Bimbo announced that the prices of its products will continue to rise during 1Q23. So far, the company has made three price adjustments in 2022. The company cited the increase in the cost of inputs for its products as the main reason.
Like in other countries, Mexican food prices have risen in the past years since the beginning of the COVID-19 pandemic. Data from the Agricultural Markets Advisory Group (GCMA) pointed out that from November 2021 to date, the prices of corn flour have climbed 20.4 percent. The costs of wheat flour ascended by 36.7 percent and oils by 17.2 percent.
According to the National Alliance of Small Traders (ANPEC), the bakery industry had to confront price hikes for its main inputs, such as wheat, energy and logistics. "The price of wheat has exploded as a result of the war in Eastern Europe. Moreover, the cost of gas and electricity in Mexico is increasingly expensive and the supply is insufficient. In addition, there is a shortage of cardboard, plastic and aluminum, which makes the logistics of packaging these products more expensive," said ANPEC.
Another reason for the sudden increase in prices is the end of Mexico’s Inflation and Famine Package (PACIC). The agreement was promoted at the beginning of the year as a response to global inflation, as the government wanted to control the rise in prices of products in the basic food basket. The six-month time span of the agreement recently came to an end, leading Bimbo to make price adjustments
The company reported an increase in the price of its products on Dec. 19, 2022. These products include the 640gr pack of white bread, which went from MX$42 (US$2.13) to MX$45 (US$2.28), and the 360g pack of white bread, which increased from MX$32 (US$1.62) to MX$36 (US$1.82). Both of these products were included in the PACIC. Additionally, the price of sugary donuts and toasted bread will rise by MX$1 (US$.051) each.
“Given the complex situation we are facing, we will do what we must do regarding product prices in 1Q23. It is a difficult decision, but it must happen," said Alfred Penny, President, Bimbo Bakeries US.
Marisol Huerta, Analyst, Financial Group Go for More (Bx+), said that the company expects the raw material market to become more stable, which may alleviate the pressure on food and beverages producers like Bimbo.
During 2Q22, Bimbo’s net sales grew 20 percent in comparison to the same period in 2021. From July to September 2022, profits rose to MX$102.82 billion (US$5.2 million). According to the company’s quarterly report, this was mainly due to a favorable mix of prices and the increase in product volume.