Sara Lee

1.  What is Sara Lee’s corporate strategy? How has its retrenchment strategy changed the nature of its business lineup?

Sara Lee retrenched seven of its business units in 2006 – direct sales, U.S. retail coffee, European apparel, European snacks, and U.S. and European meats - in order to focus its resources on it’s more profitable industries. By 2006, these five business units had negative net profit margins and negative operating margins. Four of those units had negative margins of more than 10%. Other units were seeing steady declines in revenues in profits since 2004. The company’s goal was to boost its sales lines by 2% and increase its profit margin to 12% by 2010. The company followed a strategy which allowed it to increase its corporate profits since most of its retrenched business units were unprofitable.

After retrenchment, Sara Lee was able to focus on its food and beverage, foodservice and international businesses. The company has successfully used its retail meat unit by selling similar meats to its foodservice customers. The retail meat has seen increases in sales and operating income. Sara Lee is the market leader in retail breads in the U.S., trailing Kraft within the meat sector. Fresh bread sales jumped more than $600 million within 3 years due to the leverage Sara Lee had with grocery stores to increase shelf space for its product line. The foodservice industry provides Sara Lee the ability to use its meats in restaurants and fast-food restaurants. Sara Lee has a strong market share in this sector. Its beverage profits are growing at 5%. Providing low-calorie desserts, Sara Lee has met the needs of its customers and captured a larger market share.

Sara Lee’s international products consist mainly of beverage, bakery and household and body care brands. Most sales are made in Western Europe with Asia and Australia close behind. The international division is working to integrate its business units by adding improvement programs....