Commercial and Strategic Management

PRACTICAL CASE
SARA LEE CORPORATION IN 2011
Teacher: Teresa de Lemos

by

Group 4
Pedro Soldado N 70184
Kathrin Beck N 80429
Matthijs Van der Linden N 80430

November 10, 2014

Index
Index ........................................................................................................................................... 1
List of Figures.............................................................................................................................. 2
List of Tables ............................................................................................................................... 2
0. Executive Summary ................................................................................................................ 3
1. Introduction ............................................................................................................................ 4
2. Market Definition/Market Segments ..................................................................................... 5
3. External Environment Analysis ............................................................................................... 7
4. Internal Environment Analysis ............................................................................................. 12
5. Organization Competitive Position Analysis ........................................................................ 19
6. SWOT Analysis ...................................................................................................................... 23
7. Conclusion ............................................................................................................................ 24
References ................................................................................................................................26
Annex........................................................................................................................................ 27

List of Figures
Figure 1 - Five Forces of Porter for Sara Lee Corporation .......................................................... 9
Figure 2 - Value Chain Analysis of the Sara Lee Corporation ................................................... 12
Figure 3 - 9-Cell Matrix ............................................................................................................. 15
Figure 4 - Net Profit Margin Calculated for Sara Lees Continuing Operations ....................... 17
Figure 5 - Hanesbrands Operating Profit Margin 2002-2006................................................... 18

List of Tables
Table 1 - Market Segmentation for Sara Lees businesses ........................................................ 6
Table 2 - PESTL Analysis.............................................................................................................. 8
Table 3 - Mapping between threat and scale used on chart ..................................................... 9
Table 4 - Results from Industry Attractiveness Analysis .......................................................... 13
Table 5 - Results from Business Strengths Analysis ................................................................. 13
Table 6 - Legend for Figure 3 .................................................................................................... 15
Table 7 - Operating Profit Margins for Sara Lees Businesses 2008-2010 ............................... 17
Table 8 - Cross-Business Strategic Fits Analysis ....................................................................... 19
Table 9 - Legend for Table 5 ..................................................................................................... 20
Table 10 - Benchmarking Analysis ............................................................................................ 21
Table 11 - SWOT Analysis for Sara Lee Corporation ................................................................ 23

0. Executive Summary
This report provides an analysis on the Sara Lee Corporation In 2011: Has Its Retrenchment
Strategy Been Successful case study, published in 2010 by A.A. Thompson and J.E. Gamble.
It is provided a market, external and internal environment analysis, along with evaluation of
the competitive position of the corporation. In the end, a SWOT analysis for the corporation
is presented.
On the internal analysis we include a 9-cell industry attractiveness/business strength matrix
that analyzes each main business of the Sara Lee Corporation.
On a first quick analysis, the beverages and food industry where Sara Lee is included has a lot
of competition. Big corporations try to achieve competitive advantage through innovation on
its products, marketing campaigns and advertising.
Most of Sara Lees businesses are relatively attractive, but all of them have been against the
general economic recession, reducing its profitability, and most important, the growth rates
on the respective markets.
We also concluded that some of Sara Lees businesses have synergy opportunities. However,
only a few of them (in particular the meat and food service businesses) have strong strategic
fits, making them strong contenders for investment.
In the end, we recommended that:

International Beverages and N. American Food service businesses should receive higher
priority for investments, being the more attractive businesses, combined with better
growth opportunities;
Senseo business should be sold, as it is not very profitable and the market has a slow
growth rate;
Sara Lee must leverage on synergies, especially where operation, distribution, and
marketing and sales activities are concerned.
Leverage on the Sara Lee brand name.

On our critical analysis, we found out that Sara Lee decisions were not compatible to our
recommendations. In the end, Sara Lee lost most of its competitive advantage, its innovation
power, and most of all, suffered a decrease of over 50% on its revenues.

1. Introduction
This is an analysis on the well-known Sara Lee corporation based on the article Sara Lee
corporation in 2011: Has its retrenchment strategy been successful? published in 2010 by
A.A. Thompson and J.E. Gamble.
In this analysis the market will be analyzed including an internal and external market analysis.
In the external analysis a full PESTL and five forces of Porter analysis are provided. In the
internal analysis the reader will find Sara Lees value chain, a full 9-cell industry
attractiveness/business strengths matrix analysis and various tables with financial indicators.

In the following competitive analysis the value chain synergies and the key success factors are
further analyzed. This leads to the final part of the competitive analysis, the benchmarking.
After a concluding SWOT analysis this analysis provides recommendations and a conclusion
which also includes a critical contemporary analysis on Sara Lee in 2014.

2. Market Definition/Market Segments

Market
On this analysis, the consumer goods market is considered with an emphasis on the food,
beverage, household and body care products since Sara Lee is focused on this market.
Therefore this analysis will start with a short analysis on the global consumer products market
with an emphasis on food, beverage, household and body care products. The market
segmentation will also be based on this focus group. Sara lee mainly operates on the FMCG
(Fast Moving Consumer Goods) market and is defined by products with a useful life shorter
than one year. Food and beverages, personal care, household and cleaning products, apparel
and footwear are all part of this category since they are bought frequently by the customer
with recurring expenditure.

Market Segmentation
Segmenting a market can be done in many possible ways. One would be to segment the
general market, the market of FMCG into easy to target categories like food, beverages,
cleaning products, body care, and so forth. Another option is to segment the market
according to geographical segmentation, demographic segmentation, psychographic
segmentation and behavioral segmentation

In this analysis a market segmentation according to Sara Lees main businesses is chosen.
These are:
1.
North American Retail
A variety of packaged meat and frozen bakery products, sold to retail customers in North
America. Brands include: Hillshire Farm, Ball Park, Jimmy Dean, Sara Lee and State Fair.
2.
North American Fresh Bakery
The baked packaged goods are expected to increase by 4% also according to the growing
demand of gluten-free and other diet products such as whole grain or high fiber.
3.
North American Food Service
Divided into a foodservice channel and a private label of refrigerated dough products
4.
International Beverages
Here, sales a made in various channels: the retail channel, the foodservice channel and in
direct delivery to restaurants and warehouses.
5.
International Bakery
Here, sales are as well made in two channels: retail and foodservice.

Business
North American
retail

Segment
Supermarkets
Warehouse Clubs
National Chains

North American
fresh bakery

Supermarkets
Mass merchandisers
Warehouse clubs
Restaurants
Schools and other institutional outlets
Distributors
restaurants
Hospitals
Other large institutions
grocery stores (private label dough)
Mass merchandisers (private label dough)
Supermarkets (retail)
Warehouse clubs (retail)
National chains (retail)
Distributors (Foodservice)
restaurants (direct delivery)
Warehouses (direct delivery)
Supermarkets (retail)
Warehouse clubs (retail)
National chains (retail)
Distributors (foodservice)
Institutions (foodservice)

North American
Food Service

International
Beverages

International
Bakery

Buyer Decision Criteria

- Need for frozen products
to resell or use
- Need for savable
products to resell or use
- Need for packaged and
storable bread

- Need of raw materials

for food service

- Need for canned or

bottled beverages for
reselling

- Need for bakery and

dough products to retail

Table 1 - Market Segmentation for Sara Lees businesses

3. External Environment Analysis

In order to better understand the external environment on which our company is in, we
decided to use 2 methods:

PESTL analysis, that we used to assess the external macro-economic factors;

Porter five forces, to analyze to level of competition within an industry.

PESTL Analysis
The PESTL Analysis is widely used as an environment analysis tool. It encapsulates the most
important factors that describe the environment on which the company/business operates,
divided by its nature (political or economic nature, for example.
The following PESTL analysis will show the relevant external factors and their impact on Sara
Lee and similar businesses in the industry.
Factors
Political

Impact on Business

In 2011 California Proposition 37, a law

proposition issued in 2012, was in the making.
Proposition 37 was a law that would require
companies to label products that are genetically
modified and disallow companies to label products
as natural when these products are in fact
genetically engineered. Eventually 51 % voted
against the law (Wikipedia, 2014).
Economical

In general, growing political concern about

the production process can have a negative
impact on brand loyalty, sales and
revenues. The Proposition 37 in specific
would have a negative impact on sales, as
people will probably be less attracted to
products with the genetically engineered
label.

Poor economy has been leading to decreasing

sales. For example sales of the North American
Foodservice division declined from 2.1 to 1.9
billion dollars between 2008 and 2009.

Poor economy forces Sara Lee to explore

all potential ways of increasing revenue by
focusing on the most promising markets,
strategic pricing, reducing inventory and
increasing efficiency.

Social & Demographic

Citizen initiatives like Take the Flour Back in 2012 Health and environmental concern may
and March against Monsanto show that there is result in a sales decrease.
a growing concern in society about health and
environmental issues related to production and
consumption of consumer goods. Although these
7

initiatives started in 2012, the concerns among the

people have been growing the years before.
(Wikipedia, 2014).
Technological
Technological innovation, like genetic engineering, More efficient production leads to lower
allows businesses to produce their beverages costs and ultimately higher margins
more efficiently.
Legal
Law proposition like Proposition 37 can potentially Labeling legislation adds cost to the
form a great threat to the consumer good production process and can have a
industrys revenue and therefore to the Sara Lee negative impact on sales.
Corporation. Now in 2014 the EU, Australia, New
Zealand, India and China country already require
food and beverage companies to label products
that are genetically modified. The American Food
and Drug Administration still does not require
labeling, but this is likely to change in the future.
Table 2 - PESTL Analysis

As we have seen the processed food and beverages market Sara Lee operated in was in some
difficulty in 2011. The growing political and societal concern about the health and
environmental impact of the production and consumption of consumer goods could be seen
as the greatest threat to the industry at that time. Smart branding and adjusting to the new
consumer wants and needs (more organic/ healthy food) could be a way to profit of these
changes.

Porter 5 Forces Analysis

In order to evaluate the industry attractiveness on this particular case, the Porters Five Forces
analysis was used. First, it was needed to provide an appropriate scale to quantify each force.
The scale used is defined on Table 3.
Scale
1
2
3
4
5

Threat Size
Very Low
Low
Medium
High
Very High

Table 3 - Mapping between threat and scale used on chart

Forces of Porter
Threat of New Entrants

5
4
3
Competitive Rivalry

Threat of Substitute
Products

Supplier Bargaining Power

Buyer Bargaining Power

Figure 1 - Five Forces of Porter for Sara Lee Corporation

The result of the analysis is illustrated on Figure 1.

Competitive rivalry
There are a lot of strong competitors competing in the same industries as the Sara Lee
Corporation, for example: Unilever, P&G, General Mills and Kraft. There is little possibility for
product differentiation, which results in a big competitive rivalry for market shares on the
same product markets.
Score on scale: 5
9

Threat of substitute products

It is very easy for consumers to switch to buying another product from a different brand
without any costs. Because the switching costs for consumers are that low substitute
products can pose a great threat.
Score on scale: 4

Threat of new entrants

As said before, there are a lot of competitors competing in the same market in this specific
industry. These companies have established connections with suppliers and retailers over the
years. These well-established connections give these companies a significant advantage over
possible new entrants.
The already existing companies have big asset bases, allowing them to enjoy economies of
scale. Producing and distributing would be more expensive for new entrants with less assets
and therefore less economies of scale.
Because competition is fierce, distributors have the option to choose from different brands to
put on sale. This gives distributors a lot of power. It is not likely that distributors would prefer
a new brand that nobody knows over an already established well-known brand.
Score on scale: 2

Buyer bargaining power

Because there is a lot of competitive rivalry and very little product differentiation consumers
have the ability to choose between different brands when buying a product. Companies will
try to win customers over, which gives the consumer (buyer) a strong position.
Score on scale: 4

Supplier bargaining power

Suppliers in this industry usually have big deals with companies and supply great quantities of
materials. Companies like Unilever or Sara Lee buy great quantities from suppliers. For a
supplier losing a customer like Unilever would be a financial disaster.
On the other hand, Sara Lee and competitors are extremely dependent on the services of
suppliers, which gives the suppliers power.
Score on scale: 3

10

Adding all forces, we get a total of 18. Based on this, as 18 is more than the average of our
maximum total (5*5 = 25) we conclude that the industry is not very attractive.
The processed food and beverages market Sara Lee operates in is one with a lot of competitive
rivalry. Because there is little opportunity for product differentiation the competitors
(Unilever, Kraft, General Mills, etc.) are all competing for the largest piece of the same cake.
Good marketing/ branding and creating maximal customer loyalty is vital for Sara Lee to
defend their market share.

11

4. Internal Environment Analysis

Value Chain Analysis
To analyze the internal environment, it is suitable to use Porters Value Chain. This process is used to identify the internal activities that the
company engages when transforming its inputs (raw materials, supplies) into outputs.
This analysis is divided on primary and support activities. The primary activities are activities that add value to the final product in a direct way,
and the support activities are the ones that add value indirectly [1].
The analysis done is presented in Figure 2. It was done at a corporation level, with activities analogous to all Sara Lees businesses.

INFRASTRUCTURE

SUPPORT
ACTIVITIES

- Multinational corporation, with North American and International divisions

TECHNOLOGY DEVELOPMENT AND INNOVATION

- Product innovation
- Process innovation (manufacture, packaging)
- Development of corporate-wide information systems platform

10

HUMAN RESOURCES MANAGEMENT

PRIMARY
ACTIVITIES

- Global employees management

INBOUND LOGISTICS
- Supplies distribution
to all divisions
- Suppliers storage

OPERATIONS
- Products manufacture
- Quality control
- Packaging

MARKETING AND SALES

OUTBOUND LOGISTICS - Product advertising

- Warehousing
- Order fulfillment
- Global distribution

- Product pricing
- Product promotion
(shelf space negotiation
for example)

SERVICE
- Customer
service

Figure 2 - Value Chain Analysis of the Sara Lee Corporation

12

9-Cell Industry Matrix

To better decide which businesses are worth investing on or keeping, we need to
analyze the attractiveness of the industries of each business unit, and their
corresponding market position.
To do this, we used the standard factors in which the analysis can be done: as an
example, for industry attractiveness, we have market size, intensity of competition,
and product innovation.
The results for industry attractiveness are presented on Table 4.
Business
Unit

N.A.
Retail
Meats

N.A.
Retail
Bakery

N.A.
Frozen
Desserts

Result

6,35

6,2

4,75

N.A.
Single
Serving
Coffee
5,35

N.A.
Food
Service

Intl
Coffee

Intl
Bakery

8,5

7,1

5,45

Table 4 - Results from Industry Attractiveness Analysis

The full analysis is available on annex A, table I.

Some major notes:

Product innovation, on the majority of these businesses, is not very preponderant,
unless on food service, with the innovation on presliced deli meats being a major
factor on the NA Food Service business;
Despite the generalized slowing on market growth due to recession and loss of
consumer purchasing power, Sara Lee maintained a steady position on some of its
business (N.A. Retail Bakery in particular);
Fresh products and products with short shelf lives are exposed to more regulatory
constraints (more complex packaging and distribution).

For business strengths analysis we considered, for example, relative market share,
marketing and promotion and distribution capabilities.
The results for business strengths analysis are presented on Table 5.
Business
Unit

N.A.
Retail
Meats

N.A.
Retail
Bakery

N.A.
Frozen
Desserts

Result

8,75

9,05

7,8

N.A.
Single
Serving
Coffee
5,85

N.A.
Food
Service

Intl
Coffee

Intl
Bakery

7,3

8,25

5,35

Table 5 - Results from Business Strengths Analysis

The full analysis is available on annex A, table II.

13

Some major notes:

North American Retail division has many market-leading and highly popular
brands, so high ratings where marketing and promotion is related were given;
Sara Lees future emphasis on nutrition and wellness (especially on meat and
bakery products) foresee a possible major advancement where product innovation
is concerned;
Most businesses where Sara Lee didnt have a good market position have been
divested throughout the years, so the current business all have a fairly strong
position on market.

Given this results, we can now present this information on an industry attractivenesscompetitive strength mapping matrix, with which well be able to conclude on what
businesses are priority for investment (and possible divestments).
The matrix is presented on Figure 3.
.

14

Figure 3 - 9-Cell Matrix

High priority for resource allocation
Medium priority for resource allocation
Low priority for resource allocation
Table 6 - Legend for Figure 3

Circle sizes were scaled to reflect the percentage of revenues generated by each
business unit. These values are approximate, so some caution is required when
analyzing it.
We conclude that most Sara Lees businesses on North America, except Senseo, are
relatively strong positioned in their industries. From the International businesses, the
coffee/beverages business is the one with the strongest position, while the bakery
business only has average overall appeal.
This analysis allows us to also conclude that Sara Lees N.A. Fresh Bakery, N.A. Food
Service and International Beverages businesses are the strongest and more mature
businesses Sara Lee owns, so they should be given high priority for investment.
15

Additionally, N.A. Food Service business seems to be the one that can generate more
value to Sara Lee by investing in it. If a more aggressive retrenchment strategy is
needed, this business should be considered as the ones worth keeping.
The other businesses should only be considered for medium investment.
N.A. Frozen Desserts business has a strong position on its category, but it is a relatively
small market, and have one of the lowest industry attractiveness.
Although none of Sara Lees businesses can be considered unattractive (as seen on the
matrix), if more divestures are needed, the Senseo and International Bakery businesses
are strong choices for this (consider selling to invest on other businesses).

16

Financial Analysis
Considering some of the information provided on the test case, we were able to
analyze Sara Lees corporation from a financial position.
The financial ratios and a more complete analysis are available on annex B.

Net Profit Margin

8,0%
6,0%
4,0%
2,0%
0,0%
2005
-2,0%

2006

2007

2008

2009

2010

2011

-4,0%

Figure 4 - Net Profit Margin Calculated for Sara Lees Continuing Operations

If we consider the net profit margin for continuing operations presented on Figure 4,
we can conclude that Sara Lees profit margins are not very attractive, but some
growth can be observed, possibly from the efforts on operating efficiency
improvement.

On Table 7 an analysis of the operating profit margins of Sara Lees businesses can be
observed.
2010

2009

2008

North American Retail

12,3%

9,1%

5,7%

North American Fresh Bakery

2,1%

0,9%

2,7%

North American Foodservice

6,7%

1,7%

-14,8%

International Beverage

18,4%

16,1%

17,0%

International Bakery

-1,8%

-24,4%

-37,0%

Table 7 - Operating Profit Margins for Sara Lees Businesses 2008-2010

Doing a quick study of this data, we conclude that most Sara Lees businesses dont
have very attractive profit margins.
17

N. American Retail business shows a slow growth throughout the years, but is still not
enough to make it a profitable business. N. American Fresh Bakery doesnt even make
a profit after taxes, being near breakeven point during this period.
Sara Lees Food services has shown some growth, but the situation in 2010 still does
not make it a very attractive business.
The International Beverage business has the best margins, making it a strong
contender for further investment (always positive margins, and with a considerable
growth from 2009 to 2010).
The International Bakery division is the best contender for divestment. Although it has
been recovering its position since 2008 (nearing breakeven point in 2010) the other
businesses are less risky and present better opportunities.

If we analyze the profit margins for Hanesbrands apparel division prior to the spin-off,
we conclude that there was not much difference from this divisions margins to the
others still owned by Sara Lee. Furthermore, it is easy to understand the reason to why
this business was not sold or simply divested: almost all other divested businesses
made Sara Lee lose money.
This analysis is presented on Figure 5.

Hanesbrands Operating Profit Margin

14,0%
11,7%

12,0%

9,2%

10,0%
8,0%

9,7%

9,5%
7,7%

6,0%
4,0%
2,0%
0,0%
2001

2002

2003

2004

2005

2006

2007

Figure 5 - Hanesbrands Operating Profit Margin 2002-2006

18

5. Organization Competitive Position Analysis

Cross-Business Strategic Fits
To better decide which business are better suited for investment (or improvement on
current operations), we have to map each business value chain activities, and identify
which synergies we obtain from this.
This analysis also identifies which businesses cannot be combined, giving a crucial
insight when divestures strategies are an option. The results are presented on Table 8.
Value Chain Activities
Business
Units

Purchasing

Technology
&
Innovation

Operations

Sales &
Distribution
Marketing

Advertising
&
Promotion

N.A. Retail
Meats
N.A. Fresh
Bakery
Sara Lee
Frozen
Desserts
N.A. Single
Serving
Coffee
N.A. Food
Service
International
Beverages
International
Bakery
Table 8 - Cross-Business Strategic Fits Analysis

Opportunity to combine purchasing activities to achieve better

deals (purchase in bulk) and attain better efficiency on the whole
process
Opportunity to share developments and innovations on products
manufacture or packaging for example
Opportunity to attain cost-sharing benefits
Opportunity to attain cost-sharing benefits
Opportunity to use common distribution channels, and improve
distribution capabilities (e.g. centralized management)

19

Opportunity to combine sales and marketing activities,

Opportunity to leverage on the use of a common brand name, and
launch marketing campaigns using products from both businesses
Opportunity to seize the brand recognition, bargaining power and
consumer preference the N.A. Fresh Bakery business already has,
to promote Senseo and breakfast meats
Opportunity for combined promotions
Table 9 - Legend for Table 5

From this analysis, we conclude that there are many possible ways to obtain synergies
between the businesses.
However, most of them are concerned to activities related to marketing, sales and
promotion.
Few strong strategic fits were identified where purchases, operations and distribution
are concerned, and most of them focus on cost-sharing benefits, not actual synergies
where efficiency and process improvement can take place.
In the N. America businesses, the strongest fit we found is between the retail and food
service divisions, where operations and purchasing activities can be combined
(products produced on the same facilities).
In the International divisions, we advise that Sara Lee uses the Sara Lee brand to the
fullest, launching marketing and promotion campaigns leveraging on the excellent
brand image it has on some of its businesses.

20

Key Success Factors

For the different business there are various driving forces of change. On corporation level we
can sum them up to forces as product innovation changing technological and manufacturing
processes, growing buyer preferences, marketing innovations and changing societal concerns.
Therefore we can pin down the following Key Success Factors:
1. Low Costs
To be able to compete maintaining low costs is essential for Sara Lee to maintain or increase
market share.
2. New product Innovations
Due to the ever changing marketing strategies and changes in technological and manufactural
processes its crucial for Sara Lee to keep being innovative with their new and existing
products.
3. Distribution Channels
As a major distributor in North America and Internationally, Sara Lee needs to be ever focused
on their distribution channels. Keep and maintain the existing ones and also get grip on more
channels, or lose inefficient or too expensive channels. This way SL can make sure to have
their products widely available in large volumes.
4. Product variety
To be the number one choice of its customers Sara Lee needs to ever revisit and increase its
product variety.

Benchmarking
Bearing all those factors in mind, we can analyze the competitive position of Sara Lee and
some of its major competitors.
The benchmarking analysis is presented on Table 10.
Factor
1
2
3
4

Weight (%)
30
20
25
25

Sara Lee
3
3
3
2
2,75

Kraft Foods
3
4
4
4
3,7

Nestl
3
5
5
5
4,4

Table 10 - Benchmarking Analysis

21

Both Nestl and Kraft Foods have been focusing a lot on product and processes innovations
and improvement. From our analysis Sara Lee has some innovative edge (mostly resulting
from leveraging on cross-businesses innovations).
Kraft Foods distribution channels gained a lot of power with the acquisition of Cadbury in
early 2010 [2].
For low prices, theres not a great difference on pricing for these companies, mostly because
the buyer has many similar products at his disposal, and if prices were to change, it might be
catastrophic to the company.
From this analysis, we conclude that Sara Lee does not have a great competitive advantage
on its competitors. Kraft Foods and Nestl can easily launch new, innovative products to
leverage on a fast-developing market opportunity.
Still, this analysis is subjective and prone to errors, especially on this case where some data is
not available to further analysis, so special caution while reading from its conclusions is
advised.

22

6. SWOT Analysis
After the previous analysis, we are in a position to withdraw the Strengths and Weaknesses,
Opportunities and Threats for Sara Lee corporation, and intersect them so we can provide a
well-informed decision about the strategy to follow. The analysis is presented on Table 11.

STRENGTHS

WEAKNESSES

Strong brand portfolio

within food and beverage
markets
Worldwide presence
Brand loyalty (specially on
bakery products and
international coffee
brands)
Market leading position
on several businesses

Over diversified
businesses
Difficult operations and
activities centralized
management
Slow growth and low
profit on most businesses

Invest on stronger
businesses divest on the
ones with fewer
opportunities

Focus on businesses with

higher profits and with
better growth
opportunities

Focus on businesses on
markets with better
growth, and products with
stronger brands
Divest other businesses

Consider divesting only

on money-losing businesses
Try to explore
opportunities on all
markets (quite diversified)

OPPORTUNITIES
Focus on profitable
businesses
Seize synergies and costsharing opportunities
Exploit the Sara Lee brand
Innovate (new products,
new efficient processes)

THREATS
Uncertain economy (slow
business growth)
Selling businesses means
thinner opportunities (less
markets to explore)
Strong competition on
some businesses
Customer preferences
and habits constantly
changing

Table 11 - SWOT Analysis for Sara Lee Corporation

The result of this SWOT analysis will be included on the following sections.
23

7. Conclusion
With all analysis done, we came to some conclusions regarding the retrenchment plan, and
some recommendations for Sara Lee Corporation.

Retrenchment Plan Analysis

After doing an internal analysis of this corporation, and with the support of the financial data
provided, we conclude that the retrenchment plan was successful.
However, the overall situation, especially regarding markets share improvement and profits
made, has not improved very much. Considering a long term evaluation, the plan was not that
successful.
We also evaluated the Sara Lee spin-off, Hanesbrands. Being a totally different business
(branded apparel) and with not many related strategic fits, it was a good decision for it to part
ways with Sara Lee. It also helped improve the financial situation, with the $2.4 billion
payment (although it got into debt with this decision).

Recommendations
Having all the previous analysis in mind, here are our major recommendations:

Sara Lee must work on a more aggressive investment/divestment strategy;

The International Beverages division is the most profitable, and has a very good
position on its market (being the leading brand on countries that consume a lot of
coffee, e.g. Norway and Denmark), so it must receive high investment priority.
Moreover, innovations on this market can yield good competitive advantages
The N. American Foodservice division shall receive high investment priority, according
to our analysis (industry attractiveness/business strengths, strategic fits with other
businesses and SWOT in particular).
It has one of the best growth chances (despite reduced consumer spending) and has
leveraged greatly on innovations on the retail market;
Looking at less attractive businesses, the Senseo single serving coffee should be sold,
as it as the worst position from all businesses, and its on a market that is still not big
enough to be profitable.
The International Bakery business, although not very attractive, can leverage on the
brand power Sara Lee enjoys on North America, and try to explore the brand on the
international division;
24

Considering the power of some of its brands, especially on the beverage and food
businesses, and its leading position, Sara Lee should try to invest on small, rapid growth
market segments, by developing new products or acquiring other companies (instead
of spending money on some of its question-marks businesses.

Critical Comparison 2010 vs 2014 [3] [4]

From 2010 until 2014, Sara Lee has gone through some major changes.
Starting at 2010, it sold its Fresh Bakery division to Bimbo (contrary to our recommendations),
even though it was one of its strongest businesses, and with some very recognized brands.
However, they got to keep the Sara Lee name on some of the products now sold by Bimbo. In
the end a good division of the corporation was lost.
Sara Lee did tried to find synergies between their businesses, but it then decided to use them
as a way to cutback some costs (on R&D, staff, and so on). The extreme cutbacks in the R&D
department did as intended result in fewer product launches but also at the same time caused
a sudden vacuum of innovation.
These huge cuts and divestments lead to lost in revenues (from $19 in 2005 to $8.7 billion at
late 2010 after Bimbo deal). Many jobs have been lost and suppliers have lost a big client.
The selling, splitting and refocusing did raise cash as intended but it seems that the
management of Sara Lee forgot about the shrinking dividends of the investors after all the
cutbacks.
Sara Lee was split into 2 companies: Hillshire Brands, for North American operations, and D.E.
Master Blenders 1753 for the international beverages and bakery markets.
The corporation ended up to be a stripped company with no growth strategy (and no power
to explore new possibly profitable markets) and no innovations.
We identified that the biggest mistakes were the selling of the Fresh Bakery business, who
according to our analysis had a good position on the market, and the lack of funding for
innovation and R&D.

25

References
[1] O. Jurevicius, "Value Chain Analysis," 25 April 2013. [Online]. Available:
http://www.strategicmanagementinsight.com/tools/value-chain-analysis.html.
[Accessed 24 October 2014].
[2] "kraft foods lays out its new global growth strategy," 15 September 2010. [Online].
Available: http://www.mondelezinternational.com/Newsroom/MultimediaReleases/Kraft-Foods-Lays-Out-Its-New-Global-Growth-Strategy. [Accessed 9 November
2014].
[3] "Sara Lee Corporation," [Online]. Available:
http://en.wikipedia.org/wiki/Sara_Lee_Corporation. [Accessed 10 November 2014].
[4] A. Hartung, "Killing Me Softly- Leadership Failure at Sara Lee," 25 January 2011. [Online].
Available: http://www.forbes.com/sites/adamhartung/2011/01/25/killing-me-softlysara-lee/. [Accessed 10 November 2014].

26

Annex
A
Industry Attractiveness Assessment for Sara Lees Businesses
(Scale 1 = very low attractiveness, 5 = average attractiveness, 10 = very strong attractiveness)

Weight

N.A.
Retail
Meats

N.A. Single
Serving
Coffee

N.A.
Food
Service

Intl
Coffee

Intl
Bakery

Market size and growth rate

0.25

Industry profitability

0.15

Intensity of competition

0.20

Emerging opportunities and threats

0.15

10

Product innovation

0.20

Social, political, environmental,

regulatory
TOTALS factors

0.05

1.0

6,35

6,2

4,75

5,35

8,5

7,1

5,45

Attractiveness Measure

N.A. Retail N.A. Frozen

Bakery
Desserts

Table I - Industry Attractiveness

Competitive Position/Business Strength Calculations for Sara Lees Business Units

(Scale 1 = very weak, 5 = average, 10 = very strong)

Strength Measures

Weight

N.A.
Retail
Meats

N.A. Fresh
Bakery

Sara Lee
Frozen
Desserts

Senseo

N.A. Food Intl

Service
Coffee

Intl
Bakery

Relative market share

0.20

Marketing and promotion

0.25

Product innovation capabilities

0.10

Distribution capabilities

0.20

Brand name recognition/image

0.25

10

10

TOTALS

1.0

8,25

5,35

8,75

9,05

7,8

5,85

7,3

Table II - Industry Attractiveness

27

B
Selected Financial Ratios for Sara Lee Corporations Continuing and Discontinued
Operations, 20042010
Operating
profit
margin
Net profit
margin

2010

2009

2008

2007

2006

2005

2004

8,5%

5,5%

2,0%

4,6%

5,7%

5,8%

8,8%

5,9%

2,8%

-0,3%

3,5%

2,6%

3,8%

6,5%

Return on
7,4%
5,2%
0,2%
5,3%
5,4%
6,3%
9,8%
assets
Table III - Financial Rations for Sara Lee Corporations Continuing and Discontinued Operations 2004-2010

Selected Financial Ratios for Sara Lee Corporations Continuing Operations, 20062010
Operating
profit
margin
Net profit
margin

2010

2009

2008

2007

2006

8,5%

4,5%

-0,5%

3,1%

2,3%

5,9%

2,1%

-2,5%

2,6%

-0,2%

Return on
8,7%
3,8%
-1,6%
3,4%
1,5%
assets
Table IV - Financial Rations for Sara Lee Corporations Continuing 2006-2010

Operating Profit Margins Before Significant Items for Sara Lees Business Units, 2008
2010
2010

2009

2008

North American
Retail

12,3%

9,1%

5,7%

North American
Fresh Bakery

2,1%

0,9%

2,7%

North American
Foodservice

6,7%

1,7%

-14,8%

International
Beverage

18,4%

16,1%

17,0%

International Bakery

-1,8%

-24,4%

-37,0%

Table V - Operating Profit Margins for Sara Lee 2008-2010

28

Operating Profit Margins for Hanesbrands Prior to the Spin-Off by Sara Lee, 2002
2006
2006

2005

2004

2003

Operating
profit
9,7%
7,7%
9,2%
11,7%
margin
Table VI - Profit Margins for Hanesbrands Prior to Spin-Off 2002-2006

2002
9,5%

29