Emilio Veneziano
Case 3: Sara Lee Corporation
MGMT 471W Dr. Fairbank
Sara Lee Corporation
To: Brenda Barnes
From: Emilio Veneziano
Date: 11/12/13
Subject: Assessment of Sara Lee Corporation’s Corporate Strategy
Brenda, your decision to spin-of Hanesbrands was a questionable one. This sector of
the Sara Lee Corporation did not necessarily correspond with its other North American
business, which were concentrated in the food industry. But, the sector did correspond with
the businesses included in Sara Lee International, which would have allowed the additional
distribution of apparel to other foreign markets. The primary products offered were not
innovative or ground breaking products, but provided a strong and steady source of revenues
for the company. Though revenues, gross margins, and operating margins were at a steady/flat
rate, Hanesbrands saw an increase of over $103 million in net income after 2005. Returns on
assets have fallen 5% since 2004 and return on equity was cut in half during the same period.
Debt-to-equity ratios was around 0.5 in 2006 right before the spin-off, showing that
Hanesbrands had been capable of keeping its debts low compared to the amount of equity it
had on hand. After the spin-off of Hanesbrands, the business acquired significant debt in order
to remain a standalone business. Though the company was able to pay off $100 million in longterm debt, the significant amounts of debt left over may hinder its ability to turn solid profits in
the future. Sara Lee should have retained this business, allowing it to expand in foreign
markets it already had a presence in while bringing in revenues which could be used to
accelerate other businesses.
This company has positioned itself with strong food products which make it successful in
both the retail and foodservice industry. Sara Lee can utilize its strong growing meats in its
Emilio Veneziano
Case 3: Sara Lee Corporation
MGMT 471W Dr. Fairbank
food service business, saving costs within the company while building strong relationships with
other businesses. Sara Lee’s thick-sliced bread is very popular in supermarkets, which has
captured a strong market share while producing strong sales for the North American Retail
Bread segment. Its desserts are not fairing as well, with sales approximated to decrease over
the next several years. The desserts, however, hold a fair market share in the foodservice
business, allowing Sara Lee to cater healthier options to fast-food customers. Sara Lee
International has captured strong market share within Western Europe, utilizing the sales from
its coffee pods. The Senseo coffee pods are the second best-selling coffee product in Europe,
generating $25 billion in sales for SLI. SLI has taken advantage of the growing hot and cold
coffee drink industry, innovating products that will allow it to grow market share within this
segment. Bimbo, SLI’s number one brand of bread in Spain, should be able to take advantage
of some of the growing packaged bread sales, though private label brands are preferred.
Bimbo may not be able to continue its sales within the International Bakery segment due to the
switch to private brands in the future. The company’s household brands are overshadowed by
Kiwi, which generates almost $300 million in sales. Sanex is a cash cow for this segment, with
the significant market share held in a slow-growing industry. The company should be able to
continue generating its constant sales of $280 million. Though SLI has other insecticide and
household brands, it diverts quickly from the company’s core line of businesses. Its other
products generate large sales for the company, but stray away from the company’s main focus.
The insecticide brands do have the largest market share, and are positioned to overtake the
rapidly-growing Asian market. Its air fresheners are in a declining market, which may prevent
its 3volution from generating large sales to improve value for the company.
Sara Lee Has several positions that it can take that can strategically grow its profitability
and help meet the company’s goals. The company currently has limited margins on its bakery
line, especially from its dessert items. Since Sara Lee has significant market share with its
packaged bread in North American, the company should eliminate its dessert sales and the sale
Emilio Veneziano
Case 3: Sara Lee Corporation
MGMT 471W Dr. Fairbank
of single-serving coffeemakers. Growth in this segment is very slow, and is not growing within
the foodservice industry either. By selling off its dessert brands, Sara Lee can invest the profits
of the sale into other innovations in its other business units. Sara Lee International should
expand its household and body care brands into the United States. Its air freshener brands hold
significant market share in Europe, which could be utilized in North America. The market for
cleaning products and air fresheners is strong in the United States. Sara Lee’s innovations
would be very successful in the growing market across the Atlantic. The company can also sell
more of it insecticides in developing nations, where few treatments are available to prevent
bacteria. Nations in Africa are still growing, and could utilize the insecticides to improve
farming practices within the continent. Beverage products sold by Sara Lee International
produce almost 50% of all profits. These beverages could be sold to local retail business, similar
to what is done with Sara Lee Foodservice. The company has already begun selling beverages
in retail operations, and with the current contacts and knowledge of the foodservice industry,
profits could easily be managed. The strategy allows Sara Lee to develop larger profits by
selling its teas and coffees within local businesses throughout Europe. If Sara Lee follows these
strategies, the company will be able to obtain profits similar to what it had before its
divestures.