Milling & Baking News - February 15, 2005 - 11

B U S I N E S S

Major baking changes included
in Sara Lee restructuring plan
Continued from Page 1
chairman of the board until the next annual meeting, in October.
As part of its restructuring, Sara Lee
will either spin off or sell a number of
businesses. In addition to the previously
announced plans to sell its $1.8 billion European apparel business, Sara Lee will spin
off the balance of its apparel business into
an independent, publicly traded company.
The baking business will be affected by
this spin-off since Sara Lee has named Richard A. Noll, current c.e.o. of Sara Lee Bakery
Group, as president and chief operating officer of the apparel business. Mr. Noll will
assume his new position July 3, with the
start of the company's new fiscal year.
Mr. McMillan had high praise for the
baking division head.
"Rich Noll, who has very successfully
turned around our bakery business and
turned the Sara Lee brand into the force
in the fresh baking industry over the last
three years, is returning to his roots and
will be the president and chief operating
officer of the branded apparel business,"
Mr. McMillan said in a Feb. 10 conference
call. "Rich has a phenomenal track record
running apparel businesses, including
every category in which we compete."
Other businesses Sara Lee will sell
include Meats Europe, a $1.1 billion
packaged meats business in Europe;
Direct Selling, a $450 million business
that sells cosmetics, household products
and other products through a network
of independent sales people in various
nations; and U.S. Retail Coffee.
The spin-off and divestitures represent
$8.2 billion in annual sales, about 40% of
the company's annual revenues.
"Under our transformation plan, we
will concentrate our financial management
resources on a smaller number of business
segments where we are well-positioned for
substantial growth," Ms. Barnes said. "As
a result, Sara Lee will undergo a significant
portfolio change, pursuing the disposition
of our businesses that do not fit with our
strict focus within the food, beverage or
household products categories."
With the restructuring, Sara Lee Bakery
will no longer operate as a distinct segment of Sara Lee Corp. Instead, parts of
the baking business will be included in the
parent company's three new business lines
- North American Retail, North American
Foodservice and Sara Lee International.
North American Retail will include
bakery, packaged meats and Senseo coffee
businesses in North America. The retail
business, which has $4.5 billion in annual
sales, will be headed by C.J. Fraleigh. Mr.
12 / Milling & Baking News, February 15, 2005

Fraleigh joined Sara Lee in December as
chief customer and marketing officer. He
came to Sara Lee from General Motors.
The North American Foodservice business will include the bakery, coffee and
meats food service businesses and will be
headed by James Nolan, currently executive vice-president of U.S. operations for
PepsiAmericas Inc. Mr. Nolan will join

Brenda C. Barnes, president and chief
executive officer, Sara Lee Corp.
Sara Lee Feb. 21 to lead the business.
Ms. Barnes said the change will make
Sara Lee much more effective as it seeks
to meet food service customer needs.
Robert S. Kopriva, who is c.e.o. of Sara
Lee Foods and has headed the meats
business, will retire at the end of June
after nearly 25 years with the company.
Sara Lee also said it is planning to locate its North American businesses with
its corporate staff at a single site to be
determined in the Chicago area. While
the baking business currently is located
in St. Louis, the meats business is headquartered in Cincinnati.
"By bringing our North American
businesses together in the Chicago
area, we will provide a natural catalyst
for sharing best practices and pursuing
growth opportunities across the businesses," Ms. Barnes said.
Reinforcing his confidence in the future
of the baking industry was Mr. McMillan.
"We remain very bullish about the
highly fragmented fresh bread segment
where the Sara Lee brand has grown
rapidly," he said. "Our margins continue
to improve, and we are expanding to
new geographies in the United States."
Exactly which baking corporate func-

tions will be moved to Chicago has not
yet been determined, a Sara Lee Bakery
spokesperson said. The U.S. bakery
products business is headed by William J. Nictakis, and the U.S. warehouse
and frozen international operations are
headed by Mike Knowles.
In connection with the restructuring,
Sara Lee expects to take charges totaling $1 billion over the next five years.
Prospective cash charges include $250
million for employe transition costs and
$240 million for information technology
and business transition costs.
Significant charges will be taken in
connection with the shift toward the
Sara Lee brand and away from regional
brands in the baking business.
"The company expects to reduce the
number of brands utilized in its North
American Bakery business as well as to
increase the research and development
and marketing spending behind a smaller
group of large brands," Sara Lee said. "The
net book value of the trademarks currently
used in the North American Bakery operation is $327 million and a substantial portion
of this asset will be written off as customers
are transitioned to the larger brands."
The company also said it will take $220
million in charges for plant closings in the
United States but said specific facilities to
shut down have not yet been identified.
Ms. Barnes said the restructuring will
result in various cost savings and margins improvements aggregating $575
million to $800 million annually.
She said the savings will be offset by
a planned $250 million increase in marketing spending as well as research and
development investment.
The company is seeking a 12% operating
margin by fiscal 2010. Ms. Barnes said that
would be a higher margin than the company has achieved in the past 25 years.
"Today, Sara Lee is embarking on an aggressive, strategic plan that will transform
the entire enterprise into a tightly focused
food, beverage and household products
company," she said. "We are taking bold
action that will enable Sara Lee to compete
more successfully in today's dynamic marketplace and thereby generate consistent,
long-term top-line growth and bottomline profitability for our shareholders."
Ms. Barnes joined Sara Lee last June as
president and c.o.o. She spent 22 years at
PepsiCo, Inc. and was president of PepsiCola North America.
"Our decision to fundamentally transform Sara Lee presents an ideal time for
Brenda Barnes to transition to her new
role as chief executive officer," Mr. McMillan said. "We recruited Brenda last
year to be my successor, and her contributions and leadership have exceeded
all expectations." MBN
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