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Sara Lee - Timeline

1939- Came into existence after acquiring CD Kenny co. called as Consolidated Foods Major Business - Food Beverage & Household Major Products - Sara Lee, Kiwi, Coach,etc

1970s Purchase of more than 90 family owned businesses(Total Assets- $ 1 Bn) 1975- $ 2.5 Bn Conglomerate; sold more than 50 companies 1975-85- Valued Non food business 1978- Purchased Douwe Egberts, dutch coffee tea & tobacco producers 1979- took over Hanes Corporation 1980s Non food business accounted for more than 50 % of income; acquisitions solidified durable goods manufacture 1985- Sara Lee official name1989- 30% income was from abroad 1989- 30% income came from abroad 1990s Early 1990s- Spent 1.7 $ Bn to acquire hosiery co in France, Spain, Italy, UK(Retailer had high power in this segment; Walmart dictating terms) 1997- Restructuring- Buy back of $ 3Bn of shares as part of DeverticalizationShifting from manufacturing & sales orientation to one focussed on Marketing the firms top brands

2000 onwards

Steven Mc Millian appointed as President & COO Focussed on core categories Divested non core assets & brands Reckless acquisitions Highly bureaucratic Decentralized management Sales of 20Bn$ Purchased Coach Leather goods companies (unrelated diversification)
2000- focus on three core categories- Food, Underwear and household

products 2001- Purchased St Louis based EarthGrains for $1.9Bn Nations 2nd largest bakery 2005- Transformation decision- Culmination of ten years stock performance 2006- Operating in more than 40 countries; selling in more than 180 countries

Issues Faced
Lost touch of Consumer preference

Late to enter in healthy &nutritious food segment

Bad Risk Management Losses due to food contamination- suffered losses

in settlements & remunerations

What went wrong?

1997 & 2000 restructuring which failed hurt the stock price &

sales. Unable to create synergies across various non-core brands and businesses due to difference in distribution channels, customers etc. De-centralized approach to selling gave them less power with retailers.
In July 2001, Sara Lee purchased St Louis based Earthgrains

for $1.9 Billion plus assumption of $957 Million in long term debt to try to consolidate and expand its underleveraged baked goods business, but it returned only $100 million Operating Profit in the first year.

What went wrong?

Binge acquisition strategy left Sara Lee with portfolio

of completely different businesses operating independently of each other which created coordination problems (Eg. With retailers). This meant that it would not be able to create synergies across brands and save costs, which is the inherent advantage of having so many businesses. Incurred redundant costs of millions of dollars due to mismanagement. Poor investment decisions due to lack of consumer insight led to a lot of waste of resources. Eg. Hoisery

What went right?

Sara Lee had generated strong market shares within

the food service sector Represented in diverse industries Generated brand loyalty by acquiring strong brands Retrenchment created opportunities to focus

Turnaround strategies
In September 97 the company announced a $ 3

billion share repurchase agreement by selling its manufacturing facilities. In May 00 the company sold of its non-core business like leather goods business and athletic apparel business. In March 2003it announced closing of almost 50 fresh bakeries and eliminated a few regional brands

Future Actions
Food, beverage and household products should be

their focus Apparel business should be made into a separate entity Reduce the number of brands in North America and focus on a smaller group of larger brands

Financial Recommendations
Implementing a Lean enterprise model throughout

the organization is expected to result in annual savings of approximately 300 million Centralization of Information Technology, procurement is expected to result in annual savings of approximately 250 million Consolidation of North American food operations is expected to result in annual savings of approximately 35 million Infrastructure rationalization is expected to result in annual savings of approximately 150 million