Sara Lee Corporation in 2011: Has Its Retrenchment Strategy Been Successful?
Sara Lee Corporation was founded in 1939 and, as of 2001, had acquired more than forty companies. Sales reached $10 billion in 1988, $15 billion in 1994, and $20 billion in 1998. However, revenues peaked in 1998, as Sara Lee struggled to manage the company’s broadly diversified and geographically scattered operations. In February 2005, Brenda Barnes, Sara Lee’s newly appointed president and CEO, announced a strategic plan to transform Sara Lee into a more tightly focused food, beverage, and household products company. The centerpiece of Barnes’s transformation plan was the divestiture of weak-performing business units and product categories accounting for $8.2 billion in sales - 40% of Sara Lee’s annual revenue. Barnes believed that Sara Lee could benefit from concentrating its financial and managerial resources on a smaller number of business segments where market prospects were promising and Sara Lee’s brands were well positioned. As the first phase of Barnes’s transformation plan, Sara Lee was to exit eight businesses: Direct selling, U.S. retail coffee, European apparel, European nuts and snacks, European rice, U.S. meat snacks, European meats, and Sara Lee branded apparel. The latter was spun off as an independent company, Hanesbrands Inc. Following the disposition of these nonstrategic businesses in 2006, Sara Lee focused on increasing the sales, market shares, and profitability of its remaining businesses including North American Retail, North American Fresh Bakery, North American Foodservice, International Beverage, International Bakery, and International Household & Body Care. Sara Lee’s management estimated that by focusing more on the stronger brands with good growth potential, its revenues would grow to $14 billion in fiscal 2010 and that the company’s operating income margin would increase to at...
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