Sara Lee company history and business analysis

Sara Lee's Acquisition Strategy

Sara Lee's recent acquisitions are linked to its long-term strategy. The one major acquisition that Sara Lee has completed in the last few years is their purchase of Earthgrains. The following paper will show the purpose of the acquisition and how it is linked to the strategy. Sara Lee's disposition of many of its units will also be briefly described.

In 2001, Sara Lee acquired Earthgrains, the second largest fresh bread company in the United States. The president of Sara Lee C. Steven McMillan is quoting describing the purpose of the acquisition stating that "Earthgrains is a key element in the investment phase of Sara Lee's reshaping program as it creates a strong growth platform for one of our core businesses" (Sara Lee, Sara Lee Corporation to Acquire Earthgrains for $2.8 Billion). This acquisition is part of Sara Lee's strategy of building on the brand leadership in their three main sectors: food and beverage, intimates and underwear, and household products. In this case, the acquisition adds to Sara Lee's food and beverage brand and allows them to build on the strong position of the brand.

The president of Sara Lee C. Steven McMillan is also quoted describing the benefits of the acquisition stating that "we immediately quadruple our annual bakery sales and, equally as important, we acquire a premier direct-store distribution system that will help drive the extension of the Sara Lee brand franchise" (Sara Lee, Sara Lee Completes Acquisition of Earthgrains). It is important to note that Sara Lee already had a bakery group operating. However, this bakery group was not operating as efficiently as was required, at least partly due to a poor distribution system. This leaves Sara Lee with two options. One is to develop an improved distribution system. The second is to take over a company that already has a successful distribution system. The second option was the preferred option because there is less risk and because it is a faster solution. The other option of developing a system would have been more risky because there is always the possibility that the distribution system would not be effective. Since Earthgrains already had a successfully operating system, Sara Lee can solve their problem without any risk of the system not working. This also solves the problem of having to take the time to develop a new system. Another associated issue is that with a better distribution system and other positives that are gained from taking over Earthgrains, Sara lee can expect to expand its sales in this area. Buying Earthgrains gives the company the facilities to expand. At the same time, Sara Lee does not have to compete with Earthgrains.