Sara Lee Challenged on Antitakeover Defenses Invites Consumers into its Kitchen

I was reading two articles on Sara Lee a few days ago. BrandWeek did a Q&A with the company’s Food & Beverage division Chief Marketing Officer, Kim Feil. The Wall Street Journal published an article (paid content) on Sara Lee CEO Brenda Barnes rebuffing calls to shield the firm from a possible takeover. Just like Melanie Griffith’s character in Working Girl (only the Italian version), I wondered how the story is going to unfold.

Will the company have the chance to architect its own turnaround strategy before investors and corporate-governance groups push to accelerate growth through an acquisition? There is definitely tension between organic growth, which I view as the most durable and desirable, and super-size me growth of the takeover kind.

Every company, division, and business should have an exit strategy. And whether the company is owned by a private equity group or is public, that group wants its dues. Sara Lee’s strategy, as reported by Sonia Reyes in BrandWeek, is to get back to its core business and shed all the unwanted products, which comprised 40% of the company’s revenues. It’s interesting to note that in its move towards fresh and convenient meals, the company is emerging leaner.

Will staple processed brands such as Hillshire Farm and Ball Park Franks weigh the company down in its quest for longer-term margin improvements? Laura Ries of Ries & Ries in Atlanta bets the company will have a hard time turning the ship around. So strike one from the branding world. Prudential analyst John McMillin gives CEO Barnes credit for managing a tough business in a very competitive environment.

One thing is for sure, everyone is watching. Ms. Barnes’ first order is “to deliver on the plans” the company has. “That’s what I worry about,” she was quoted in the WSJ. Can Feil’s marketing efforts and consumer outreach come to the rescue? This is an interesting scenario. You have a company with:

• A mix of legacy brands and new brands -– meat and potato vs. leaner products
• A staple of commodity products existing in different categories –- sausages, breads, frozen cakes
• A plethora of suppliers at retail level –- frozen section, bread shelves, etc. think of eight sections of a retailer’s store

And you have a CMO determined to promote the following initiatives “both collaborative and innovative,” according to Sara Lee Food & Beverage CEO CJ Fraleigh:

• Marketing messages of convenience, taste, value, healthy eating and suitability for all meal occasions
• Driving each Sara Lee business unit to take advantage of combined knowledge and categories
• Executing on the core focus of the marketing team she assembled –- matching the consumer’s desire to find fresh, high quality, great tasting, and easy to prepare meals and snacks

To make the company’s base assets more appetizing, relevant, and interesting to consumers, Feil:

• Built a retail environment to invite consumers into its kitchen –- they call it the “sensory and customer experience unit” –- it’s a mini store that will help people see how the different products will be sold and then to taste the products themselves
• Is working on packaging for ease of storage, portability, and portion control –- some of consumers’ critical considerations
• Wants to connect with the right consumers at the right time (quality) to develop preference over quantity (the old elevate awareness mantra) – she is doing this with more morning online and TV buys around the concept of “Happy Breakfast” and “Happy News”

What do you think? Will these initiatives put the company on a steady earnings diet? Will the celebration touted in the “Joy of Eating” help Sara Lee feed hungry investors? What other initiatives and strategies would you recommend to rewrite the company’s story? Do you agree that the brand portfolio approach will pay off? How about the company's vision, is it specific enough to drive quality vs. quantity? Is this a recipe for success?

Comments

[gianandrea facchini]

Valeria, your post is making me think about how many and many companies are looking to change their business and their profile because the place where investors pushed them is a dead end. Too many business have push too far just for the revenue and the quarterly bottom line, going tactical rather than strategical. This is now a problem in a fast changing world where the ability to adapt is a key. Do you remember about dinosaurs?

[Valeria Maltoni]

Gianandrea:

It will be interesting to see how Sara Lee moves forward. The devil is always in the execution and customers are a very large part of a company's success. As a marketer, I appreciate a challenge when I see one.

[Joe Raasch]

Hi Valeria,

Though I don't work in marketing anymore (and it was the focus of my MBA!), I am always intrigued by what companies choose to do with their coveted brands.

There are two things I would do:

1. Be unwavering in connecting the brand promise of each specific product to its individual consumer base. This means Hillshire Farms may not have to put out a 'lean' version of the breakfast sausage.

2. Spend less on 'above the line' advertising like television and print, and focus more of the marketing dollars on 'below the line' advertising such as channel promotions, shelf space, targeted email (permission marketing!) - all that nail the brand promise.

Remember the McLean hamburger from McDonald's? They did focus groups for months to make sure consumers really wanted a leaner offering at McDonald's. Those that participated loved the burger, the taste, the packaging, the concept, etc. McDonald's forgot to ask one critical question: "Would you buy this hamburger at McDonald's in lieu of other offerings?" As the market showed, people did not buy McLean. The brand promise is french fries and chocolate shakes and McNuggets, not 'healthy'.

"Give the people what they want!"

[Valeria Maltoni]

Joe:

We want you back in marketing. Sometimes we over think and bypass the most obvious, which, as you point out, is keeping the brand promise.

Those products already have a good customer base. How can we give those customers a megaphone to tell others?

[Joe Raasch]

Hi Valeria,

Make me an offer and I am back in marketing!

To my grave I will sing the virtues of Nut Goodie candy bars, Bisquik biscuits, my local Vietnamese restaurant, North Face jackets, Allen Edmond shoes, the red sauce at Cossetta, the Moosejaw website, nalgene plastic bottles...

Why? Varies by product: some are made in Minnesota, some have performed admirably in adverse conditions, some just last forever.

Getting people to tell these stories, to uncover these stories within themselves, creates the megaphone.