Global Dietary Shifts And Rising Costs Will Erode Margins

Key Takeaways

• Shifting consumer preferences and stricter food regulations threaten core product sales and profitability over the long term.
  
• Rising input costs, growing retailer power, and integration risks from expansion heighten margin pressure and earnings volatility.
  
• Strong global diversification, strategic investments, and active portfolio innovation position Grupo Bimbo for sustained growth, operational efficiency, and brand resilience amid evolving consumer and market trends.

Catalysts

Produces, distributes, and sells various bakery products.

• Demand for Grupo Bimbo's traditional bread and baked goods faces structural risk from the accelerating global shift toward low-carb and low-sugar diets, which is expected to erode core category sales and drag on consolidated revenue growth for years to come.
  
• Tightening global regulations on processed foods-including sugar taxes, stricter labelling, and advertising restrictions-will drive higher compliance and reformulation costs, placing persistent downward pressure on net margins.
  
• Increasing buyer power from consolidating supermarket chains and hard discounters, coupled with the rise of private label competitors and artisanal bakeries, is likely to erode Grupo Bimbo's pricing power and further squeeze gross profit margins across key developed markets.
  
• Overreliance on wheat and other commodity inputs, combined with ongoing inflationary pressure and global supply chain disruptions, is set to increase input cost volatility and could lead to sustained periods of gross margin compression and volatility in earnings.
  
• Rapid expansion into new geographies raises integration risks and operational complexity, potentially resulting in execution missteps and underperformance in acquired businesses that could drag on both top line growth and long-term profitability.

Grupo Bimbo. de Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Grupo Bimbo. de compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Grupo Bimbo. de's revenue will grow by 4.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 2.9% today to 2.5% in 3 years time.
• The bearish analysts expect earnings to reach MX$12.0 billion (and earnings per share of MX$2.66) by about June 2028, down from MX$12.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 25.5x on those 2028 earnings, up from 18.3x today. This future PE is greater than the current PE for the MX Food industry at 12.4x.
• Analysts expect the number of shares outstanding to decline by 0.76% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.87%, as per the Simply Wall St company report.

Grupo Bimbo. de Future Earnings Per Share Growth

Risks

• Grupo Bimbo's robust global diversification and ability to achieve record-breaking sales across multiple regions, even in challenging macroeconomic environments, suggest a resilient and flexible revenue base that can offset periodic downturns and support topline growth over time.
  
• Ongoing strategic investments in automation, supply chain optimization, and digital transformation, particularly in North America, are on track to deliver significant productivity improvements and operational efficiency, positioning the company for higher net margins and EBITDA growth in the medium to long term.
  
• Active portfolio innovation in both value and premium segments, alongside a multi-brand strategy and targeted launches in health, wellness, and protein-focused products, enables Grupo Bimbo to adapt rapidly to changing consumer preferences and supports brand relevance, which can sustain or expand revenues.
  
• The company's continued success in M&A and global expansion, with recent acquisitions in Latin America, Europe, and Asia, enhances geographic diversification and organic and inorganic growth potential, increasing resilience and stability for both revenue and earnings.
  
• Recognition for ESG practices and a growing portion of sales meeting optimal nutritional standards strengthens Grupo Bimbo's brand equity and can attract ESG-conscious consumers and investors, potentially supporting premium pricing and increasing net earnings durability over the long term.

Valuation

• The assumed bearish price target for Grupo Bimbo. de is MX$49.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Grupo Bimbo. de's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MX$78.0, and the most bearish reporting a price target of just MX$49.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be MX$477.3 billion, earnings will come to MX$12.0 billion, and it would be trading on a PE ratio of 25.5x, assuming you use a discount rate of 13.9%.
  
• Given the current share price of MX$51.5, the bearish analyst price target of MX$49.0 is 5.1% lower. The relatively low difference between the current share price and the analyst bearish price target indicates that the bearish analysts believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.