Keepers Of The Flame
February 1, 2006
Keepers Of The Flame
Stoking the fires of Sara Lee’s meat business rests in the hands of CJ Fraleigh and his cabinet of industry veterans.
In line with its transformation plan, Sara Lee’s executive team is in charge of driving growth in its food-and-beverage segment concerning key product categories including the company’s namesake brand of Sara Lee. Meat category brands include Ball Park, Hillshire Farm, and Jimmy Dean. Non-meat brands include Kiwi, Sanex, Senseo.
In the following conversations, team members, including Fraleigh, chief executive officer; Rich Armstrong, chief supply-chain officer; and Kim Feil, chief marketing officer, detail strategies designed to grow the food-and-beverage product portfolio.
CJ Fraleigh, a man on a mission
Career and education highlights: general manager for the $29 billion GMC-Buick-Pontiac division of General Motors after previously serving as executive director of advertising and corporate marketing; 12 years with PepsiCo, beginning as assistant marketing manager and finally moving up to vice president, colas, and brand director – Pepsi, a $12 billion retail brand. He joined Sara Lee in 2004 as chief customer and marketing officer. He holds a bachelor’s from Lehigh University and an MBA from Columbia University.
Q: In your view, where do things stand concerning Sara Lee’s transformation progression?
A: We are very pleased with the progress we have made thus far in our transformation efforts. The core message that I have said to investors, analysts, and employees reflects the heart of what we are. We are an extremely high-integrity company, and we are committed to being responsible citizens of the categories that we brand for our supplier, customers, and consumers.
Q: Describe the transformation formula for your group.
A: We are going from an organization that had its roots in an entrepreneurial, decentralized, and small operating company environment, and moving towards an integrated, world-class food/consumer-products company. Examples of what you see now and what you will see in the near future could not have existed with nine of 10 decentralized meat companies, 60 bakeries operating completely independently, a separate frozen-dessert group, as well as our coffee group. It is better to combine them.
Q: Discuss the execution strategy.
A: We are building a world-class food R&D center that will have well over 100 world-class people working here in Chicago. You could not do that when you have a $200-million meat com-pany in one place, a $40-million bakery somewhere else, and a $300-million meat company in yet another place. We now have an integrated sales force of more than 500 people that call directly on customers. A couple years ago, we worked with a broker sales organization. Some sold Jimmy Dean and others sold another one of our products. By and large, we make direct calls on all our major customers. We now have category experts concerning refrigerated and frozen food. I can go in and talk to the CEO of a major food retailer because we are now a multibillion-dollar food company; we are not a small meat company or individual bakery. We can talk about how we can meet some of their broader strategic needs.
Q: Is there an example?
A: When we offered a coupon in a newspaper for Sara Lee bread and Hillshire Farm Deli Select, a number of retailers thought that was such a good idea, they put up an incremental bread display and gave us an incredible display of Hillshire Farm Deli Select and allowed us to put bread displays on both sides. It sounds real simple, but in the past we would have bought two FSIs [free-standing inserts] for different weeks. We got some cost efficiencies. It is true this is no novel concept, we just have not marketed meat and bread together.
Q: What do you mean by world class?
A: Being in the top tier in terms of revenue and profitability growth compared to other food and consumer product goods companies. Another element would be the amount of innovative products to market and the insight and level of innovation behind them. In that regard, we have Jimmy Dean Bold Country sausage, a great tasting and innovative new product with a new flavor. It added incremental business to us. Then there is the Jimmy Dean skillet creation launched in late summer of 2005 that does what good food products must do, which is taste great. It adds tremendous convenience to the consumer. The incremental volume, revenue, and profit we will get from that product will be a lot higher. We did a lot of research on that product, and we got the balance right in terms of different spices and flavor profiles.
Q: How did retailers respond? Did it require persuasion from Sara Lee?
A: When we said we were pulling this thing together with joint promotions in our meat-and-deli businesses to display these products in the store, they said “What took you so long?” Retailers want to grow their total business. The more they can get people to cross-shop by merchandizing products together, the better off they and their customers will be.
Q: Are there other notable milestones the company reached recently?
A: A year ago, we were gaining share in two out of eight meat categories and a limited number of bakery categories. We are now gaining share in six out of eight meat categories and gaining share in total meat and total bakery. Our Sara Lee brand is up more than 50 percent in the bakery business. Are consumers picking us more than the competition? Another key milestone for me was to get our management team in place. I have done that. All my direct reports are either new or longtime Sara Lee people. We just added a new HR leader to round out the team. A key milestone is that we actually moved into our new headquarters in August. Until then, we were still running the meat business out of Cincinnati and the bakery business out of St. Louis.
Rich Armstrong, Sara Lee's road warrior
Career highlights: With 36 years on the job at Sara Lee, Armstrong says he does not need a resume. He joined Hygrade Foods, the suburban production home of Ball Park franks, as an hourly worker in its Tacoma, WA, facility in 1970. By 1987, he had worked his way up to general manager at Hygrade, having served as supervisor, production scheduler, and plant manager during his 19-year tenure. Before attaining his current position, Armstrong spent time at Hillshire Farm and Kahn’s New London, WI, facility as general manager for three years. Next stops included a year at King Cotton Foods in Memphis, TN, where he was chief executive officer, and nearly seven years in the same position at Galileo Foods in San Lorenzo, CA.
Q: Paint a picture of the supply-chain initiative in Sara Lee’s new guise.
A: Our aspiration from Day One was to create a supply chain as a competitive advantage. The pieces include all matters of logistics, customer service, manufacturing, responsibility for food safety and product quality, warehouse, and transportation. When people ask me how I will know when we are there, my answer is, we will know when our customers tell us we are there. We have to distinguish ourselves from our competition in terms of our ability to be flexible, responsive, and reliable.
Q: Wasn’t this the strategy in the company’s previous life?
A: There always is room to improve. It does not mean you are bad. Customers have new and different expectations than they did five years ago. If you have a supply chain that has not changed in five years, then you are probably not ready for the new requirements of the customer.
Q: What is the chief challenge confronting execution of new supply-chain strategies?
A: For me, it’s about being in a position to react at the speed customers need. Flexibility is key because you just don’t know what that new demand will be tomorrow. Take a simple thing like customer service, for example. What is good customer service? Benchmarking may point to an order-fill rate of 98 percent. That means you are working at a world-class level. We are saying we can do better than that. We have been able to demonstrate performance higher than that by using available technology, creating a culture that expects more of itself than customers expect, and then holding people accountable for results. There is nothing wrong with that. A lot of people are afraid to say it out loud. But if you give clarity to your vision and your objectives and you give people the resources to meet those objectives, then you have to hold them accountable for results. To me, the culture we are developing is very important – it is a specific ingredient of all those things we want to do. Do we really believe it? Can we achieve it? Do we have resources to do it? Do we have the right level of ambition to get it done? The answer to all those things is yes.
Q: What about specific recent accomplishments?
A: In our old world, each one of our companies used to deliver to customers separately. We addressed that over the last two to three years on the supply chain with five strategic and geographic mixing centers – the latest one earmarked for Macon, GA. Existing mixing centers operate in Allentown, PA; Rochelle, IL; Toleson, AZ; Dallas, TX; and Atlanta, GA. Our products go into mixing centers with the right mix given the customer geography. Now we can take an order regardless of brand, and consolidate it on one truck. That means one full truck coming to the customer, versus four or five that are partially full. What you get are efficiencies for customers, for Sara Lee, and for anybody in between. That is very significant in terms of how we get our products to our customers.
Kim Feil, Sara Lee's marketing maven
Career highlights: Previous positions included stints at Kimberly-Clark Corp. as vice president and senior marketing officer, and Mosaic InfoForce as chief executive officer. Other corporate positions include five years at Information Resources Inc., including a stint as president; senior vice president of strategic planning of Dr. Pepper/Seven UP Inc., and PepsiCo Inc. in its Kentucky Fried Chicken and Frito-Lay Inc. subsidiaries.
Q: State your mission.
A: My mission is to put together the logical connections that consumers will enjoy and then bring great-tasting solutions from our portfolio. We think of it as breakfast, lunch, dinner, and snacking solutions for a full range of needs, from a hot breakfast to an on-the-go sandwich. This includes everything from whole-grain white bread for kids to a hot Sunday morning breakfast with the family.
Q: Describe the execution strategy.
A: It starts with a great team, which is what we have. Everybody who has landed here is either new to the company and their jobs or new to Chicago. The common theme is they are on a mission and they are ready for an adventure. Secondly, it is to dig deep into our understanding of consumer insights. We are developing an organization called the Central Insight Agency or the CIA. This group will serve by helping us get deeper into how consumers enjoy their meals and snacks. Insight will be an even bigger part of what will have our solutions stand out in the market. Then it is developing great products, which is why we are building a new state-of-the-art R&D facility.
Q: What are your specific responsibilities?
A: I provide leadership for our global branding efforts by overseeing consumer, enterprise, and partnership-marketing initiatives. As a marketing leader, my role is to identify where we think the big opportunities are to help consumers with new solutions and then give direction about what areas we want to explore.
We just finished interesting sandwich research to help guide what kinds of meat and bread people put together. Saturday afternoon lunch is one of the big occasions uncovered in the study. It is when the family pulls everything out of the refrigerator and they have a free-for-all making their own creations. It also is family time together because it is so rare that they have a chance to hang out. Bringing the insights to the products together and then developing new solutions for needs they have are some of the key steps we are taking.
Q: Is there more you can share concerning the consumer-insights initiative?
A: I am new to these categories, but I have been in the consumer packaged goods industry for 20 years. One of the things that strikes me is that many of our categories — bakery, processed meats, sausage, and fresh-meat retailers — have had very limited access to rigorous consumer insights. They are fragmented categories, with lots of competitors and lots of products coming and going in them. Yet they are among the top 10 volume and profit categories for the retail customer. These are products consumers buy every single week to have in their refrigerators and on their shelves. It is interesting that these categories have been under studied. One of the big aha’s about Sara Lee is it will bring insights to the market no one else has really seen. When you have sandwich meat, bread, buns, and hot dogs, these are reasons to conduct in-depth studies.
Q: Who are the main beneficiaries of this initiative?
A: I think analysts are interested because the more you understand about consumers, the more targeted and affective your marketing and innovation programs are. The industry will be interested because it will uncover new knowledge about consumers that individual suppliers may not have the resources to explore. Customers and retailers will be interested because they would very much like to bring order to these categories. They already experience healthy profits from them, and would like to know how to grow them even faster. Consumers will be interested because it will mean even more new and exciting products for them. NP