Meat + Poultry - April 2009 - 6

COMMENTARY

Reassessing priorities
®

t this point in the global economic downturn, it may be
cold comfort to hope that the
changes many food processors are undertaking to their product portfolios and
manufacturing operations will make
them stronger when the global economy recovers.
The volatility of commodity costs
combined with unpredictable consumer purchasing patterns have forced
companies to reassess their priorities
and to focus on aspects that deﬁ ne
their strengths.
This subject was clearly on managements' minds at the Consumer
Analyst Group of New York's annual
conference in mid-February. Missing
from this year's event was the constant
stream of new value-added product introductions and wide-ranging discussions about new opportunities available in emerging markets that have
highlighted past conferences.
The focus this year centered on performance. Tolerance for underperforming brands and stock-keeping units is
nonexistent and many are being disposed of or discontinued. Emphasis
at this year's CAGNY was on the need
for processors to have a No. 1 or No. 2
brand in a market category in order to
achieve long-term proﬁtability.
That emphasis highlights the power
private label is exerting over brands as
the value trend gains momentum. It will
not be surprising to see manufacturers
with a toe-hold in a category through
the ownership of a No. 3, No. 4 or No.
5 brand dispose of these assets to focus on core strengths.
Companies also are stressing operational performance with the intent
of maximizing facility efﬁciency and
production.
During her presentation, Brenda
Barnes, chairman and CEO of Sara
Lee Corp., said the company's Project
Accelerate will yield beneﬁts of $200
million to $250 million during the next
two years. The effort will involve such
actions as outsourcing, supply-chain
6

MEAT&POULTRY

April 2009

improvements and rationalizing SKUs.
Project Accelerate also is designed to
reduce Sara Lee's spending against indirect goods and services, which runs
about $2.9 billion each year.
Sara Lee's focus on supply chain improvements also is having an impact
on facility operations, speciﬁcally capacity utilization. In her presentation,
Barnes cited the company's Claryville,
Ky., meat plant as an example. With
no additional capital outlay, the facility
has been able to improve its production capacity by 25 percent.
"We plan to implement this at other production facilities and believe we
can generatnte 10 percent to 30 percent
greater capacity per plant, again, with
no capital outlays," Barnes said.
The Kellogg Co., Battle Creek,
Mich., also is focusing on improving
its performance with its K-LEAN program. By 2011, the company hopes
to achieve $1 billion in annual cost
savings through its K-LEAN manufacturing optimization efforts. Initially
started in two U.S. plants, the program is being introduced throughout
the company.
"We had always seen our manufacturing facilities as being world-class,"
said David Mackay, president and CEO
of Kellogg. "We didn't think there were
real savings opportunities there.
"We brought in some external consultants to really challenge whether that
was actually true or not, and I'd have to
say that we've been quite surprised at
some of the opportunities that they've
identiﬁed," he added.
Beyond this economic downturn,
these efforts will make Sara Lee Corp.,
the Kellogg Co. and other food manufacturers that have undertaken similar endeavors stronger. Each underscores the
fact that even in this economic environment, food manufacturers may take advantage of opportunities to improve the
proﬁtability of their businesses.

EDITORIAL STAFF
Editor

Joel Crews
Executive Editor

Keith Nunes
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Bryan Salvage
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Steve Bjerklie
Dr. Temple Grandin
Steve Krut
Bernard Shire

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Richard Stier

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Meat + Poultry - April 2009

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