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en m Arthur A. Thompson John E. Gamble The Universty of Alabama University of South Alabama $1O.8b1lonn fiSCAI 2010, ind the company's Corpomtion's...

7. What is your overall evaluation of Sara Lee’s retrenchment plan? What evidence and/or reasons support a conclusion that Sara Lee shareholders have or have not benefited from the company’s retrenchment strategy?

Arthur A. Thompson The Universty of Alabama In February 2005, Brenda ßan~ Sara Lee Corpomtion's newly appointed prCiídeßt and CEO, annouiii:d a bold and ambíLíoU5 multí- ")'~u strategic plan to transform Sar.i Lee iiio a more tightly Jocuscd food,ben~r4g and house- hold products comp-.iny. The centerpiec of Barnes's tmllfonnation plaii was the divestíture of weak-performing hUl;lnesuníts and product categones 3coounting for S7.2 bíllon in sales (37 percent of Sam Lee's annu31 :rcvcnues).Whíle ¡he diYC5titurci would cut Sara Le'sreirenuC5 fmm $19.6 hílíon to about $123 bíJJOß, Barnes be1íe¥ed that S3ra Lee\'(ould be pettC"T off con- centmlÍ0E its financial and iwdnagerul resource on a smaJJer number of busÍJJ~ segments in whch market prospt'cs were prommog and Sam Le's brands were well positíoned.! Once i1ie retrendunent ínítiali\'cs wcrccompleted, the plan was to dn\'e the company's gnm1h '¥ia ínítÍltiH."S to boost the sales, markei $mire and profitabil- íty of ahe key rcm.iining bmnds: S3m Le breads and bakery producl$ßall Park me-.ns, Douv.e Egbem colfee Híllslúre Farm mea Jimmy De-.m sausge, and Sens ~jngle-5er¥c coffee products Company exectí~'e$ beIie\"ed that the retrem:hment'trould alliny ren:iiue. to incrC'dsc to $14 bílíon by fisca12OJO and that the company's opemtÍßg profit magiß Í1i 2010 would incfeaee to at leat 12 percu (versus an S.l p¡m::cnl operat- ing profit margin in fiscal 2(04).1 By fi.alYC"Ar-end 2010, ít remmnedunclear to what extent iberetrendiinent smitegy had benefited sliare1iolder~ The company liad mÍ5ed both rewcnue and operating profít margín projec- tions for 20HJ.Rcyenues had iiicrelSed to onl)' n i: en m John E. Gamble University of South Alabama $1O.8bí1líonín fiSCAI 2010, ¡ind the company's opemling profit margi dming the had improved to onb' 8.5 percnt. Dunng 2010, Sarale had engaged ui further retrenC"imenl with the di\"cstiturc of íts International House- hold and Body Care busines whicb produce and marketed Kiwí shoe care products, Sanex persomil care products AmhiPur aíT freshcIJ- ers, and v-.irious insiicides and cleaning prod- ucis sold outside North America. Tbe comp-Any was also well under way with J'rojeci Acclemte, a company-wide cost ~n':ígs and producti~'Íty inítíaiirc launched in 200S that focused on out- sourcing, supply ihain effcíencies and o¥erhe-Ad reduction. Project Acclemie had produce say- ings of S180 milion by 2010 and \V-dS expeed to produce eumulatí.c sm.-jngs of :$350 mi11on 10 $400 miJJon by the end of fiscal 2012. Manaee- ment also laum:berl a smire bu)'back plan in 2010 that would repurchase $25 bilon 10 53 bi11on of share oyer a thre-ye-. .r period. Also during 2010, Brenda Barnes had bee forc to step down as CEO in Augus1 after suffenng a stroke in :M~iy. The company's chief financial offcer, Marcel Smits, had been named inienm CEO \vhile the board searched for a permnent replacement. Smíis's st. .itegics Jor 201 i focus on increasing share in the company's most powerful by.suds pursing growth in attmctí\"e geogrAphic markets and fully eaptunng the anticijYdted benefits of Projec AccelerAte. COPJnt.,2fJ1(b¡ Attll Á. Tip-'Wian.lohii L Gai:Al ri~ reed
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Sara lee’s retrenchment plan was though off very carefully. With hyper competition setting in
Sara lee found that having so many lines of business was definitely interfering with the business...

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