Hillshire Brands has outlined further details of the its three-year “strategic plan” for generating profitable growth following its spin-off from Sara Lee earlier this year.
The US meats and bakery company, which was formed after Sara Lee spun off its coffee and tea business, told investors and analysts at the Barclays Back to School Conference yesterday (5 September), its key strategic priorities centre on “strengthening” its core brands, “expanding into adjacencies and augmenting the strength of its portfolio through selective acquisitions”.
“This year, we are already seeing progress against our plans, and continue to work aggressively to strengthen the challenged portions of our portfolio like lunchmeat and foodservice bakery,” said CEO said Sean Connolly. “As a transition year, the initiatives we pursue in 2013 will strengthen our brands, reduce costs and fill our innovation pipeline. We are fully committed to making these investments as we position Hillshire Brands to achieve our targets for 2015 and beyond.”
In June, Hillshire revealed its management had developed a three-year plan to generate US$100m in cost and productivity initiatives. The company also said it planned to investment in branding and product development, without providing specific details.
At the conference yesterday, Connolly said Hillshire will focus on its core brands of Hillshire Farm, Ball Park, Jimmy Dean, State Fair, Aidells and Gallo.
“The company is firmly committed to supporting its products through greater marketing, advertising and promotion spend as it seeks to expand revenue from new innovations to between 13% and 15% of total revenue by fiscal 2015; up from historic levels of 9% of revenue.”
He added: “With an experienced senior leadership team now in place, we are focused on executing our strategic plan to drive long-term growth and profitability though brand-building and margin-accretive innovation. Ultimately, we believe these efforts will create significant value for our shareholders.”
Last month, Hillshire said the expectation of rising commodity costs had placed more importance on innovation and brand building as it booked a drop in full-year operating income.
The firm said its commodity bill increased by US$8m in its fourth quarter and that it had absorbed $385m of commodity cost increases into the business over the last two years.
CFO Maria Henry yesterday reiterated Hillshire’s long-term 2015 operating targets of 2-3% volume growth, 4-5% net sales growth and 10% operating margin.
“We continue to look at 2013 as a transition year with increased potential for variability that may impact our performance,” said Henry. “Our top priority is investing in our business in order to create sustainable, long-term shareholder value, and we believe we are well-positioned to do so with our strong balance sheet and attractive underlying cash flow.”