DOWNERS GROVE, Ill. – Sara Lee Corp. reviewed its plan, first announced on Jan. 28, to spin off its North American Retail and Foodservice business in a tax-free transaction, creating two pure-play, publicly traded companies at the Consumer Analyst Group of New York’s (CAGNY) annual conference on Feb. 22.
“We are excited to create shareholder value by spinning off our North American business resulting in two pure-play companies,” said Marcel Smits, CEO. “This will allow for greater management focus, faster growth potential and greater strategic flexibility, while providing more focused investment options for shareholders.”
The spun-off North American Retail and Foodservice business (excluding North American beverage) will retain the Sara Lee name and is expected to account for approximately $4.2 billion of the company’s total fiscal 2011 net sales, based on the mid-point of current guidance. The business has benefitted from investments in leading industry brands including Jimmy Dean, Hillshire Farm and Ball Park, which have generated strong growth and financial results over the past five years.
The business’s focus on innovation, value-added sales mix and operational efficiency has driven substantial margin improvement across its categories. Investments such as the new, state-of-the-art, sliced-meats facility in Kansas City, Kan., which began production this month, support the company’s goal of furthering its sustained competitive advantage.
The yet-to-be-named company, internally referred to as “CoffeeCo,” will consist of Sara Lee’s International Beverage and Bakery businesses, as well as the current North American beverage business, and is expected to account for approximately $4.85 billion of the company’s total fiscal 2011 net sales, based on the mid-point of current guidance.
The company also discussed the impact of escalating commodity costs on its businesses. Mark Garvey, chief financial officer, provided insight on the challenging effect of commodity costs during the first half of fiscal 2011, and reinforced the company’s position that it will see improvement during the remainder of the year.
“Although we anticipate further headwinds in the second half, particularly as we push through our new price increases, we do expect the increases that we have already taken will benefit our margins in the back half of the year,” Garvey said.