Sara Lee - A Tale of Another

Turn Around
Team Chandragupta Maurya
Overview - Timeline Based
Overview based on 4 key executives and the timeline

● Nathan Cummings (1939)

● John H. Bryan (1975 - 2000)
● Steven McMillan (2000-2005)
● Brenda Barnes (2005 - 2010)
Overview - Contd.
Nathan Cummings
● Instrumental in acquiring
C.D.Kennedy Company in 1939
● Also took the company public and
began trading in 1946
● Looked over the acquisition on
family owned businesses
● Doubled the sales ($2B) and
accumulated total assets worth
($1B)
John H. Bryant
● Took the role of Chief Architect of
Strategy in 1975 and took
initiatives to diversify and
decentralize
● Changed the name from
Consolidated Foods to Sara Lee
● Focused more on non-food sales
● Increased sales from $9 billion in
1987 to $20 billion in 2000
Overview - Contd.
Steven MacMillan
● Shifted the core competencies
from non-food to food
● Launched initiatives to narrow
down the focus on undergarments
and household products division
● Instrumental in divesting non-core
assets
● Key executive to announce the
impending transformation in 2005
Brenda Barnes
● Joined Sara Lee as COO in 2004
and later appointed as the CEO in
2005
● Was part of the boards of various
multi-billion dollar retail chains
● Implemented plans based on 3
pillars - Customers, Consumers,
Geography
● Instrumental in Hanesbrands spin
off
Internal Signs of Decline
● Series of unrelated acquisitions in the 80’s and 90’s lead to different
businesses operating independently
● Decentralized management resulted in a higher redundant cost
● Complex and bureaucratic structure made it difficult for the retailers to
operate
● Owing to that, the company started losing out on tapping the consumer
preferences
● Poor planning created a havoc in pricing strategies and they started losing
out the edge in the market
● Sara Lee should have planned to expand into the health foods market which
would’ve given them a competitive edge
External Signs of Decline
● During the recession of 2001, acquisition was not a good idea considering
Sara Lee’s performance but nevertheless, they went ahead and acquired
multiple ventures ranging from a coffee company to women’s apparels
company
● Clothing industry went through multiple radical changes resulting in Sara
Lee’s acquisitions turning into dead weights
● Food industry consolidation shifted the pricing power to the consumers. This
combined with the internal issues made Sara Lee lose out to competition
Turnaround Efforts - 1997
● Deverticalization initiatives in multiple facets right from manufacturing to
sales and brand management
● Repurchase of shares worth $3B by selling off manufacturing assets
● Initiative resulted in stock pricing going up by $6
● Deverticalization coincided with a period of widespread illness resulting in
the following expenses for Sara Lee
○ $5M on lawsuits
○ $3M on food research
○ $25M on plan innovation
○ $200k on fines
Turnaround Efforts - 2000
● Reshaping efforts announced which costed the jobs of over 13000
employees
● Initiatives to sunset non-performing brands
● Diversifying portfolios by Coach, a leather goods company, which is clearly a
departure from their core business of food
● Acquired Earthgrains which specialized in fresh packaged bread and
refrigerated dough but this did not yield the desired result as the operating
profit from a company acquired at $1.3B was less than $100M
● Decentralization caused inefficiencies which impacted scaling and
merchandising initiatives
Downfall
● Credit rating for Sara Lee dropped
and that resulted in a slump in
capital acquisition
● Expense of initiatives resulted in a
sunk cost of $68M in 2005
● Share prices dropped to $12 by
2007
● Net income figures were
saturated and was around $719M
Reasons
● Highly bureaucratic
● Lack of clarity in both strategy
and portfolio management which
resulted in bad investments and
immediate disinvestments
● Poor market research
● Failure to exploit core
competences