Is there something to like about Sara Lee?

by Steve McKee

Sara LeeI’ve kept my eye on Sara Lee for several years now, originally because the company was a poster child of the Loss of Focus principle. But in 2005 new CEO Brenda Barnes introduced a plan to streamline Sara Lee, which analysts would have described as a conglomerate but could more accurately have been characterized a beast.

Launched in 1939 as C.D. Kenny Company, over the course of the next sixty-plus years the organization acquired and divested brands in industries as varied as supermarkets (Piggly Wiggly), electronics (Electrolux), apparel (Aris Isotoner, Hanes, Champion, Playtex), shoe polish (Kiwi), and even chemicals (Oxford Chemical Corporation). It took its present name from a company acquired in 1956, The Kitchens of Sara Lee.

By the early 2000s Sara Lee’s strategic chickens had come home to roost in the form of slow sales growth and weak earnings. A company that had fueled growth for decades through artificial diversification had simply become too unwieldy to manage.

Sara Lee BagelsThat’s when Barnes launched (according to internal company documents) “a bold and ambitious multi-year plan to transform Sara Lee” by divesting brands comprising 40 percent of its revenues and focusing R&D efforts on food. By 2007 Sara Lee was increasing market share faster than any of its major competitors, and last month Barnes announced that she was selling Sara Lee’s deodorant and skin care brands to Unilever. When asked about the rationale behind this recent move, Barnes – no doubt for the umpteenth time over the past four years – said, “Our intent is to build a great business in food and beverage.” (It was a “multi-year plan,” remember?)

Count me a fan. Contrary to the strategic flailing about demonstrated by many companies when they encounter rough waters, Sara Lee has kept its focus. Barnes has consistently executed on her now four year-old strategic plan, and the nearly $2 billion take she’ll get from the sale to Unilever will equip her to further strengthen Sara Lee’s food and beverage brands. Which will leave a good taste in the mouth of the company’s investors. Smart.


Steve McKeeSteve McKee is a BusinessWeek.com columnist, marketing consultant, and author of “When Growth Stalls: How it Happens, Why You’re Stuck, and What To Do About It.” Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

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