DOWNERS GROVE, Ill. – On June 5, Sara Lee Corp. announced its strategy for its North American foods business, Hillshire Brands Company, which emphasized new product development, marketing investment and disciplined cost control. Its strategy is expected to deliver annual revenue growth of 4-5 percent and an operating margin of 10 percent by FY 2015 and have a near-term dividend payout ratio of 30-35 percent, management said.
Announced earlier that day, the new company name – Hillshire Brands Company – will come into effect after the June 28 spin-off to shareholders of its international coffee and tea business.
“We envision making Hillshire Brands Company the most innovative meat-centric food company in the US,” said Sean Connolly, chief executive officer of Sara Lee Corp.’s North American Retail and Foodservice business, who becomes Hillshire Brands Company’s CEO after the spin-off. “We begin life in a dynamic sector as a major player with four iconic mainstream meat brands – Jimmy Dean, Ball Park, Hillshire Farm and State Fair – and our two artisanal brands – Aidells and Gallo. They position us well and provide tangible opportunity for growth in value-added products.
“We intend to produce robust shareholder return by strengthening our core brands and expanding into adjacent food categories,” he added.
Connolly said the company will leverage its marketing discipline and market insights to develop inventive new products, while financing innovation and increased marketing investment through enhanced margins and operational efficiencies.
Connolly and Maria Henry, chief financial officer of Sara Lee Corp. North American Retail and Foodservice, who will become Hillshire Brands’ chief financial officer after the spin-off, outlined Hillshire Brands’ four drivers of profitability: Higher revenues through innovation and increased brand support; improved gross margins through new, higher-margin products, brand strength differentiation, and productivity; increase marketing, advertising, and promotion to 5 percent of revenue by fiscal year 2015 and make it more-effective; and further cost and productivity programs including a three-year plan to save $100 million and investment in insights and innovation to manage selling, general and administrative (SG&A) expenses.
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