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Sara Lee to raise prices again on higher commodity costs

By Caroline Scott-Thomas , 09-Feb-2011

Sara Lee said it intends to raise the prices of its foods and beverages on the back of continuing commodity price pressure, as it reported nearly flat Q2 sales of $2.35bn.

The company, which said last month it is splitting into two companies, said adjusted results fell to 24 cents per share from 27 cents, just missing analyst expectations of 25 cents per share. It reported Q2 earnings to January 1, 2011 of $880m, up from $371m a year ago.

Sara Lee Corp. CEO Marcel Smits said: “At $0.24, our second quarter adjusted EPS from continuing operations showed good improvement from the $0.14 earned in the first quarter. As we focus on driving operational improvement in our two growth businesses, we are well positioned to finish the year with a strong second half. The North American Retail segment will benefit from first half pricing actions and MAP investments. In the International Beverage business, we continue to push through pricing to offset commodity increases and we expect further benefits from successful innovation.”

Sara Lee had already raised prices by 3.1 percent on coffee and other products in Q1, but this did not prove to be sufficient to counter rising commodity costs, which rose $127m in Q2.

The company last month announced its decision to split into two separate companies after months of speculation over a possible buyout, which it expects to take place early in the 2012 calendar year. The split involves spinning off the company’s North American retail and North American foodservice businesses – excluding beverage – into a new public company under the Sara Lee name, producing brands such as Sara Lee, Jimmy Dean, Ball Park, Hillshire Farm, Chef Pierre and State Fair. And an as-yet-unnamed second company will comprise Sara Lee’s international beverage and bakery business, plus the company’s North American beverage business, with major brands including Douwe Egberts, Senseo, Pickwick, Maison du Café, L’OR, Café Pilão, Marcilla and Bimbo.

“We are excited to move forward with the implementation of our strategic initiative to create two pure-play companies. We are confident that this plan offers the best opportunity to deliver long-term value to our shareholders,” said Smits.

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