Barnes envisions more efficient Sara Lee following reorganization

by Eric Schroeder
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CHICAGO — Sara Lee Corp.’s senior management, led by chairman and chief executive officer Brenda C. Barnes, on Monday provided an update to the investment community on the advancement the company has made in transforming itself into an innovative, integrated operating company tightly focused on its customers and consumers.

During its annual "Meet the Management" meeting with analysts held Sept. 18 in Chicago, Ms. Barnes noted the tremendous amount of work completed since the company began its five-year transformation plan in February 2005.

"In less than two years, we have made significant progress in transforming Sara Lee into a company focused on building strong brands in the food, beverage, and household and body care categories, delighting consumers and customers around the world, and delivering long-term consistent value to our shareholders," Ms. Barnes said. "We have exited non-core businesses, including the successful spin-off of Hanesbrands Inc. earlier this month, aggressively improved operating effectiveness across all major functions of the company, strengthened our management team, driven new product innovation and continued to evolve our culture. We look forward to building upon that success in fiscal year 2007 and beyond."

In addition to Ms. Barnes, several members of Sara Lee’s senior management team discussed the core strategies of each of the company’s businesses.

Theo de Kool, chief financial and administrative officer, said fiscal 2007 should be an "inflection point" for the company’s performance and should show positive top- and bottom-line growth trends across all businesses. He indicated that new product introductions, new marketing programs and strategic customer initiatives will be instrumental in driving sales growth in the coming year.

Mr. de Kool noted that the company expects cash from operations to be between $400 million and $500 million. In addition, he said transformation costs and benefits are tracking in line with or are better than company plans. As a result, Sara Lee is expected to continue to return significant value to shareholders in fiscal 2007 by delivering a $370 million dividend payout, repurchasing $500 million of shares and reducing net debt by $1 billion.

Commenting on the food and beverage business, Christopher J. (C.J.) Fraleigh, chief executive officer of Sara Lee Food & Beverage, said the group’s focus is on driving margin improvement by building brands through innovation, quality, and clearly communicated product benefits; executing sales programs to benefit customers and the consumers in their stores; integrating continuous improvement initiatives; and aligning employees behind growth and achievement.

Mr. Fraleigh said Sara Lee will launch at least 20 new products in its food and beverage unit during fiscal 2007. Last week, the company launched six bread varieties as part of its new Sara Lee Hearty & Delicious bread line, including the company’s first all-natural bread.

In addition to new products, Mr. Fraleigh outlined how the organization has begun to successfully execute selling meat and bakery together. Bringing this combination of deli meat and bread, or the hot dog and the bun, to customers along with increased integrated marketing support has been successful and has generated incremental sales, he said.

Finally, Mr. Fraleigh reviewed major brand growth initiatives, highlighting that Sara Lee is the company’s largest and fastest-growing brand, and is expected to become its first billion-dollar food brand.

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