Eric Tinoco
Sara Lee Case Questions
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Assignment Questions
1. What is Sara Lee’s corporate strategy? How has its retrenchment strategy changed the nature of its
business lineup?
Sara Lee’s ongoing and current corporate strategy began in March 2008 and is known as ‘Project
Accelerate’. It included additional business process outsourcing, operating segment restructuring, new
supply chain efficiencies, reductions in corporate overhead, and reductions in employee benefit costs.
By the end of fiscal 2010 Project Accelerate had produced total cumulative benefits of $180 million.
Management projected that cumulative benefits for Project Accelerate to reach $350-$400 million by
thye end of fiscal 2012. With respect to its retrenchment strategy, in 2010 the division had a number
of market-leading brands such as Ball Park franks, Jimmy Dean sausage, Hillshire Farm smoked
sausage, State Fair corn dogs, Sara Lee frozen deserts, and Senseo single-serving coffeemakers and
coffee pods. In 2010, its North American Fresh Bakery unit was the best-selling brand of packaged
bread sold in the U.S., with an 8.3% market share. Its North America Foodservice unit held a 65%
market share in liquid coffee and tea sold to food service customers, a 52% market share in pies, a
19% market share in cakes, and a 20% share of refrigerated dough sold to food service customers. Its
International Beverage, International Bakery, and International Household & Body Care units all had
leading product brands in various markets throughout the world.
2. What is your assessment of the long-term attractiveness of the industries represented in Sara Lee
Corp.’s business portfolio?
Based on performance figures as of the end of fiscal 2010, the long-term attractiveness of Sara Lee
appears high. Its Project Accelerate has resulted in a re-focusing of its core products while divesting
away of non-core businesses has allowed it to repurchase stock thereby increasing EPS and making
the brand more attractive to prospective investors.
3. What is your assessment of the competitive strength of Sara Lee Corp.’s different business units?
My assessment of the competitive strength of Sara Lee’s different business units is high. The
company’s new business line-up will allow it to lower operating expenses through its continued
emphasis on efficiency, its focus on its most promising markets, and by reducing inventories.
4. What does a 9-cell industry attractiveness/business strength matrix displaying Sara Lee’s business
units look like?
Some of the business units will be in the upper left hand corner of the 9-cell industry attractivenesscompetitive strength matrix. And this will allow them to have units with high significance needs.
5. Does Sara Lee’s portfolio exhibit good strategic opportunities for skills transfer, cost sharing, or brand
sharing do you see?
Yes, I believe Sara Lee’s portfolio exhibits good strategic fit. As mentioned in answer 3, the company
narrowing into food retail industry has increased the chance for value-chain matchups. The narrowing
has also opened up opportunities for skills transfer, cost sharing, and brand sharing as segments use
mostly the same products and product line.
6. What is your assessment of Sara Lee’s period following the divestitures that were the core of Sara
Lee’s retrenchment strategy?
Out of all the Sara Lee’s Units, the International bakery is the weakest after the retrenchment. Most
of the strongest and successful ones are International Beverage and North America retail. The
performance during the fiscal year 2008 – to 2010 was sufficient enough just the way they projected it
to be. The company still has good foresight because they have plans and strategies to rise and make
more profit.
7. What is your overall evaluation of Sara Lee’s retrenchment plan? What evidence and/or reasons
support a conclusion that Sara Lee’s shareholders have or have not benefitted from the strategy?
I believe that Sara Lee’s retrenchment was a good idea because they improved their weak points and
they eliminated those non-core business units in order to focus more on the stronger units that could
yield profit to the company. Project Accelerate looks to be on target in achieving expected benefits of
$350 million to $400 million by 2012, which would lead to improvements in earnings per share of
$0.15 to $0.20.
8. What actions do you recommend that Sara Lee management take to improve the company’s
performance and boost shareholder value? Your recommended actions must be supported with
convincing, analysis-based arguments.
I believe if Sara Lee sticks to the retrenchment plan, there would be an increase in their profits. They
company should always monitor new entries into the market in order to identify the potential threats
and deal with them pro-active to the extent possible. Also, as they generate more free-cash flow as
revenues increase while costs decrease, I would recommend that they continue their sharerepurchase program. It rewards investors and signals to the market that the company’s management
strongly believes in their future prospects.