Sara Lee Corporation
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The Sara Lee brand is associated in most people's minds with American-style cheesecake and other bakery products, but Sara Lee Corporation's portfolio gradually expanded during the 1980s to house an extensive collection of clothing, coffee and housecare brands. Hanes, Playtex and Wonderbra, Douwe Egberts, Kiwi Shoe Polish and Radox bath salts were all acquired, turning Sara Lee into a substantial diversified conglomerate with annual sales over $18bn. Substantial, yes, but unfocused as well, and in 2005 the group began breaking itself up, selling or demerging all of its apparel, household, bakery and bakery products over the next six years. Hanesbrands and DE Master Blenders 1753 were two of the companies created in that process. Pared down to its deli meats operations, Sara Lee Corporation's remaining operations in North America adopted the Hillshire Brands name in 2012.
The Sara Lee brand name only ever formed just a small part of the business which was known until 1985 as Consolidated Foods. Entrepreneur Nathan Cummings acquired a small biscuit and candy business in Canada in the 1930s, and then moved south of the border into the US at the end of the decade, first managing and then buying CD Kenny, a small sugar, tea and coffee distributor. Three years later, he merged that business with a larger packaged goods distributor, Sprague Warner & Co. A series of other acquisitions followed, including the well-known Monarch restaurant distribution brand. In 1945, the company changed its name to Consolidated Grocers, and floated its stock the following year.
The group prospered in the 1950s, becoming Consolidated Foods and adding a host of further businesses to its portfolio, including in 1956 frozen bakery company Sara Lee (which had been named by founder Charles Lubin after his 8-year-old daughter). Also that year, Cummings acquired supermarket retail chain Piggly Wiggly. Two further supermarket chain were added in 1961, Eagle and Shasta (all sold in 1966). With sales touching $500m by the end of the 1950s, the group turned its attention to the international market. The first non-US purchase was Dutch canned goods producer Jonker Fris, followed by other companies in Europe and Latin America. In 1966, the group acquired its first non-food business, cleaning products company Oxford Chemical Corporation.
Cummings retired in 1968, but the group continued to expand rapidly over the next two decades, moving into packaged meats and other goods, with the acquisitions of Bryan Foods, Electrolux appliances, Gant clothing and Canadelle underwear (all 1968), Aris Gloves (1969), Hillshire Farm and Rudy's Farm (1971), Erdal (1972), Chef Pierre frozen desserts (1972), Hanes hosiery and underwear (1979), Standard Meat (1982) and Nicholas Kiwi household and car care goods (1984). Some remain in the portfolio, others were sold along the way.
In 1985, with sales touching $8bn, the group changed its name again, giving its frozen food brand top billing to become Sara Lee Corporation. High quality leather accessories company Coach was purchased the same year, followed by Bil Mar Foods (1987) and Adams-Millis (1988). In 1989, the group completed a clutch of major purchases including leading French hosiery company Dim and sportswear company Champion. But the most significant move was the completion of a merger with Dutch coffee and tobacco company Douwe Egberts/Van Nelle. Consolidated had acquired an equity position in the Dutch company in 1978, but purchased the remaining shares in 1989 to create Sara Lee/DE, based in Holland.
Sara Lee's shopping spree continued through the 1990s with purchases including Playtex Apparel (1991), BP Nutrition Consumer Foods, SC Johnson's furniture care business (both 1991), SmithKline Beecham's bath and bodycare business (1993), and Brossard (1997). Also in 1997, the group began a major restructuring program designed to cut down on the number of brands within the portfolio, and move away from manufacturing. Job cuts and closures cost $1.6bn that year. In 1998, the Sara Lee/DE international division sold its portfolio of tobacco brands, including Drum and Van Nelle rolling tobacco to the UK's Imperial Tobacco for $1.1bn. Also that year, the group's US foods division was hit by a product recall operation costing $76m, after hot dogs and meats were linked to a food poisoning outbreak in Michigan.
The group acquired US-based Continental Coffee Products Company from The Quaker Oats Company during 1998, followed by Chock Full O'Nuts and Wechsler Coffee Corp in 1999. Also in 1998, purchases included Brazilian coffee company Cafe do Ponto and Spain's Hornimans and Suenos de Oro tea brands. At the end of 1999, the group bolstered its portfolio further, paying around $280m for Nestle's US brands Chase & Sanborn, Hills Brothers and MJB. In early 2000, the group mounted a hostile bid for UK clothing company Courtaulds, which derived about 40% of its business from troubled retailer Marks & Spencer, for whom it made underwear. Sara Lee initially made a friendly approach to Courtaulds but was rebuffed. The company eventually won over Courtaulds shareholders with an offer of $150m ($239m).
Shortly afterwards Sara Lee announced further restructuring to focus on its three international core divisions of food & beverage; intimates & underwear; and household products. A string of businesses were disposed of in the course of the following months. In 2000 the group's food service division, PYA/Monarch, operating principally in the US, was sold for $1.6bn to Royal Ahold. Sara Lee spun off its upmarket leather accessories business, Coach, in 2001 (making a profit of almost $1bn in the process), followed by the international textiles business of Courtaulds. Other businesses sold included bakery businesses in the UK, US and France, underperforming underwear brands in Australia, France and the UK, and Spanish meats business Argal.
In February 2005, Sara Lee's chairman, president & CEO Steve McMillan unveiled a radical restructuring of the group, but handed over responsibility for its execution to newly recruited president Brenda Barnes. She eventually presented a plan to break up the group and led the initial stages of the overhaul.
The group's $1.1bn European meats division, with brands including Aoste, Justin Bridou and Cochonou in France, Imperial in Belgium, Stegeman in the Netherlands, and Nobre in Portugal, was put up for sale in 2005. A deal was eventually agreed the following year with Smithfield Foods, who paid around $614m for the business. A collection of Mexican cold meats brands including Kir, Zwan and Duby, were sold in 2008.
The Sara Lee Branded Apparel division was divested in 2006. The North American business was spun off as Hanesbrands; the European business was sold to private equity investors (but was reacquired by Hanesbrands several years later).
Household Products was for many years Sara Lee's smallest but most global group. The original plan was to sell the division as a single unit, and Goldman Sachs was hired in 2009 to explore this route. In the end, no single buyer could be found. However Unilever agreed to acquire the group's portfolio of European body care products for almost €1.2bn. Brands included dusch das, Badedas, Radox, Delial, Matey and Fissan for kids, Monsavon, Williams, Brylcreem hair styling products and Zwitsal babycare. Sanex was also part of that deal, but Unilever was ordered to sell on the brand by European competition regulators, and it was eventually acquired by Colgate-Palmolive. Procter & Gamble signed up to acquire the Ambi-Pur air fresheners unit for €260m.
The company sold its insecticide business in India in 2010 to local partner Godrej for a handsome E185m. The remaining insecticides in Europe and Asia were sold to SC Johnson for €154m. At the end of 2010, SC Johnson also sealed a deal to acquire the Kiwi range of shoe and leather care products for €245m, and transferred White King bleach and other cleaning products in Australia to local company Pental for €38m. At one time, the group also owned a global direct selling operation, distributing cosmetics, fragrances, jewellery, toiletries and apparel products directly to consumers' doors under the House of Fuller and other brands (including Avroy Shlain in South Africa and Nutrimetrics in Australia). This business was sold in 2005 to Tupperware for $557m.
The proceeds of this sell-off were mostly used to repay debt; but one significant acquisition was the purchase of US bakery Earthgrains for $2.8bn in cash and debt, quadrupling Sara Lee's bread operations. Other smaller deals included Polish coffee company Prima and Trailís Best Snacks, the fourth largest producer of meat snacks and beef jerky in the United States.
However, the divestment process was interrupted when CEO Brenda Barnes suffered a stroke in May 2010 and was forced to take emergency medical leave. She relinquished her post permanently in August in order to concentrate on recovering her health. Marcel Smits, previously EVP & CFO, was appointed as CEO, and pressed ahead with the break-up.
Another pillar of the old group's North American operations was sold later that same year. Sara Lee Bakery had been the largest fresh bread company in the United States, with sales of $2.1bn in fiscal 2010. In November 2010, the group announced a deal to sell that business, including more than 40 bakery plants across the country, to Grupo Bimbo of Mexico for $959m. That deal closed in Sept 2011, and Bimbo subsequently acquired the group's remaining bakery business in Spain and Portugal as well. A small bakery business in Australia was sold to McCain Foods in 2012.
The coffee business previously known as Sara Lee International was spun off to shareholders in early 2012, as DE Master Blenders 1753. It later became part of what is now Jacobs Douwe Egberts.
Sara Lee Corp's combined sales for its last financial year, ending to June 2011, rose on a comparable basis by 5% to $8.6bn. However reported sales for 2010, including divested businesses, were $10.8bn, while sales in 2009 were $12.9bn. Net income for 2011 more than doubled to almost $1.3bn, as a result of disposals. With only its cold deli meats business remaining, the company adopted the new name of Hillshire Brands Company in 2012. It was acquired two years later by meat processor Tyson Foods.
Last full revision 4th November 2016
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