7rnvldcd opportunities that could enable Bimbo to scale~np and achreve cost savings. Exhibit 4 proi'ides a summary overview of its vnriou&rands, t l~c associated product lincs, and thelr country of operation. 4

Sales and Disfribution Systeni ,A,+,

Biinbo had one of the largest &%?host complex distribution networks in the country-scco~~d only to Coca-Cola. With time, Bimbo's distribution system had become more sophisticated and larger but qualitatively, it was es lly the same as when Bimbn started h 3 years ago-prod~~cts wcrc delivered fresh directly fr bo depots to the retail store, there were n o intermediaries in between. Bimbo products wcre diitributed in to threc different charulels: supermarkets, convcnicncc stores and through what whsLc$lIed the detail channel to Inom & pop stores (M&Ys). l11e importancc o f thc detail chnilnel was diminishing as M&Ps fnund it harder every day t o ct~mpcte with expanding supermarket chains,iutd convenience stores that offered other services such as ready-to-en1 food. Tn the last 10 years, the arket chains had grown considerably and the traditional M&P c l i a~ lne l was losing share it 5). Convenience stores especially, werc showing strong growth as thcy exp~ilded into s nd rural areas. Moreover, large chain retailers such as WaI-Mart and Cl~edraui were offering banking services to their customers, thus making it harder for MPrPs to compete. The total grocery retail market in Mexico was estimated nt $125 billlan in 2007.9

"::)i-cigi~ exchange as of Uecelnber 28, 2[1(17 w a s 10.HhhZ. Source: Diariv Ofici.11 cir In I:edrrac~bn www.dofjinb.mx, l,.lst \:icwcd J~ l l v 3rd 20U8.

"Iietniling Mex~co: Cnmitry Market Insight," Errrunto!,ilor l n l ~ ~ r ~ ~ a l r n , ~ n l , May 2U(18 and "'Tc~p 5 Rctailcrs in hlcxicr,," llim,(.l lil.tai1, Seplember 2OlIH.

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Cropo Bi~nba: Growth and Social Responnibili t \

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All Bimbo products-from all brands and from all plants--were taken to depots from where they were distributed to all channels. rn Mexico, around 40'X1 of Bi111bo's total workforce consisted oi route-sdles associates. Its flagship brand, Biinbo bread, was distribntcd in large trucks srrvii>g

mvtropolitan ci t i~s and towns. The rest of the brands were distributed in s r n a l k trucks by ~nclependent sales forces. The distribution system was highly programmed A'haqdheld computer ccu~hincd ,711 the information on customers, their average orders, product $par $ken ts, ~ l t d tl~cir <let,, i I rvute. That information was synchroi~lzed with Bimbo's ..;en.er at the end& each day.

Mrx~co I~as nearly 1 million sales outlets, of which Bimbo reached nearly 750,000. Salesmen ;~rrlvcd at the depot around 630a.m. to load their trucks. Thanks to the handheld, t h q knew which ~moduc'ts t ~ l l c l ~ i l depending on the routes they were assigned that day. Trc~c-ks were randomly ~nspecie~t to cross-check the information in the handheld with the actu~l physicai stock in the truck. Sd1esrnt.n s tartrd their routes around 7:OOn.m. At each sales point, salesmen del~vrred products that they booked and took back products before their "sl~clf lifc" 1i;ld ex Th~s practice was necessary tu ~nslirc that co~~surners had access to fresh product in the niarket r~ All salcs ~~~torrnation ~ v a s entered ~ n t o the handheld for control of daily sales. At t l ~ f their route, salespeople r~t i i rned to their appropriate depots, where stocks were checked and the recalled products were rcndled to be sent to a n "expendio" or discount sture < A %

B

Sdlespeople had sdlrs' guals that they could att.i~n t creasing sales in each stcjre vr ~ncrensing the number of clients in their "route." Dd~lv w es to salesmen co11sistc.d nf a base salary plus commission, whidi w,3s a percentage of their riuilfh$$es. Cornmissinn, on average, was morv tl1211 d o ~ ~ b l e the base salary. C7n average, a Bimbo ~atespersdn earned slightly more salary than tlie one usually offered by food industry for s~tlular pos~tions.

The traditional or deta~l channel was the mast important channel for Bimbo because it r~presei l t~d its largest source of sales. Bimbo supen71sors were always trying to encourage their team to expand their sales points to include nuntraditional outlets such as gas stations, beauty parlors, internet cafes, ,Imong others.

A large fraction of low-income people, who;l<i~ed in rural areas or small towns, dcpcndcd on tllc traditional M&Ps to buy their groceries.'O See &hibit 6 for a view of three semi-urban outlets. M&Ps u>\~,~l l y stlld at higl~er prices ~IIAII supermarkets but lower t1in11 convell~ence stores. Most M&Ps had o vpry c-lose rela tianship with their cIients who often relied on the crcdi t given by the store owner for their p~ i r c l~~~ses . Most of the time customers cleared their accounts by pay day. S L K ~ credit was usually not oftered by convenience stores or supermarkets. In spite of its service levels, thc tmciitinilnl ch,~nncl was: slclwly disappearing. It was becoming increasingly d i f fisul t for the srn,lll MQPs to compete wlth convenience stores and supermarkets. Their stores were smaller, the product range mnre liniited, and the layout and management of the stores less pruf~ssic~11;ll hIQPs had to pay for most of their inventory in cash. They received almost no credit from ~uppliers-~ome d k t r i buturs such ns Coca Cola, Sabritas (PepsiCo.), had only recently started to offer credit to XI&Ps h.l~>~.eover, hrcnuse their p u r c h a j volumes were relatively smaller, they rccc~\-cd nn qunnt~ ty-d~scoimts such as ~hnsc offered to cimve e stores and supermarkets. As a response i n the needs of the hIQl's but "Bp. nlsn ns n way of maintaihing Bimbo's most important chaniicl, 11) 2004 Blmbfi in~tinted n bald ~ ~ c w progriliii called "Pesito."

' ' I l;ro111 field visits, the case wnferq rstinlated the~r r i ~ c trl bc a b ~ ~ l t 25U tu 500 sqmrt' feet. The uwners reported suerage daily sales u l bel~z-pen $200 and $450. r-rf ~ v l i ~ ~ l l 50d.15, ~ U I C E ,ind water niccl~ltltcd for 50'L, food-30'L, and tul?,>cco-2UY:,. I.ar$er stnres als@&rried rleaniilg and some liraltli a n d brauty p r r ~ r l r ~ i t s 5omc c.\rrietl beer. Margins varied widely hy product, nv~rngin!: abr,UV20%.

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Grupo Bimbo: Growth and Social Responsibility

Dur~ng the course of their daily route selling, salesmen offered credit on purchases of Birnho products. Store owners wanting the credit pad a flat fee of 2 pesos (20 cents) rcgsr&+ess ;'&hc srzc of thr ordcr placed. The sales persoil entered the credit information on to his handheld:is& record of rdcll credit could be uploaded lnto Bimbo's central system once the sales person ended his daily route. A t the next visit to the store--which could be anytime between two days to one week, the store owner had to pay the credit to the sales person. The sales person woul J then give the store owner n receipt, w11ich was printed from the handheld and the transaction was closed. If the store owner was unnble to repay the credit, for a payment of 2 pesos the credit could be rolled over, but no new transactions would be made.

Many Bimbo clients recognized that "Pesito" was a way to increase their incomc, without havinc to invcst in inventory, helping them to grow their business. Consequently the default rate was very low. Bimbo had different sales forces for different brands, thus there were separate Pesito progr,lms for each brand. For example, a store could have outstailding credit.with Bimbo, Marincla, Tin Rosa and Barce1. The store would appear in the Pesito accounts under four different identifiers.

'fhere were limits to the amount of credit that a sales person could give per cl~ent, in most cases the equivalent of one week's order; and then there were ~y 11 limits per rt>r~te as well. 'll~rough steildy efforts by Grupo Bimbo's route sales pcople, approxima y 350,000 of the small store owners participated in the Pesito program and paid on time, and.Bimbo; .goal was to further increase that In the ctming years.

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Microfinancefor Store Owners

Don Lorenzo Servitje had, among many other of his social concerns, the idea of 1-[elping the poor tl~rough micro credits. Don Lorellago was partin~larly interested in the M&Ps skure owners bccnuse, LI~rough Bimbn, he had noticed ho> they lived day by day solely with the incolne frnm their st or^. They 11;ld no health or life insurance and Don Lorenzo noticed how many times M&Ps had t o close duc to sickness or death in the family. Store owners also had 110 access to the formal financial system so they 11ad to rely on money enders, especially to make capital improvemeilts in the store. They seldom l-rrld resources ti. $4 ~n their store to make it more productive or more a t t r~c t~ve to customers for example by insta mg new equipment, refrigerators, meat cutters, or a PC to access tlie intcrnct. -

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'l'hus in 1994, brnbo *fed% alliance with Fincomun, a microcredit instihttion with the goal of providing furthe&imncia~e'r$ices to i t s M&P clients. l'he loan process with Fincnrnun was simple. A Bindm salespersoi~"cmld recommend a cliei~t to Fincomun. Bimbo salespeople knew their clients quite well, their business model, their cash flow, and their credit reputation. If the client accepted the offered credit, Fincomun agents visited the store and gave them a check that could be cashed a t n bank. Tf the Bimbo sales person assisted in the follow-on collection, they were paid a srllall fee for the effort. Only a very smalI proportion nf Bimbo's clients, l~owever, rverc Finct~inun custc~mcrs (less than 3"). By June 2008, Fincomu~ also offered Life and Hospitalization insurai-rce and had 400 clients in the pilot stage of the insurance program.

History of Bimbo's Corporate Social Responsibility

From i t s very beginnings, Bimbo prided itself on its commitment to social causes and Mexicr)'~ devc.lopment. In 19,54, not even 10 years after its founding, Bimbo opened a sch~~ol for- workers'

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Crupn Bimbo: Growth and Social Responsibility

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ch~ldrci~. Since then, a percentage of Bimbo's pre-tax prdtits were earmarked for social':$@ r c l uci~tiol~al causes. "1 wanted to dedicate myself to something more than just making cakes ariid brcad. I aspired to senre others," Don Lorenzn was reputed to have said in a newspaper intervi~w.'] Even in hard times, Bimbo had avoided firing people and reducing the CSR budget. Roberto Servitje iiscd In say, "Entrepreneurs arc mcant to create and grow, not tn destroy." Over time, Bimbo's portfolio of CSR programs had grown both in size and in sophistication. .At the beginning, the programs were more geared internally, toward Bimbo's associates. Over time, they expanded cxtcrnally ns well. Bimbo's CSR programs were divided into ti matrix (for a detailed &scription nf prugrams sce Exhibit 7). Daniel Serviije asserted, ''Our CSR programs are diuded into six ca teg~l r i~~; that overlap with each other. We have internal and external progmms, and then we ]in\-e ewnomlc. social ilnd environmental programs. When Bimbo was founded, CSR wils nei tlier ~ . t ruct i~rcd nor furmal. It was something that we did because we believed in it; bcp J&@r \.alilri i ~ f social awareness were embedded in all of us since we were children." 5 ,r@j$&

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Mnrthn Eugenia H~rnindez, head of institutional relations and CSR and, who had Lwen at Bl~nbr, since 1981, recilled "Don Lorenzo used to say, 'Your left hand sl~ould never know w11at your right hand is giving.' And that was the philosophy bcl~ind CSR at that t ~ n ~ e ; ~t W A S IDM~ k ~ y . ' ' Robertc~ l 'ercz GOrnez, head of labor relations dnd a 20-year-old veteran of the company added, "l.t7i th Don I,oreuzo, Bimbo was a smalI and privately held firm; cni~tact with assocla s was very persot~nl. Eve11 tho~igl~ 9: Eilnbo has grown rapidly and is now a public company, the sotial responsibility pl~ilosophy is still thy s ; l ~ ~ ~ c . Contact with associates is still personal. Daniel Servitje visits e3c-h phnt ever-! year &?nd has aluiu;ll mcct ings with associates of different areas." 6

The cotiiyany's CSli budget was determined as a perc ot its prat~ts. TI I I~ prrcet~tngc M'RS

dec~ded bv a CSR cnmrn~ttee comprised uf fi l e members oard. The comm ~ttee also deci~lr~i which programs to support and to rvhat amuunt. The prof1 tage varied fro13 year to ye,lr, ~ n d w a s determined ~ndependently for e n d &try. Bimbo's CSR program wcrc dividcd illto four arcas rr f cr>lnlni tmrnt: Emplcrvees or .4ssociat@s, Health, Environment, and the Community,

51nc.e the begu~n~ng, one of our greatest concerns was our relationship wit11 associates. We \vantcd pcopIc to work happilycwe wanted them to identify with the conipai?y and we wanted the111 to be respected, havlng~h%&&strumcntnl view of people; we wanted relations with personnel ta be harmonious and cordial. With the years, the view of a highly productlr~e fim~ t h ~ t coirld .11so Lie a profoundly humane company consolidated. Profit sharing with our tlss~jcl.ltes was higher than that required by law and many of our associates purchased shares with t l l r ~ r monthly savings.Iz

(Don Lorenzo Scr\,itje13)

I I J L o r ~ l ~ ~ ~ ~ SC'T ;tr y Realizar," Rr$~rf i!n , Cl r~b sect loll. May 1 h, 200H.

10'Y~. Profit sll,!rilrg i n H ~ n ~ L ~ o \ v a s linked in productivity and c u u l ~ l go from II":, tn 13 5.:.,

the company 5ok1rce 'ornyanv ~ntvl-in;lhr>n. ,F

I' "Bi~nbo. .4 60-Yedr History of Believe and Create " Siwrcc: w w ~ r . . ~ ~ up>L-~~r~l.co cnlr In\ ; ~ d n n n , rnntrn t 1 u'l~vidc~l/ I iistc~ria~~20C;r~1p1~?~,2OHirnbo.pdf. I ~ s t viewed: J d y Rth, 2008

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Crupo Bimbo: Growth and Social Responsibility

In 2005, Bimbo hlred a Canadian company to analyze B~tt~ho's competiti~~e concluded, "We have analyzed their technology. They have the best in the world. the markets where they are present and have a great distribution nehunrk. Hnwev the most 1s that people are committed far beyond what i s normally seen in other companies. People ~c l f l~ t~fy w ~ t h the company. We see all workers, at all levels, seeking to give the best in them. That is what trr~ly makes them special."14 Blmbn was rated one of Mexico's best ~~1;lces to work during the last eight years.

l u September 2008, Grupo Bimbo as a whole had more than 97,000 associdtrs, of n.hich around t10,000 worked in the baking divisinn in Mexico. Around 25% of them were ~ntcrnat~nnal ; I ~ ~ o c i a t c ~ and 13% were women. Right from the beginning, Bimbo's top management did not merely pcrielve t h r~ r associates as a labor resource, but rather as p~oplc who wcrc pnrtncrs In Bimbrl's mis~ir~n to sre<Itc value. They were treated with care, and provrded opporh~nities tu grow and Iearli dnd ;~ci i , .~ncr their quality of life. Grow and innovate was the motto driving Brmbo's relationship with 1t5

,Isso~l.ltrs. Javier Millin, head of Human Relations, put it simply: "Our cnmpct~tivc adv;Int;lsc i~cs w1t111n o w values, outstanding among which is the person. Viewing a persun a s an indil idual is the small difference that makes all the difference. Once they are treated that wnv penplc gct ~r~volvccl, they become Interested in the company's objectives."

Bimbo's programs for its associates were divided into two arras clt suppot4t: ec~nomic ur development. Within econamic benefits, Bimb ,, l ~ d health ;Iss~r;tdnct'. support tor home & improvement, and help with wills and deeds. It ongly ensouragecl lot~g-term re tiretnen t r~lrrlllss among its associates. Roberto Servitje said: "ll7haf;?ou truly gain is what you srlve and in~~est . " Under personal development, Bimbo offered its associates various courses that covered rn~lcl~ marc than just training for the wnrkylace. h h y courses ;ld&sed personal development opportunities st1c11 ,IS,

irnprnv~ng communicativn skills, raising ileal thy families, and so on. There were also educa tiollL1l offering, that enabled assouid tes to c ~ r n ~ l e f & ~ ; $ i ~ h sd~ool program, m11i11e 2nd on-site E~~glish proficiency courses, and a mandatary caiirse on hnw busiilcsses work ~ n d contribute to the ecoilolny (to see '1 descript~on of Bimbo's programs for 1k associates, see Exhibit 8). Roberto Sen~itje said, "The firin is what its people are, and the a t their leaders are."

F r r m a tl~ong the tt~;u~l; benchts provided to associates, the health and education offerings were 111ghIv valued. h.Iekic.o'r; piiblic health system was known to be ineffrcici~t. It often took long hours to he seen h y a doctor atld receive treahnent, and many visits to the doctor before one could see a specialist. Moreover, few people had access to preve~~tive mcdicine. Biinbo tried to bridge the gap by pruviding free con~y let? medical exams to all associates over 411, oncc a year preventive medical exams for cardiovascular illr~esses d t Bimbo facilities and follow-up checkups for those identified as needing further monitoring and care. All Bimbo associates were covered by the Mexican government's health plan, to which Bimbo made a contribution, as did the assr)citltes througl: pa y r d l deduction. In order to enable its associates circumvent the poor system of public care, Bimbn mndc a v n ~lnl-he its facilities for the government tn operate its clinics. Bccause of the~r location most of these operated as exclus~ve clinrcs for Bimbo empluyees. Moreover because these clinics were on Bi~nlit> pr~rnises, t l~e company was able to offer better infrastructure than w h ~ t would normally be available. to SLIC~I clinics.

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'14'o'l,, C;rupo Bimbo, I'eople &lake the Diffcmnct.." y rc~n lh t l l r l r gwrn by Javrer hf~ll.in. I~cad <,I H urnan I<eIatlnns, 2007

Grupo Bimbo: Growth and Social Responsibility %4

Within Organization for Ecoi~ornic Cooperation and Development countric5 (OECD), Mexico had the dubious reputation of being second in obesity rankings after the United States.l"ecen t studirslh showcd that obesity in Mexico wr thin the total population had TF, but that this growth had accelerated at an alarming pace in the Idst 20 accelerated lou/" to 20% in children, 30'i" tr, 10L% in adnlescents, and (ii)"~,

in obesity was most worrying in children (see Exhibit 9) . Tlir same study 1inkc.d sons for thc increase In childhood obesity tn changes In eating habits, to diet:: hish in c.~lorirs, ref~ned carbohydrates and sodas, and decrease in consumpt~on of f ru~t t ; ~ n d vegetables. This samt. study stdted that the increase 111 obesity was also related to a drcreasc In r1ivs1c;ll ;~cti\.rtv 1u Mex~co, the obesity risk for children 9 to l h years old ~ncrensed for each hour that they watched TV or played v~deuga~nes. On average, Mexicaii chlldren watchcd TV 01. played videog~mcs 4.2 to 6.3 hours clarly.l7

To couriter the varied causes of obesity, in 2007 Rimbo launched a hvalth prugram c~ l l c r l Cornmi tted to Your Health. The program had many different compimnents rur~ghly divided in to f ~ v c arms: iimproving product healthiness, education in henlth and nutrition, prrr~notion of physicai activity, research, and being an exemplary firm in tcrms of hcnlth n ~ c i ~~utr i t ion (for details of the programs see Exhibit 10). The company published Nutrinntas, which reached 1 million print and co~~lir~e subscribers, and distributed spnrts and nu trition~:materi3ls for 11,1100 5 tudents. As part of t ts efforts to promote physical activity, the company staged a nationwide silccer tuurndmcnt for children, Firtbolito Bimbo Stnrs. In 2007, 46,000 children aged 9 to 12 particip~tcd iu the program n lid the tvirining team travelled to Venezliela for the @e Yy'e Cup soccer tanmarnrnt. In 2008, mrlre than 5[I,OOO children attended, winning a trip to l$ls ey I L arld. It1 its 2007 a nn~rdl report, the company ,~ffirmcd its commitment to health: ,c ,>

, ,,

The millions of people who enjoy our prod~rcts each Jay i c l ~ l r l t on tlmn tor ~lu,llit)~, consistency and taste. The success lies in stayin? attuned to consumer tastes and trends. That mcnns enhancing the nutritional value oc our product5 and itltroducing new, lie,~lthy ~~ptianu. In this regard we follow the guidelines*~f&k World Het~ldl Organization on reducing tdt, s,?l t and sugar content, and decreasing p o r t i o ~ sizes.. .We are also innovating by adding functional ingredients to numerous products, for example, to lower cholesterol or enhance mineral absorption. We have created a range pf products with less than 100 calories edch; and just JS importantly, wc are inlveestmg in'"&%ss-market educational campaigns to encourage active, healthy lifestyles.

In 01-drr to create the necessary research and developnient ~ n f rastructure, Grrrpo Bimbo had bullt t 4,ui- Innc~v,i lion and Nutrition Institutes ('lnstitutos de Ii1vcstigaci6n y Nutrici6i-1 de Grupo Birnlw'), t i 1 11 i l f tllrlll li)catgI&Mexic~,ne in the United States and one in South Amerlca.

I' Wnt Id Hpalth Orga~urahon, www.who .u rg I~s t viewed Julv 8,2008

l7 "(ILIP~I~~JLI I~~filnti l ." Inst~tuto N,IC~OIIA~ de S,tlud I'ublica, Nnv. 200h. w w w . i c s p . m x / P r ~ r t a l / C e ~ ~ t r r ~ s / c j s s / n l s / h / '['hi I:.. 1 4 tlrl f. I.,lst vivwcd jtilv 7, 2008.

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Criipo Biinbo: Growth and Social Responsibility 509-025

Err uirur~rnenl

Bimbo's prngr~lms in terms of environment protection were d l ~ i d ~ d in t(l f1i.e areas: emissinn reductinn, s ~ v ~ n g water, saving energy, solid waste rnnnagem~~i t and C5K on en~~ironnientsl matters : h r u u ~ h all lnst~tution dedicated to forest conservation and refurrstatlotl calleci "Reforestamos MEXICI)." In the words of Martha Eugenia Herndndez, "we w-;lnt to be J <;reen C a r ~ ~ p ~ ~ u y , both inside and rnitstde." Fee Exhibit 11 for the impact of its natural resource conscr\lntimi cftnrt.

In 1998, hlewico suffered extensive fires in its forests; Mcxlco lost XOr),oOO hectares u t torcsts. The govern~~ien t inv~trd companies to participate in recovering lost iurests. B~mbn resprmded sy eedily . Its nssoc~n tes raised nioney, and each peso donated by them w a s matched by Bjlnbo. As a result of the company's (and its associates') cfforts, I rnilliot~ trees were planted a&% natural nrens were targcted for improvement. After that impressive achievement Bimbo's ,directors decided to exten J -their commitment to Mexico's forests un a more permanent hasis. "- ,<" ,, ,

, ,,

As a result, in 2002 I3imFv created nou-pra t i t ~r~anization'dedicattld to protecting t11c forc~ts and trees of Mexico and named it "Rcfores b rn i~s hIe i i~o." The administrative costs of I7eeforestanin:: Mexico was entirely borne by Bimbo, while the casts of the various projects were shared by Birnl7rj and other firms such as Wal-Mart, Rai~cn Sat1 h ~ d e r , Hewlett Packard, as well as individual d o n ~ r s . Twcnty percent of Bimbo's saving from energ. conservation was used tn fund Reforestamos Mexico. All lieforestarnos' employees, including the d~rector, were independent. Its director, Ernest0 Herrera. Iiad wurked for Bimbo prinr tn this appointment ahd was passipnatcly committed to its mission. '1 have worked for the environment for 10 ycnrs. For me, I:et^nrestamos Mexico has been a dream-comc- true. I work in something thdt I passinnately care about, and in one of tl-rc most committed col~ipimies in the world. 1 envision Reforrstamos Mexic~gxpanding into Latin America and working along wit11 s o m ~ of America's most important envir@,mental NCOs." From the 27 people that constituted Reforestamos Mexicu's advisory bnardya3nly"d'iworked for Bimbo.

I11 add~tiun to ~ts l?eforestamos Mexico activities, in August 2008, Grupo B ~ ~ n b o allt~ounced t l~a t it had begun the use of degradable polyethylene packaging for its p.oduib, which m ~ d c ~t thc first R k x i c a n cumpany to use n 100% enujronment-friendly material. Ram011 River,~, O p ~ r n t ~ o n s Director nf Lr up0 Blrn bo, commented, "the products packaged in degr,>d;l ble w riipping preserve their fi-~'~Ii11rs~ ~ t ~ d all ot their ristics exactly the same as thosc u51ng traditional cvr~pping, and tliri-rfure cunsut-t~crs can 11 nfidence that the product will rontiilur to be exnctlv thc samc." 11'1 th the technology kno ," the degradation of the plastic began ns soo~i as its r~srf l~l life iu.lc w r r and the p l a s t ~ c ~ c l i ~ p r ~ c d . The plastic was programmed to be consiimed by hnctrtr~~i and funs1 In the sol], throdgh an additive that reduced its inolrculnr structure. T h ~ s prncess o f ~ lcgrnd~l t~nn would take a maximum perlod of 3-to-5 years, in rclmparisoi~ to thc normal process t h ~ t could take as long as 100 to 400 years.'"

Bimbo was acutely aware ~f ib close linkages ti1 the community, and tlierefore had instituted various programs in support. I t workrd jou~tly wit11 the National h v e l o p t - ~ e n t Bank for the small

prise (National Fiimrl~-r~,m PI- NAFtN) to help its suppliers with working capi ta l nccds. orted many educationdl programs tot- bdtli its suppliers 2nd its store owners. For

o provided a course tlia t helped thctn Itnprove their brlsiness skills. The topics qualie ~mpmnvcmcnt, nnd trnckit~g opt.mt~oi~s onlinr.. For store cnvners,

lh Lrupu Bimbo lncurpor,~tc.s D e g a d a W r P a ~ k a p i ~ g 100L E ~ ~ v i r o i ~ m t n t Frienrlly, l~ttp://~~~ww.gr~~pobirnL~u.con~ uuv/ snlaprrnsn/indrx.php?f1~~rilcti~~1~=h~~1n~,bo1etin&l~ngID=2&L~~~llD=2l2.

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Grupo Bimbo: Growth and Sorial RespunsibjIity

131 rnhn cleveloped A course jointly with local uiliversities called "the store-owner universi ilr~ru~,~.sidad iIc1 rcndc,u." This course covered basic management tools such as accounting, cus tornrr service, operations planning and control, and some basic computer skills amo~ig n h e r t111rigs. bv jiine 10C)g, Bimbo had delivered 38 classes to almost 1,000 store owncrs.

Tn 21107 and 2006, tl~rough Tclcvisa Foundation, an institution that sought the dex eloplnent of childrel~ and youtlg people of Mexico, Grupo Bimbo distributed 550,000 copies of a Values Calendar , ~ n d Tc;lcl~t.r's Si~pport G ~ ~ i d e , to almost all Mexican elementary schods. Each year Athe company in1 i tc.d 1 rn~llian d111dret1 to visit its many plants and learn about the food indust+y*lw company 11,iJ long been a s:rpportrr of the Papalote Museo del Nino (children'spttseum), providing the f ~intl ~ n g support for a school program for chlldren from low-i~icon~e cv~nmurz~tles to visit the 111 ilseum Over 4,500 children visited the museum evcry year as part of the prog~-d 111 In addltion the cihnpnliy drrectly suppnrted Crtsol, at\ elementary school for low-mcome children.

In .1~1Llit1c)n, Grupo Bimbo supported the act~vities of the Mexlcan Fouuil,~tion for Rural Dcvclopment ("Fi1ndaci6n Mexicana para el Desarrullo Rur~l") , an organiziitiiln wi t l ~ nmre than 40 !!cars of experience that promoted the development of thc agr~cultural sector, dnci lorir-111come 1-ttrriI

fainilies. Tne company also supported the Center for ln tegrdted Develuprnen t ot t l ~ c Ctluntryside, A. C., ("Centro para el Desarrollo Integral del C a m p , A. C."), which benefited an? of the poorcst pnpulntlons of Mexico in the Nayar zone. In ;l 51n11lar vein, the company ~~1ypi1rtt.d various development programs for indigenous cornrnuni ties in dreas ~ u i h a84ieal th, nutrlt 1011, a tld education, thmtlgli ivorkshops coordinated by Foundation Mazaliua Region (@atronato Pro Zona hInz.lh~~;l") be~iel~ling more than 20,000 people from the Mazahua area of nortliwestcrn Mexico State.

All-in-all, Bimbo supported many different projects anAgrganizatlo~is (for n l ~ r t nf iristitti t 10:)s suppnrted by Bimbo, see Exhibit 12), leading Martha Eugenia H e r n s n d e z to conclude, "We have lots ( I F rcq~lcsts for help and we would love to help everyone. Wc want tn be Snnta Claus but we just cdnnvt! Tt is hard to say no, but it is hard to say yes to 6verything."

Going Forward

Tllcrc was no question in Daniel Servltje's mind t h ~ t the internationalization of Bimbo's business r\.,ir important for its growth strategy. Zll a d d ~ t ~ o n to itlcreasiilg Bimbo's presence in m a r k e t s sucl7 as tlie United States or Latin America, he also wanted to penetrate markets where Bimbo was not prc,tbnt or wlicre it was just entering, such as Chind. An important challenge was to improve 1 1 tern,~tlr>nal profitability, which was lagging behind Meuico's operations. But the leadership position it had gamed in the domest~c market and Indeed 111 many markets of 1,atln Amenca was something tlint IhnieI Servitir did not want tu luse sight of. Hc rccallcd the passion and conlmitment with ~ 'h lc l i h ~ s prcdcccssars, his father Lorenzo Serv~tje, and then his ui~cle, Roberto Servitje, had led the cnmpa~iy. They werp able to blend the c u n ~ p ~ ~ ~ ~ y ' s strategy devclopmcnt and its missinil and rrnlups. 1 le wondered what he could do fu r an rncorc. Bitubii wn.; ~indoubtedly anc of the mnst respected cntnpanies in Mexjco. How should he go bout conhuuing the tradition in Mexico and rest nf the markets it had entered?

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G I - u p Bi~nbu: Growth and Social Responsibility

Exhibit 1 Historical Bimbo Sales

Srtrrre company informatiol~. q%, I+

3,

Exhibit 2 Consolidated Income Statement (millp$ dollars)

Net sales 426 2,302 3,279 5,851 6,653 Cost of sales Gross profit

Operating expenses , %

Operating income ': :;&:,,:, Integral financial result Other income or exp '3'&5'+%et lncorne beforeTincom&5a lncorne tax e* s e d,:.

Net incane b e f o k r ticipation in partner cmpsnjer Equity In ~nccrhe'of arrociatd companies ' ,,

, , > ,

Net incune 23 126 192 333 360 ROE 12.3% 10.3% 12.0% 15.6% 14.0%

ROA 9.1% 7.3% 7.5% 8.7% 8.7';;

Source. Grrrl,cb Kinlbo, I9li1,. IY.)S. 2000 n n ~ l 211117 Annud rcport, www.grttpobimbo.mm, last v i r ~ ~ c d Junc 5th, ?XIS

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506-025 Grupo Bimbo: Growth and Social Responsibility

Exhibit 3 Financial Information by Region (million dollars)

1998 NET SALES 1,923 364 238 2,524 > -

OPERATING INCOME 266 11 (32) 245

EBITDA 338 23 (1 4) 34% &;;g

ZOO0 NET SALES 2,431 599 249 3,279

OPERATING INCOME 356 (9) (9 338

EBITDA 443 12 9 463

2006 NFT SALES 4,110 1,399 , 490 5,851

OPERATING INCOME 510 4 539

EBITDA 634 A 52 ' 25 71 4

2007 NET SALES 4,575 1,524 699 6,653

OPERATING INCOME

EBlTDA

S o ~ ~ r c e . Grr~po Bimbo, 1980, 1$518,2000 and 2007 Annual repyt, w~vw.gr~~pobimbu.cum, last viewed Ji111e 5,2008 qy

; ;9 'A!

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Copying nr posting is an infriligelnent nC copyright. Permiusiunsfn: hbsp.harr flrd.edu trr 6 17-7H3-78h

5U9-025 G r u p ~ Bimbo: Growth and Social Responsibility

Ex l~ ib i t 5 Grocery Retailers Market Share 2 A

-Ti% $ A '

1999 ZOO2 2004 2005 2006 2007

Wal-Mart

Safeway

Soriana

OXXO

Cornercial Mexicana 2 2.6 3.4 3.8, 3.5 3.6

Gigante

Carrefour

Ched r au i

Costco

Casa Ley Cornextra

7-Eleven

HEB

Cornerc~al VH 0.3 0.3 0.3 0.3 0.3 0 3

Almacenes Zaragoza 0.2 k 2 0.2 0.2 0.2 0.2

Casa C hapa 0.2 6 2 0.2 0.2 0.2 0.2

Controladora y adrnrn~stradora de pastelerias 0.1 0.1 3 . 1 0.1 0.1 0.1

;SF

Grandes superficies de Mexlco 0.9 0.9 0 9

Others ( Mostly 'Morn & Pops") ,v 78.8 78 1 70.4 69.4 66.1 62.7

Total 100.0 100.0 100.0 100.0 100.0 100.0

C,rildn-r I:et,~lllr~g Mexico, Country market insight, Eummonitor Intrrnal~onnl, Mav OR .\l\d Rrt.~il pla~lct.

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Grupu Rirnho: Gmwth and Social Responsibility

Exhibit 6 Views of Semi-urban M&Ps

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Exhibit 7 Bimbo's CSR Programs

Grupo Bimbo: Growth and Social Responsibility

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Crupu Bimbo: Growth and Social Responsibiliiy

Exhibit 8 Bimbo's Programs for its Assocrates

nc7\)~.ln)~ne~lt benefits: Dcveiilp~nent courses for associates

o Pcrsonal development course: 3 dny course on meditation 011 oneself and life. 'Thr tvpics ranged from ones ideals, work as a rnedns of personal ,&&$$lo rnwt and c n m m ~ r ~ ~ i t y %-:,, contribution, the company, health and spiri tudli tv, role in suciety, a i ~ ~ ~ ~ x s l e r s .

o Leadership course for bosses where d ~ e ulutta tvns. The firm i s what ~t"; people a l e anti t l w people are w h ~ t its b05s is.

o What is a flnn crne d,>y course nn the firm? Topics were .ypj~gs, investr~~mt, worh. c ~ R : i r ~ l f profits. The firm was explored so that associates waul hcncrd to h a l e profit and horv in a successful firm everyone benefited.

o Family integraticm wtlrkshops for nssociatcs and their spo Education courses:

o Ope17 schoolmg tu assclclates so that they could finish middIe nnil high school. o Online English proficiency courses and on-site Englidl cclurws G 5upport for elementary to mastrrs ~J l ica t in r~ for iissi)ciates 111 XIFXIAI :IIIJ. the Unitcd States

G Intensive mandatory training cuursr on dr~v ing for all sales person11t.l. o Many production associates wanted t come sales people because wage4 were higher. & Bimbo uffered training ~ I I sales and driring to production associates so that they CUIIILI bcl-ome

sales people. :',

o Dirnbo offered, in snme uf its FrudLlc';i&;'fdcllities, sulnmer calnps for ossuclates' ciulrlrvn during the suinmer vacations.

Savings: Voluntan~ savjng plugram where 1 ti3 2h of associates' wages were kept I ~ l r a I t~ng term ,&. retirement savings program <..

Ecunr>~nic assistance: Health

o Bimbn clrgauized a hea?th week where social security cane tcl Bilnbu to du prevmtivc mrdic.itw tests o t ~ associates such as sugar level teqt$, chc:esterol, blood pressure, among nther things

o Associates that came out bad in any nf the tests were glwn ic)llorv-up chcch up throughout the year.

< I - "

o Bimbo had m d a t u j health rhrrhs fur rlS50CldttlS over 40. o In case of severe health prnhlein. B~ntbo helped by putting prcssurc, intcl the social secunt):

system su that tk~e assoclnte got adequate treatment. o Biinbo also got private labs to inake specialized tests to associates at \,cry lotv pric~,s

Home imnpryvement: ?,$<

o - Bimbo organized a t~clmr i~npruvernent fnrr through the Mexican i ~ ~ s t ~ t u t e for 11ul11e

~ q u i ~ ~ i w ~ i t, IMLVI, so that associates ccluld get home imprnve~nent c r e ~ i ~ t s and better prices o i ~

home improvement materials. Wills and deeds.

A ,A;e.A, Bi~nbu got associates special prices with public nutilrlrs su that they could regularize their land r ,,>

or hurtle by making deeds as well as wills Bimbo also helped associates by allowing thmi to pay fclr thc~r will or deeds procedures in n monthly basic instead of in a lump sum.

."-'?+pilwtionist and ductrlr in Bimbo off ices to help as~ncinter Leeping a healthier diet. A "

C<IIIJ ill:: Irr posting is all infr i~~gelr~ent of copjright. Permissio1is(a~1ibsp.l~arvard.rdu Ilr 6 17-7113-786

Grupo Bimbo: Growth and Social Responsibility

Exhibit 9 Obesity and Overweight Prevalence in Mexican Childreii

Obesity in children 5 to 13 year olds 1999 2006 % Change Ah,

i3ily.i 5 3 O n Lj. 4Y", -a;>%" no:, Girls 5 t)",, S T p 47.0%

Overrreight and obesity in children 5 to 11 year olds 1999 1006 'b Change Boys and glrls 1 H.hr%, 2h.ilnI, 3:) 7,)

Suurce: Compiled by casewriters using data from Incuesta Nacionnl de Snlnd y ~ u h - ~ c i r j n ~ h O h , l n s t~ tu h> N;lclrrn;ll ral-J 1 , ~ S ~ l u d PubIica, ht~://www.insp.mx/t.n~~n~~t/r~~~~lt~~los~~~~.ui~~t~p~lf, I x t vlrwei Julv ;.2(717R.

Exhibit 10 Health programs in Bimbo b: Snciill marketing campaign advocating 30 minutes of daily exercise through televisio~l ciulimcrcinls, billboards, radio announcements and pac%ging.

Futbnlita Bimbo Stars Tournament: Bimbo invited hlldren to soccer tourr~ament where they were given information on the need for p tiv~ty and l~c.~lltl~v dwt.

hlai l 2nd e-mail distribution of nrrtrinotas, an informatinn bmdl~lrt. 1211 hcalth n t~d I I L I ~ C I ticlr~, to more than 1 million people annually.

Distribution ot posters promoting good nutntion in 2 ;i100 pilblic rid p r iv.1 te sc'lii~~ls ,, Distribution of the book "Living a Hedl thy Lifest~le'%$Y11 Hlmbo'u ,~suc)ci,~ teu t l~rougl~ou t the world and to M&Ps owners.

>,A

Elimination of transfats from its F ~ u ~ u c t s .

Ikrl [iced portinn sizes and created products with only 100 calories

IPrai~ t.sbed fat, sugar and salt in 8% of all Bimbo's product portfolio

F~)rllfied products with iron that 3aG.e times easier to absorb, The Public Health Natic~nal lnstitutr, in its Nutrition and Health 2006 census showed that children in Southern Mexico I i ~ d an important iron deficiency. Bimbo developed products that appenlcd to children and myt 20"" uf their daily icun needs*

, : 47

Cre;lteci a new bread that hebed 'reduce chnlesterol A >

P~rt lc~pated in the Alliancem%f the Heart with Pfizcr and Lala whew 200,000 people wcrc diagllosed and tested, at no cost, for cardiovascular discascs bawd CHI ~ndicators such as chvlesterol, glucose and blood pressure levels.

tgrtrt to be an exemplary firm by giving talks to assoc~ates on hral tli and u ~ g ~~utritionists for consults, having heal thy meilus i l l ~ t s cafeterias and

rec.c>n~menda tions to have physical activity in the workplace.

RimLiil g:1v~ founding to many health organizatrons such as The Mexican Foundation tor I-Iedtth (FUNSALQU), The APAC foundation -providing rehabilitation for p~ople with icr cbral palsy, the Ko~~ald McDoilald Children's Foundation -supporting propms thd t d i res tly irt~pror.e the health 2nd well-bcing of children around the wurld, the Juvenile D ~ ~ b e t e s Research Fund, the March of Dimes -health editcation for pregi~aut women and p r o m o t i o ~ ot tolis a c ~ d siipplemcnts in bread and the Mexican Red Cross.

Source: Company iiiformat~nn

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C:(II) ~ ' i ~ i g or pt~sting is an infringement o i v o l ~ y r i ~ l ~ t . Per~nissio~is~@lihsp.l~nrvnrd.rd~~ or 6 17-783-786

Grupo Bimbo: Growth arid Social Responsibility

Exhibit 11 Impact of Natural Resource Conservation at B~mho

Since 2003, Bimbo decreased i ts vehicle fleet fuel by 3.6 miIlion litters and increased their average kilometer per liter by 15% by improved carburetion technology engines and fuel types

Sincc year 2000, Bimbo decreased its cncrgp ii~dcx per ton produced by 13", ;rnd the tliel-~nal energy index per ton produced by 34'Yu.

Since year 2000 Bimbo had saved 194 million liters of water wA 23% of i t s consllny>t~txi water treatment, installing water-treatment systems in plants, collrrt~ng M a trr from r;l In. among other things.

By 2008 Bimbo was recycling 85% of their sohd wastes through recycling p~lis~e::

St~~ircc: Company infr>rrnatiun.

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3(19-(125 Grupo Bimbo: Growth and Social Responsibility

Exhibit 12 Organizations and Institutions S~ipported by Bimbo, among others

+ Educational Institutions: o Instituto Tecnol6gico de Estudios Superiores de Monterrey (ITESEM) o Escuela Bancaria y Comercial (EBC} o U~iiversidad J e Monterrey (UDEM) o Universidad Nacional Autbnomn de MGxico (UNAM) o Lnstituto de Fomento e Investigacion Educativa (TFW)

Othcr foundations or institutions: o Televisa foundation o UNICEF o Junior League Mexico City o Papalote Children Museum: from the Support given to the museiim, in 2007 4,500

cl~ildrcn from public schools and 30,000 child;& from marginalized communities visited the museum

o Fundacion Pro Empleo Productivo o Impulsa o FundaciGn Mexicana para el Desarrollo Ru$$.' o I-'atronato Pro-zona Mazahua o Fundaci6n Tarahumara o Fundacihn CIE o Amigos del Museo de Arte Popular: 'benefits more than 8 iiiillioii Mexican artisans

Rclicf efforts: o After the 2007 floods, Bimbo inade a qampaign to help associates that were damaged by

the flood. Over 33,000 associates donded and donatioils wcre matched by Bimbo. n In the United States, Bimbo contributed to food drives for the tornado victims in Texas

and Kansas + \ < W C

In teri~a tional foundations: o Project leaders of the 21" o National rark Foundati o Toys for tots (United States) o United Way (United States) o Junior Achievement (United States) o Institute of the Americas (United States)

" Amgicas (United States) men Association (YWCA)

Source: Sr>c~al ~e$&ppilitv Rcport 2007, Grupo Bimbo.

C,

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