With new high-tech plant, Sara Lee plots growth

Reuters

By Carey Gillam

KANSAS CITY, Kansas (Reuters) - Sara Lee Corp's opening of a high-tech Kansas City meat manufacturing facility sets the stage for broad growth in its key brands and is part of a series of moves in preparation for splitting in two, company officials said on Friday.

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"We are in an investment mode," said Chief Executive Officer Marcel Smits. He pointed to increasing advertising spending, a series of small acquisitions, and heavy investments in plant improvements and automated technology.

"We want to get these two companies coming out of the gate flying. We are trying to make these companies as strong as we can," Smits told reporters on the site of the new $140 million, 200,000-square-foot sliced meats facility.

Sara Lee announced in January plans to split into two public companies, one that would focus on North American meats, and another focused on international beverage and bakery businesses. The company's North American fresh bakery business is to be sold.

The split is on track for completion in early 2012, according to officials.

The Kansas City, Kansas, facility is seen as a key investment for the future, offering additional capacity for growth in the meats business and greater efficiencies, Sara Lee executives said.

The plant has a range of automated processes that can reduce processing time and staffing requirements by about 50 percent, said Sara Lee vice president of operations John McAndrew.

The new facility, one of 11 Sara Lee meat plants in the United States, will be the primary location for processing and packaging Hillshire Farm lunch meat, which represents roughly half the Hillshire Farm brand-related revenue of about $1 billion annually. Sara Lee's entire North American meat company will have $4 billion to $4.5 billion in sales.

The lunch meat business has weathered the economic downturn well, with Hillshire Farm revenue growth running 5-10 percent over the last four to five years, said Smits.

"The Hillshire Farm business is a growth business," he said.

Soaring commodity costs have hit Sara Lee, as they have other food makers, and the company has been implementing a series of price increases ranging generally from 4-8 percent. More price increases are possible, officials said.

"It has impacted us. The reality is consumers will have to spend more money on certain staples," said Monty Pooley, president of retail for Sara Lee North America.

While emphasizing Sara Lee's continued interest in making coffee acquisitions in Brazil, Smits declined to address reports the company was in talks to buy Marata, a Brazilian coffee and beverage company.

Smits said that during the economic downturn and a spike in commodity costs, Sara Lee has been focused on innovation and cost control in a "very, very challenging" environment.

"In the last several months we've gone through the biggest ramp up in commodity costs that the company's seen in a very, very long time and we've come out of that OK," said Smits. "We've had a decent year... under what for the company are very difficult circumstances."

(Reporting by Carey Gillam; Editing by Tim Dobbyn)