1. Grupo Bimbo

2. INDUSTRY COMPETITION - Highly fragmented and competitive industry structure, with different players in different countries DEMAND PATTERNS - Consumption habits heavily influenced by cultural legacy, demographics, tastes, fashion (e.g. low-carb diets in the US), and price sensitivity DISTRIBUTION NETWORK S - Retailers bargaining power and location, country geography , transportation infrastructure, as well as labor relations affect distribution chain and costs ADMINISTRATION - Regulatory frameworks vary widely among countries for labor relations, new business registration, bankruptcy filing Bimbo’s globalization challenges

3. Mistakes in BRAZIL…. Grupo Bimbo entered the Brazilian market wrongfully assuming it was similar to the Mexican one: Overall bread consumption is much lower in Brazil than in Mexico; more specifically, industrial bread consumption in Brazil is three times less than in Mexico (2.5 kg per capita in Brazil v. 7.5 in Mexico, in 2006, data from Exhibit 4) European immigrants in South America have maintained a tradition of artisanal fresh bread – « Artisanal bread is king » (A. Diaz, Head of Grupo Bimbo , Central and South America Division) Taste for sweet goods differs from Mexico: Brazilians prefer pound cakes, cereal bars and products with milk cream, whereas Mexicans like strawberry jelly filling Intense competition and relatively low demand push prices down: industrial bread can be sold at only $ 1.50 per Kg in Brazil v. $1.90 in Mexico Unsuitable distribution strategy, targeting small shops, whereas 70% of sales happens in hypermarkets. Mexican brand names are not meaningful to Brazilians; subtle language barriers exist among Latin American countries.

4. « If youwant to be in South America, you have to be in Brazil »(A. Diaz, Head of GrupoBimbo , Central and South America Division) Although hardly profitable, Brazil is a « must » market for a group that wants to have a presence in South America.

5. …. and ways to recover. Control costs with a new distribution strategy adapted to the local market structure (as already initiated, deal directly with large retailers and use independent operators to supply small retailers) Improve revenue by offering new, different products, better suited to local taste, particularly in the promising confectionary sector, a growing market although still representing only 65% of Mexican sales in 2006 (based on data in Exhibit 5)) Make Brazil a knowledge and innovation « lab » for the group. Use sound market research, instead of blind guessing….

6. U.S. MARKET CHALLENGES Strategic importance of local environment In The U.S. Market, Bimbo’s strategy is resulting in a “Contributor” position, because of the strong importance of the local environment, specifically in terms of pricing for their product as well as their lack of bargaining power on the distribution side. Their competence in terms of operations is affected by the unionized truckers on which they have too limited power. Competence of local organization

8. well being / healthy lifestyle are general trends influencing many other industries as well as competitors (Nestle’s new goal: health & foods)

10. Supply patterns: Full shelves requirements even if not in line with consumption

11. Buy back agreements

12. Timing delivery

14. position of the U.S. is an advantage in proximity

15. as well as market demand similarities

16. Economy:

17. Price premium not applicable in the US

18. Labor costs:

19. Insurance

21. Yes, go CHINA!

22. Yes, go CHINA!

23. Bimbo in China Strategic importance of local environment Competence of local organization

24. Decision to enter China High Mid Low Low Operational Performance Organizational Development Management Discipline Performance Strategic Fit

25. Recommendations for China Continue their current strategies: Adaptability: Constant improvement & advancement of existing & new products to meet local needs Continue effective promotional campaigns Maintaining standards and improvement of technology to be ahead of its competitors (e.g. longer shelf life) Continue to build good relationship with hyper market chains & government connections Educate more customers on health-related issues and western-style products Find socially responsible solutions for return products

26. Thank you for your attention!