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Article | December 31, 1997
Outsourcing benefits point to continuing trend (sidebar)
Sara Lee plans to market, not make
One of the latest major companies to make a huge commitment to outsourcing is Sara Lee Corp. Chicago once the venerable maker of frozen cheesecake and other treats. Now a sizeable conglomerate that also makes brassieres to briefcases to bratwurst Sara Lee plans to divest much of its manufacturing operations so it can focus on its "knowledge assets" its brand marketing and distribution strategies. So says CEO John H. Bryan. In so doing Bryan says the corporation is trying to follow in the footsteps of Nike and Coca-Cola both companies that enjoy favor among securities analysts that exercise influence on the price of a company's stock. Nike does contract out its product manufacturing. However while parent Coke no longer controls bottling the company carefully guards the secret formula to its syrup concentrate which it does still manufacture. Sara Lee plans a large-scale move away from manufacturing. Earlier H.J. HeinzPillsbury and Campbell Soup announced far smaller steps in the same direction. The Wall Street Journal's Roger Lowenstein questions whether Sara Lee's brands are in the same league with Nike and Coke even whether its products are as ubiquitous or growth-oriented on the international market. "For all its brand strength" Lowenstein writes "Sara Lee can't raise prices quickly. This explains why its sales growth has slowed . . . Its vaunted brands may be worth no more than what the market says. And it is unclear that shedding plants will change that." Also unclear is what effect the sale of textile and meat processing plants will have on packaging. Will packaging judgments be a part of the "knowledge assets" that will be retained and maximized? And how will container and package selections and changes be coordinated in the packaging plants that it will no longer control? Will those plants readily and quickly make investments to handle package changes that Sara Lee deems necessary for more "nimble" marketing? Those are rarely difficult issues for the likes of Nike and Coca-Cola with their limited numbers of product SKUs. Sweatshirts and sausages may be a markedly different mix.
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