INSIGHT: Sara Lee to drive volumes through price cuts
US-based food group Sara Lee has indicated that it hopes to boost top-line growth in the remainder of the year by increasing its investment in pricing.
The packaged meat to baked goods manufacturer said that its focus over the remaining three-quarters will be to drive cost savings, which will then be reinvested in pricing and promotional activity.
"We do need to reinvest in the business and some of it will come on the pricing front," CEO Brenda Barnes told analysts during a conference call. "We don't want to see any share loss on an ongoing basis."
Earlier today (5 November), Sara Lee said that its profits had jumped 23.5% in the first-quarter. However, the company had posted a 7.4% drop in sales, which were hit by foreign exchange and lacklustre volumes.
Sara Lee has been slower than its competitors to reduce prices - particularly in the US market - resulting both margin expansion and volume pressure, the company revealed.
According to Barnes, branded competitors have been "quite aggressive" in reducing prices, which has resulted in private label share gains slowing over the last 12 weeks.
Investments, she revealed would come in the net price Sara Lee offers products to retailers, some of which goes to securing space in store and some of which would result in lower shelf prices.
Barnes insisted that the company's focus on price would not detract from the importance of innovation and product support to its growth plans.
"We do not back off innovation being a key priority and when we have innovation supporting it," she asserted. "In the first quarter our marketing spend was down, but it will be up for the full year."
While Sara Lee is planning a more aggressive stance on pricing, management insisted that the company would also be acting in a "disciplined" fashion.
"We are going to be recalibrating [pricing] but not significantly racing ahead of the curve," incoming CFO Marcel Smits said.
Barnes added: "The hardest thing to avoid is doing crazy things in the market place... We will not do crazy things to drive that volume up."
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