Milling & Baking News - December 16, 2008 - 18

Sara Lee Corp.

of operating margins to about 9%
within three to five years. Instead,
the company has struggled maintaining profitability in recent years
with margins considerably narrower than was the case in 2005.
In the most recent quarter, the
company's operating income was
$19 million on sales of $571 million,
or an operating margin of 3.3%. The
margin was up significantly from
2.9% a year earlier but remained far
shy of the earlier target. By contrast,
the operating margin at Thomasville, Ga.-based Flowers Foods Inc.
was 7.4% in the most recent quarter.
Flowers' net sales were nearly identical to Sara Lee - $575 million. But
its earnings before interest and taxes
were $42.4 million.
Asked about the degree to which
Sara Lee has been satisfied with its

'Whole grains have not slowed
down for us. We still feel very
good about whole grains as a
trend.'
- James W. Nolan

18 / December 16, 2008

Milling & Baking News

2001 acquisition of The Earthgrains
Co., Mr. Nolan was circumspect but
confident about the company's outlook.
"I wasn't here when the acquisition was made, but I would say that
there are bumps along every road,"
he said. "I can't talk about the expectations. But I know we feel very
good about our current position and
our prospects.
"Some in the industry today have
reasonable margins. When I look
at our own position, we have markets within our system that are very
different in margin structure from
other geographies. How you get the
entire system there is what we're
working on."
Even though he has spent most
of his career in the soft drinks business, Mr. Nolan's earliest years in
the food and beverage industry
afforded him contact with the baking sector. His career began 31 years

ago in the Industrial Foods Division
of Procter & Gamble Co. In addition
to selling Folgers coffee, he also sold
industrial shortening and oil to the
baking industry.
Prior to joining Sara Lee in 2005,
Mr. Nolan was executive vice president of U.S. operations for PepsiAmericas. Before joining PepsiAmericas in 2001, he held numerous
positions of increasing responsibility during a 21-year career with
PepsiCo, including chief customer
officer of PepsiCola North America
and senior vice-president of sales
and market development for PepsiCola North America.
PepsiAmericas is the second largest Pepsi bottler, serving in the
United States markets as far west
as Fargo, N.D., and as far east as
Cleveland.
At Sara Lee, Mr. Nolan's first
assignment beginning in February
2005 was leading the company's
food service business, a role he had
for 2½ years.
"This work introduced me to
the company's major food product
lines, including meat, frozen bakery
and coffee," he said.
While his experience in baking
represents just a fraction of the time
he spent in beverages, Mr. Nolan observed a number of similarities between the industries. In addition to
their reliance on direct-store delivery,
both soft drinks and baking are manufacturing intensive businesses with
similar ways of moving to market.
"The baking industry is a terrific
business, one I'm fully enjoying,"
Mr. Nolan said. "I'm greatly impressed by the company's product
line, which has incredible consumer
relevance. The industry has needed to adapt to changing consumer
trends. Baked products are probably
on the top of everyone's shopping
list. It has huge customer relevance.
And the baking aisle is one of the
most profitable areas for retailers."
For Sara Lee to succeed going forward, a holistic approach will be
necessary encompassing productivity initiatives, consumer insights and
finding ways to build local scale in
lagging markets and a common set
of key metrics, Mr. Nolan said.
To achieve a common understanding of the company's strategy, Mr.
Nolan has worked hard to ensure
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Milling & Baking News - December 16, 2008

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