As people stayed home during the pandemic, Grupo Bimbo (OTCPK:BMBOY) (OTCPK:GRBMF) was one of the packaged foods companies to benefit. The company definitely saw a hit to its foodservice channels, as well as vending and convenience stores, due to the lockdowns, but increased at-home consumption of breads and other bakery products drove strong growth in North America and Europe, leading to meaningful operating leverage.
As consumer habits normalize once lockdown restrictions go away and people feel more confident going out, I expect Bimbo face some challenges. Just as a shift to staying at home drove volume growth, a shift back toward pre-pandemic behaviors should pressure volumes. With that potential volume pressure, it will be even more important for management to execute on supply chain, manufacturing, and distribution initiatives (many of which were delayed during the pandemic) to offset volume/scale pressures.
I was lukewarm on Bimbo shares back in September, and while the shares have since underperformed the S&P 500, they have done pretty well relative to other packaged food companies. The shares do look undervalued today, with 20% or more upside in the near term.
These shares look roughly as undervalued as Gruma (OTC:GPAGF) (OTC:GMKKY), but I’d note that where Gruma has a strong ROIC and operating track record, and minimal M&A risk, Bimbo has a poor M&A track record and more work to do on operating efficiency. Gruma, then, is a more defensive play with some offensive/growth characteristics, while Bimbo is more of an ongoing self-improvement story.
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Post-Pandemic Normalization Will Bring Some Challenges For Grupo Bimbo
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