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CHICAGO - Chicago-based Sara Lee Corp. will close more bakeries and cease making many of its regional breads so it can concentrate on its best-known brands, The Chicago Sun-Times reports.
Three national brands--Sara Lee, Earthgrains and Iron Kids--generate 37 percent of the company's branded fresh bread sales, while 71 brands drive only 6 percent of the sales, Richard Noll, COO of Sara Lee Bakery Group, told financial analysts at a meeting Monday in New York.
"We've got to change our business model--from a traditional bakery business to a consumer products business," Noll said. "We have to have fewer facilities, and fewer regional and local brands."
He said Sara Lee could slash 30 percent of its thousands of fresh bakery products and gain better productivity from its plants and delivery routes.
Noll declined to say how many of Sara Lee's 55 bakeries will be closed, how many jobs will be cut, or how many of its 108 bakery brands it will stop making. He said Sara Lee will keep strong regional brands like Rainbo, Colonial and Heiner's.
The company has already announced eight bakery closings and more than 700 job cuts since it acquired Earthgrains for $2.7 billion nearly two years ago.
Sara Lee officials concede the Earthgrains acquisition has failed to live up to its billing, and they said upcoming third-quarter bakery sales will be lower than a year ago. The bakery group accounts for $3 billion of Sara Lee's $18 billion in yearly sales.
Bakery operations are being hurt by competitors that make store-brand breads at lower costs than Sara Lee, and by higher costs for store-marketing programs, employee medical costs and commodities like wheat. Sara Lee has lost 9 percent of its private-label business, Noll said.
He said Sara Lee intends to grow by expanding its sales territories, selling upscale, pricier bakery goods, and emphasizing the healthy aspects of products like crustless wheat bread for children.
Sara Lee also is benefiting from Earthgrains' direct-to-store delivery routes, which have expanded the reach of new products like Sara Lee breads.