Gruma Corporation-U.S. Operations


GRUMA conducts its U.S. and Europe operations through Gruma Corporation, which manufactures and distributes corn flour, corn tortillas, wheat tortillas and related products.

Gruma Corporation operations began in the United States in 1977. Initially, Gruma Corporation developed a presence in the major tortilla consumption markets in the United States by acquiring small traditional tortilla manufacturers and converting their production processes to the modern corn flour method. Gruma Corporation also vertically integrated its operations by:

	Designing and building proprietary tortilla manufacturing machinery for use in its U.S. operations.
	Constructing corn flour manufacturing facilities in the United States
	Establishing corn purchasing operations;
	Developing brand equity
	Forming an extensive distribution network

GGruma Corporation's strategy has been to participate in all major tortilla consumption areas in the United States, with the purpose of becoming a nationwide branded tortilla manufacturer. Currently we distribute our products to more than 30,000 stores.

The U.S. Hispanic population is expected to increase approximately 3.5% per year. We believe that this increase in the Hispanic population in the United States, and the increasing consumption of Mexican style food by non Hispanics in the United States, have yielded an increasing demand for our tortillas and related products. We also participate in this market growth by selling corn flour, primarily to other manufacturers of tortillas and tortilla chips.

Markets

Corn Flour Market. Based on internal studies, Gruma Corporation estimates that it has a leading share of the U.S. market for corn flour used to manufacture tortillas, tortilla chips and taco shells. Based on these studies, we estimate that, excluding Frito-Lay, corn flour accounts for approximately 52% of the raw material used in the production of corn tortillas, tortilla chips and taco shells in the United States, with traditional wet corn dough accounting for the remaining approximately 48%. The market for corn flour has grown significantly in recent years as a result of the growth of corn tortilla and tortilla chip consumption in the U.S. market, as well as the conversion of tortilla producers from the wet dough method to the corn flour method.

Tortilla Market. The main segments for Gruma Corporation's tortilla products are the retail and food service markets. Retail market is comprised primarily of supermarkets, smaller independent stores and convenience stores, while food service customers include major chain restaurants, food service distributors, schools and hospitals. We estimate the current size of the U.S. tortilla market to be U.S.$1.9 billion at the manufacturing level, including both the retail and food service markets, and that we are one of the leading companies in this market.

While the largest individual tortilla markets in the United States remain in the West and Southwest, in recent years the U.S. tortilla market has evolved to become national in scope.

Main products Gruma Corporation manufactures and distributes two principal brands of tortillas and related products in the United States, MISSION® and GUERRERO®, in a number of varieties of corn and wheat tortillas and tortilla chips. Gruma Corporation also produces over 20 varieties of corn flour that are used to produce different types of tortillas and tortilla chip products under the MASECA® brand.

Operations. Gruma Corporation produces corn flour at five plants located in Edinburg, Plainview and Amarillo, Texas; Evansville, Indiana; Henderson, Kentucky; and Madera, California.

Gruma Corporation produces its tortillas and other products at several manufacturing facilities located primarily in large population centers, mainly in Western and Southwestern United States. These locations give Gruma Corporation wide distribution coverage. Additionally, the Coventry plant in England was built in 1999 to penetrate the European tortilla market.