Sobering lessons from Sara Lee experience in baking

by Josh Sosland
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When announcing plans to acquire The Earthgrains Co. in June 2001, C. Steven McMillan, then president and chief executive officer of Sara Lee Corp., described the move as a “key element” for the company and a “strong growth platform” for a core Sara Lee business. In the years that followed, Sara Lee set a high standard for innovation in baking. In addition to building the Sara Lee brand on fresh baked foods “from the ground up” into a powerhouse, the company introduced a steady flow of successful new products such as the Delightful line, one of the few reduced-carbohydrate products to survive the Atkins era.

Most remarkable, though, has been the apparent success of its category-creating line of Soft & Smooth bread made with a blend of whole wheat and enriched white flour. From the very beginning, though, these new lines’ success failed to translate into earnings growth. Sales growth, too, fell short of early expectations.

Despite Sara Lee’s mighty efforts to enhance the baking business, close observers of the company were not surprised that last week’s selling price was well below what the company had paid in 2001. That Sara Lee could excel in building a valuable brand and fail in building a successful business underscore the complexity of baking and its significant differences from other parts of the food industry. This point appeared to underpin the message last week of Gary Prince, the president of Bimbo Bakeries USA, as he extolled “Grupo Bimbo’s commitment and singular focus on baking.”

The lesson for baking to take from the Sara Lee episode should not be that innovation is unimportant. It’s just that innovation alone is not enough.

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