Sara Lee Corp., which plans to split into two companies next year, will do so without its North American chief executive.
The Downers Grove-based company said Monday that C.J. Fraleigh, a six-year veteran who has been credited with improved operations and increased marketing for Sara Lee’s North American meats, has resigned.
“We now believe a different approach is needed,” Sara Lee Chairman Jan Bennink said in a release, but did not elaborate. Expected in the first half of 2012, the split will create two stand-alone companies: an international beverage business, known as CoffeeCo, and a new company that will comprise Sara Lee’s North American retail division, which makes products such as Hillshire Farm sausage and Sara Lee deli meats, and its North American food-service division, which provides food for the restaurant industry. That business, for now, is being referred to as MeatCo.
For the most recent quarter, sales for Sara Lee’s North American Retail division declined 2 percent to $726 million, as price increases failed to make up the difference for lower sales volume. The company acknowledged that it had raised prices because of higher commodity costs, and that it had done so ahead of its competition, allowing consumers to choose lower-priced options.
Analysts characterized the development as “surprising.”
“It’s a challenging market in general,” Morningstar analyst Erin Lash said. “We dealt with rising commodity prices in 2007 and 2008, as well as soft consumer spending over the last few years.”
In a research note, Barclays Capital analyst Andrew Lazar described Fraleigh’s departure as negative for the company, if only in the short term, because it creates a disruption, and he “has been a consistent source of operational leadership within MeatCo for years.”
Lazar added that given the better opportunities Sara Lee has described for the meat business as a stand-alone entity, “the timing of his departure seems interesting, in our view.”
Lash added that his departure reinforces Morningstar’s long-held perception about Sara Lee’s end goal: the sale of the remaining parts of the company.
“It’s been our view from the beginning that international beverages and domestic meats were likely (takeover) targets, given that they’re worth more than (Sara Lee’s) larger competitors,” Lash said.
Sara Lee CEO Marcel Smits will run the North American business while the search for Fraleigh’s successor is under way. Executives also maintained in Monday’s announcement that Fraleigh’s departure will not delay the split.
Sara Lee shares closed Monday at $17.17, down 10 cents.
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