Sara Lee plans to cut costs in Project Accelerate

by Jeff Gelski
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BOCA RATON, FLA. — Sara Lee Corp. is moving into a Project Accelerate cost-cutting phase that is expected to yield $200 million to $250 million in benefits about two years from now. Brenda Barnes, chairman and chief executive officer, gave details on Project Accelerate and also explained how Sara Lee’s marketing will emphasize products at lower price points when she spoke Feb. 17 at the Consumer Analyst Group of New York Conference (CAGNY) in Boca Raton.

Project Accelerate marks the next phase of improvement in Sara Lee’s transformation plans announced four years ago, Ms. Barnes said.

"Our objective was to become more streamlined, more focused, more efficient and more effective in the marketplace," she said.

Project Accelerate will require Sara Lee to take about $150 million of one-time charges between fiscal 2009 and 2011, with the majority coming in 2009. The company expects Project Accelerate to yield about $200 million to $250 million of benefits when the full-year run rate is achieved by fiscal 2011.

Project Accelerate will involve such actions as outsourcing, supply chain improvements and rationalizing stock-keeping units. Sara Lee is implementing an outsourcing model that leverages standardized processes and I.T. infrastructure.

"Our partners in the initiative include HP for data centers, AT&T for telecommunications capabilities and IBM for application development and maintenance activities," Ms. Barnes said. "We anticipate these actions will result in the reduction of 700 full-time employees, and they are expected to collectively drive annual savings in the millions."

Project Accelerate also is designed to reduce spending against indirect goods and services, which runs about $2.9 billion each year.

"We are setting up a global transactional procurement process and expanding our strategic sourcing capabilities, which will improve our visibility into how and where we spend and create standardized processes to leverage our scale," Ms. Barnes said.

Improving the supply chain process is impacting plant productivity and capacity utilization, Ms. Barnes said and added Sara Lee believes it may generate 10% to 30% greater capacity per plant with no capital outlays.

While cutting costs in some areas, Sara Lee will continue to expand promotional spending, especially in Europe, Ms. Barnes said. The company will employ more coupons and in-store executions.

"Our marketing will also place greater emphasis on the value proposition of products," Ms Barnes said. "We’re focused on affordable innovation delivering new versions of products at lower price points.

"Whether it’s a cup of single-serve Senseo coffee, the re-sealable package for Hillshire Farm deli meats, the individually wrapped Jimmy Dean breakfast sandwiches, or pre-sliced food service pies, we have a portfolio that lends itself well to tough times, and we’re featuring those attributes in our marketing."

Sara Lee’ stock price on the New York Stock Exchange opened at $8.73 per share on Feb. 17 and closed at $8.51 per share that day. It was trading at $8.37 per share in the mid-morning of Feb. 18.

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