Sara Lee underwent several turnaround attempts over decades to address structural and strategic problems. Initial problems included a complex organizational structure, poor retailer relationships, and lack of innovation. Attempts in 1997 and 2000 included layoffs, asset sales, and brand reductions. A large 2001 acquisition of EarthGrains bakeries failed to generate profits. A new transformation plan centralized operations and sold underperforming brands, aiming to focus on growth areas and reduce costs through efficiency. Recommendations included developing health-focused products, aggregating brands by category, and improving financial management through cost control.

1. Sara Lee – A tale of
another turnaround
-Ajay Norman (DM18202)
-Ankur Kislaya (DM18206)
-Melissa (DM18233)
-Saurabh (DM18246)
-Shivam shukla (DM18248)

2. Introduction
 Founded by Nathan Cummings.
 Sales doubled to $2 billion by 1973.
 In 1975 Bryan came into the picture.
 Bryan acquired Hanes Corporation in 1979.
 Domestic sources contributed 89% of its income, 30% of income from
abroad.
 In 1978, Douwe Egberts was acquired.
 Bryan wanted to have a diversified and decentralised company.

3. Contn..
 Wanted to acquire brands with higher market shares.
 The following acquisitions improved Consolidated’s pastry, coffee and
tea, and meat market shares:
 Chef Pierre Pies, Superior Tea & Coffee Company and Gallo Salame (Italian dry
sausage product maker)
 Jimmy Dean Meats (1984)
 Sales figures:
 $9 billion by 1987
 $20 billion in worldwide sales by 2000

4. Initial Problems
 In 2000, Steven Mcmillan became the CEO of Sara Lee.
 Sara Lee focussed on its core categories:
 Food
 Underwear
 Household products.
 Structural problems persisted during 21st century.
 Shareholder distrust with regards to Sara Lee’s product portfolio.

5. Internal problems
 Complex organizational structure.
 Poor relationships with its retailers (category-
buying).
 No cooperation expected among divisions.
 Lack of new and innovative products

6. External problem:
 Consolidation within the grocery and other retail food
channels.
 A loss in market share due to recession.
 Lower sale prices and higher energy costs.
 Failed to respond to changes in consumer trends.
 Sara lee has little pricing power.
 Bargaining power of consumers increased.

7. Attempts at Turnarounds – Sept
1997
 $3 billion shares were repurchased by selling manufacturing facilities.
 Reducing degree of vertical integration – “Deverticalization”.
 Shift to Brand Management and Outsourcing.
 There was an increase in stock prices.
 Recalled contaminated meat
 Affected credibility and failed to improve sales.
 Share prices tumbled.
 Growth from fiscal 1996 to fiscal 2000 was 2.2%

8. Attempts at Turnarounds – May
2000
 Fired almost more than 13,000 employees.
 Acquired Coach and Mark Cross leather goods.
 Non-performing brands were removed to reduce costs.
 Regional brands had been cut by half.
 Lack of focus on key brands and growth.
 Lack of product innovation.

9. The Largest Acquisition Yet
 Purchased EarthGrains for $1.9 billion.
 Consolidate a branded consumer business.
 To brand EarthGrains’s baked goods with the Sara Lee brand
 Leverage EarthGrains’s existing Direct Store Delivered (“DSD”) system
 EarthGrains reported less than $100 million in operating profits
 Shut down some of their 55 fresh bakeries and eliminated some regional breads.

10. The Transformation Plan
New Organization structure:
 North American Retail to include bakery, packaged meats and coffee
retail business
 North American Foodservice to include bakery, coffee and meats
foodservice
 Sara Lee International will include bakery and beverage business outside
North America
 North American food and beverages businesses to be located with
corporate staff and headquartered in Chicago
 Share best practices and pursue growth along with development
opportunities for the employees

11. The Transformation Plan
Changes in the Portfolio (Portfolio action):
 Sale of Branded Apparel, European Apparel business; Meats Europe;
Direct Selling and US Retail Coffee. These represent almost 40% of
company revenues ($ 8.2 billion)
 Focus on smaller no of business segments that can result in growth
Operational Efficiency (To reduce cost):
 Reduce the cost structure; increase R&D and Marketing spending for
small brands
 Centralisation of the IT, procurement and services ($175 mn to $250 mn)
 Reduction of manufacturing capacity in North America retail business
 Cost saving will be offset by increase in marketing spending ($ 250 mn)

12. Recommendations
 New Product Development:
 For health conscious customers
 Aggregating businesses:
 By aggregating brands according to category – adapting to retailers
 Better financial management:
 By better cost management
 Use better strategies for Hedging
 Cost saving through centralization of back end operations

13. Thank You