About Industrias Bachoco, S.A.B. de C.V.

Industrias Bachoco, S.A.B. de C.V., through its subsidiaries, operates in the food industry in Mexico and the United States of America (United States or U.S.), primarily in the poultry industry. The company owns and manages more than a thousand facilities, organized in nine production complexes and more than 80 distribution centers in Mexico, and one production complex in the United States. In Mexico, the company’s core business is poultry (chicken and egg products), but it also produces and sells a wide range of other products, which it refers to as ‘others’, including balanced feed, pet food, pork, beef and turkey value-added products, and one day old breeders and chicks, as well as a laboratory that produces vaccines for the poultry industry and other similar industries. In the United States, the company’s sole product line is exclusively chicken products. Segments The company operates through Poultry and Other segments. Poultry segment This segment consists of chicken and egg operations of the company. Chicken Chicken products in Mexico are classified into six main categories, such as live, public market, rotisserie, supermarket broiler, chicken parts and value-added products. The company operates in all of these categories. Live Chicken: Live chicken is sold live to small independent slaughtering operations or to wholesalers that contract with independent slaughtering operations for processing. Public Market Chicken: Public market chicken is a whole broiler presented either un-eviscerated or eviscerated, generally sold within 48 hours after slaughter. This product is sold to consumers without any packaging or brand identification. Rotisserie Chicken: Rotisserie chicken is a whole broiler presented eviscerated and ready to cook. Supermarket Chicken: Supermarket chicken is a fresh whole broiler presented with the edible viscera packed separately. Chicken Cuts: Chicken cuts refers to cut-up fresh chicken parts sold wrapped in trays or in bulk principally to supermarket chains, the fast-food industry and other institutional food service providers. Value-Added Products: Value-added products refer mainly to cut-up fresh chicken parts with value-added treatment like marinating, breading and individual quantity frozen. In the U.S., the company produces and distributes only chicken products. Eggs The company participates in the bulk and packaged categories of eggs but does not participate in the processed egg market. It sells both brown and white eggs. Bulk: Bulk is distributed in large 360-egg cases. Packaged: Packaged is branded packages of mainly 12, 18, 24 or more eggs. Others segment This segment consists of operations of swine, balanced feed for animal consumption, and other by-products. Balanced Feed The company participates in both integrated and commercial channels, as it produces balanced feed used for internal consumption, as well as balanced feed it ultimately sells to third parties. Marketing Channels Marketing and Distribution of Chicken Products in Mexico The company has developed an extensive distribution system to participate in all the existing distribution channels of chicken and egg products. It participates and operates in the following marketing channels: Live Chicken: Unlike most other countries, Mexico has a large marketing channel of live chicken, which mainly operates in the central and southern regions of Mexico. Wholesalers: Large percentages of the company’s chicken sales operate via wholesalers. The main products marketed in this channel are live and public market chicken, as well as rotisserie. Institutional: The company sells a large amount of product to institutional customers. It mainly sells chicken cuts and rotisserie chicken in the institutional channel. Supermarket: The company sells cuts and value-added products, as well as supermarket chicken types through supermarket channels or convenience stores. Retail: A wide range of products are sold under this marketing channel that goes from the live chicken to value-added or public market and supermarket chicken type. The company supplies several points of sale that directly sell these products to the customers. The company uses its own fleet to transport the majority of rotisserie chickens, supermarket broilers and other chicken products to its customers in Mexico. It tries to cooperate with existing distribution channels. The company distributes products from its processing plants to its cold-storage facilities and warehouses, which serve as a midpoint in distribution to wholesalers and local customers. From its cold-storage facilities, the company services wholesalers and retailers and transports certain products directly to supermarkets and food-service operations. Its distribution infrastructure includes more than 60 cold-storage warehouses and facilities and a large fleet of vehicles. Marketing and Distribution of Chicken Products in the U.S. The company’s U.S. operations, which lie across the River Valley area in Arkansas and Oklahoma, Alabama and Georgia, produce mainly chicken products. Those plants mainly supply grocery retailers, food service distributors, national accounts and commodity customers throughout the U.S. The U.S. complex also services the foreign market and exports to several countries, including various Asian countries and Mexico. Its distribution line through its plants is handled mainly through third parties. Marketing and Distribution of Eggs Products in Mexico The company sells white and brown eggs. Its branded carton of brown eggs is a premium product in the Mexican market. The company has designed its egg distribution system to transport eggs from its laying farms to customers in all sales regions. Wholesalers: The company sells eggs in bulk; these wholesalers operate mainly in central Mexico. This product is sold to consumers mainly by kilogram and not by unit. Institutional: The company sells eggs in bulk in this institutional marketing channel. Supermarket: The company sells eggs packaged with brand identification and a large number of presentation patterns in packages of 12, 18, 24 or more eggs. Retail: The company distributes eggs directly to customers in packages with brand identification. Marketing and Distribution of Balanced Feed in Mexico The company’s production of balanced feed to third parties accounts for a wide range of products. It produces balanced feed products mainly in the poultry industry, but it also produces in other markets, such as pet food, cattle, swine and fish, among other species. The company sells balanced feed products mainly to small livestock producers and through a network of small distributors located mainly in central and southern Mexico. It has six feed plants dedicated to producing balanced feed to third parties. Patents, Licenses and Other Contracts As of December 31, 2020, the company owned a total of 810 industrial and intellectual intangible assets, including 645 registered brands, from them, 443 are brands registered in Mexico, 99 are brands registered outside of Mexico, and 103 are commercial media communications brands; 10 patents in Mexico; and 155 copyrights, from them 52 are software copyrights and 103 billboards copyrights. Seasonality The company’s sales are moderately seasonal in Mexico. Generally, it experiences the highest levels of sales in the second and fourth quarters (year ended December 31, 2020) due to higher chicken consumption during the holiday seasons. As for the company’s sales in the U.S., there is slightly less seasonality due to the mix of products offered in the market, but breast meat prices are typically higher in the second and third quarters and wings are more in demand in the first and fourth quarters. Regulations In Mexico, the Ley Federal de Competencia Económica (Mexican Economic Competition Law), regulates monopolies and monopolistic practices. Under this LAW, Mexican producers, including the company are required to notify the Comisión Federal de Competencia Económica (Competition Federal Commission) of all proposed transactions exceeding specified threshold amounts as set forth in the Mexican Economic Competition Law. It has complied with all requirements under this law. The chicken industry is subject to government regulation in the health and environmental safety areas, including provisions relating to water, air pollution and noise control. The principal laws and administrative authorities in these areas in Mexico and the U.S. include: Mexico: The Servicio Nacional de Sanidad Inocuidad y Calidad Alimentaria (Mexican Sanitary Authority), the Ley General de Equilibrio Ecológico y Protección Ambiental (General Law of Ecological Balance and Environmental Protection), and the Secretaría del Medio Ambiente y Recursos Naturales (Ministry of Environment and Natural Resources). The U.S.: The U.S. Department of Agriculture, the Centers for Disease Control, the Environmental Protection Agency, the U.S. Department of Homeland Security, and the U.S. Department of Labor. The company provides information to these authorities on a regular basis or whenever required to assure the company’s compliance thereof. Its Mexican and U.S. subsidiaries are also in compliance with all regulations and are constantly monitored to ensure compliance in case of any changes in the regulatory environment. The Comisión Nacional del Agua imposed fines on the company for infractions the company supposedly committed when extracting water from wells and other sources for livestock use. History Industrias Bachoco, S.A.B. de C.V. was founded in 1952. The company was incorporated in 1980 under the laws of Mexico.