The Flatbread Factor

The Flatbread Factor
Alonso Martinez and Ronald Haddock
Strategy+Business, Spring 2007

Today’s emerging markets, from China to Brazil to Eastern Europe, have strikingly similar life cycles of development.  As Alonso Martinez and Ronald Haddock of Booz Allen Hamilton explain in “The Flatbread Factor,” in the Spring 2007 Strategy+Business, companies that recognize those patterns can pursue global consumers strategically.

Consider Gruma SA, a company headquartered in Mexico.  Gruma’s main line of business in its home market is the production of corn flour and related products, highly sought-after commodities in a land where corn is plentiful and tortillas are a staple.  But Gruma is also a $2.5 billion international powerhouse, with manufacturing plants in the United States, Venezuela, Costa Rica, the United Kingdom, and China.

Why is a Mexican company with a niche food product like corn flour doing so well in Asia, with plans to expand into the Middle East?  The answer lies in a simple yet powerful insight:  Markets in emerging countries tend to follow the same path of development.

By observing the life cycle of emerging markets around the world, Gruma expertly timed its entry into many countries.  Ultimately, its most marketable product has proven to be not a food, but a process — the ability to roll any kind of flour, from corn to wheat to rice, into salable flatbread.

Most people from India do not eat corn tortillas, but they do eat a flatbread called naan, made from wheat, which Gruma sells in the United Kingdom and plans to sell in India.  The Chinese don’t have much taste for corn tortillas either, but they buy wraps made by Gruma for Peking duck.

Like Gruma, companies can succeed in one country after another by applying the business models and management experience they developed in countries that were once at the same stage of the life cycle.  For example, China is producing the same kind of growth they had seen in Brazil after the so-called Brazilian miracle, but at a bigger scale and higher speed.

Every emerging market follows a natural life cycle — a predictable pattern of consumer demand that is evident in steel, wheat, consumer products, and every other major economic sector.

As a country evolves from developing nation to industrialized nation, the population’s basic needs pass through four distinct stages:

  1. In developing countries, most of the population is preoccupied with basic survival — obtaining adequate food, shelter, and clo...