Chairman, chief executive officer, and president, Sara Lee Corporation
Born: ca. 1946.
Education: Auburn University, BS; Harvard Business School, MBA.
Career: McKinsey & Company, 1973–1976, management consultant; Sara Lee Corporation, 1976–1979, president and CEO of Aqualux water-processing division; 1979–1982, president and CEO of Electrolux-Canada affiliate; 1982–1986, president and CEO of Electrolux; 1986–1990, senior vice president for strategy development; 1990–1993, head of packagedmeats, bakery, and food-service businesses; 1993–1997, head of packaged-meats, bakery, food-service, coffee, groceries, and household and body-care businesses; 1997–2001, chairman, president, and COO; 2001–, chairman, CEO, and president.
Address: Sara Lee Corporation, Three First National Plaza, Chicago, Illinois 60602-4250; http://www.saralee.com.
■ C. Steven McMillan became the chief executive officer of Sara Lee in 2001, capping a career with the corporation that stretched back over a quarter of a century. He came to head the company at a time of crisis, when John H. Bryan, the previous head of the corporation and one of the longest-serving executives of any Fortune 500 company, retired after 25 years at the helm and corporate stock had dropped precipitously after a failed restructuring attempt. McMillan made part of his mission as president and CEO to eliminate redundancies among the company's diverse manufacturing structures, spin off businesses that did not relate to Sara Lee's core interests—food, underwear, and household products—and spur the company's growth, centralizing oversight and concentrating on marketing rather than manufacturing.
McMillan responded to the crisis he inherited by emphasizing speed and profitability, eliminating the jobs of about 5 percent of the corporation's workforce, and restructuring food holdings. In order to raise money he sold off stock in some of the company's most profitable holdings and disposed of the least profitable subdivisions altogether; Coach leather goods, Champion athletic wear, and PYA/Monarch food service were among the labels that McMillan sold either altogether or in part. He then authorized the purchase of companies that, though geographically more diverse, produced goods that were closer to Sara Lee's redefined core interests. The company acquired Uniao, the Brazilian coffee manufacturer and distributor; Sol y Oro, the Argentine underwear firm; Earthgrains, the bakery and frozen-dough company based in St. Louis, Missouri; and a stake in the Johnsonville Sausage Company, also located in the United States.
By the time he stepped into the head office at Sara Lee, Mc-Millan had logged a great deal of experience in management. He worked for McKinsey & Company, the Chicago, Illinois–based management-consulting company, between 1973 and 1976. He then left consulting to join Sara Lee Corporation as the president and chief executive officer of the Aqualux water-processing division. He stayed with Aqualux for three years before being promoted to president and CEO of Sara Lee's Electrolux-Canada affiliate; in 1982 he became president and CEO of Electrolux. In 1986 he was promoted to senior vice president for strategy development of the entire corporation. Four years later he became the head of the packaged meats, bakery, and food-service businesses, and three years after that he added responsibility for coffee, groceries, and household and body-care businesses. That same year he was named to the corporate board of directors, and in 1997 he was promoted to chairman, president, and chief operating officer; his further promotion to chief executive officer occurred in 2001.
The modern Sara Lee Corporation originated in the late 1930s, when the Canadian businessman Nathan Cummings created a business called Consolidated Foods. In 1956 Cummings's company merged with the Kitchens of Sara Lee, a firm created by Charles Lubin, who had given his daughter's name to his company. After 10 years Consolidated branched out into apparel and household goods, and in 1985 the company officially changed its name to Sara Lee Corporation, "to identify itself with its best-known brand," according to writer Gene Epstein of Barron's (June 26, 2000). By the end of the century Sara Lee boasted almost 140,000 employees in over 40 different countries and marketed such well-known brands as Ball Park, Brylcreem, Chock Full o'Nuts, Earthgrains, Hanes, Hill-shire Farms, Jimmy Dean, Playtex, Ty-D-Bol, and Wonderbra.
Even before McMillan took over as CEO in 2001, Sara Lee had undergone several severe crises in management and public relations. In 1998 the Bil Mar Foods division of the corporation unknowingly distributed hot dogs and lunch meat infected with the bacterium lysteria from one of its Michigan plants. The bacteria were responsible for a minimum of 15 deaths and six miscarriages due to food poisoning; about 80 other serious cases of illness were linked to the infestation. Sara Lee ended up paying $200,000 in fines and an additional $3 million to help fund research of food-borne diseases. The company also settled a class-action lawsuit filed on behalf of the families of those who died or were made seriously ill by the bacteria; the settlement totaled around $5 million.
Sara Lee's stock prices took a hit when the public became aware of the company's responsibility for the minor outbreak. Shares had been trading at over $30 in 1998; by the spring of 2000 share value had dropped by more than half, bottoming out at $14 in March. As chairman and president McMillan announced a sound strategic plan in July 2000 that helped bring stock values up to about $19 a share by that autumn. In 2001, thanks to McMillan's cost-cutting measures, the corporation posted earnings of $2.3 billion despite an absence of an increase in revenues. In 2002 revenues actually shrank, to about $1 billion by midyear. Sales in early 2003 dropped another 2 percent, even though overall profits increased by nearly 5 percent.
In the spring of 2003 another public-relations disaster struck, as Sara Lee found itself under investigation by the federal government for potential misreporting of rebates issued to grocers in the Netherlands by the company's Dutch arm. Pallavi Gogoi declared in BusinessWeek , "There is no evidence so far that Sara Lee made any improper payments" (May 26, 2003). Meanwhile McMillan blamed members of his sales staff for overreporting rebate information to the executives of U.S. Foodservice—Sara Lee's Dutch food-management company—and to the auditing firm Deloitte & Touche. Although he continued to insist that the corporation's records were accurate, stockholders received the news with cynicism. By May 2003 stock prices had fallen once more, by almost a quarter.
Still another factor in Sara Lee's struggle to redefine itself was the fluctuating European currency market and the weakening U.S. economy. The declining euro, which was introduced in the European Union while Sara Lee was undergoing corporate restructuring and reorganization, made earnings from European businesses worth less than had been anticipated. In addition investors felt that McMillan had failed to develop and promote new products that would help turn the company's finances around and capture market shares from rivals like Kraft; Sara Lee's crop of businesses were simply not performing up to expectations. Long-established brands like L'eggs and Chock Full o'Nuts lost sales to competing products. McMillan's acquisition of Earthgrains was challenged by investors; by paying $2.8 billion for the company—which was the second-largest bakery in the United States—McMillan had effectively almost doubled Sara Lee's debt. The gains he had expected to materialize from the Earthgrains acquisition had yet to appear, and investors began to believe that the CEO had paid more than the St. Louis–based company was worth. The $300 million in anticipated growth had failed to materialize.
Yet McMillan had made the purchase of Earthgrains not just for its product line but also for its distribution system, wherein almost five thousand routes were used to put products directly into stores nationwide. Ownership of that system meant that Sara Lee would no longer be dependent on outside distributors to place its products in stores. Through the addition of the Earthgrains distribution system Sara Lee products would be made directly available to over 60 percent of the U.S. population. McMillan explained in a corporate media release, "The new business will be more competitive and certainly more profitable than our separate, existing operations" (July 2, 2001). That increased competitiveness, he believed, would translate into profits for shareholders.
See also entry on Sara Lee Corporation in International Directory of Company Histories .
Barboza, David, "Fast Cars, Harleys, and Cheesecake," New York Times , July 15, 2001.
Epstein, Gene, "Just Desserts," Barron's , June 26, 2000, p. 28.
Forster, Julie, "Sara Lee: Changing the Recipe—Again; McMillan Expects Results in '03, but Will Investors Wait?" BusinessWeek , September 10, 2001, p. 125.
Gogoi, Pallavi, "Sara Lee: No Piece of Cake; CEO McMillan Has Cut Costs, but Investors Want Growth," BusinessWeek , May 26, 2003, p. 66.
"Sara Lee Corporation Taps Veteran Leader as Next CEO," Sara Lee Corporation , January 27, 2000, http://www.saralee.com/newsroom/news_release_popup.aspx?id=31 .
"Sara Lee Corporation to Acquire Earthgrains for $2.8 Billion: Becomes Number-Two Player in Fresh Bread Category," Sara Lee Corporation , July 2, 2001, http://www.saralee.com/newsroom/news_release_popup.aspx?id=57 .
"Sara Lee Pleads Guilty, Will Pay $4.4 Million over Tainted Meat," Wall Street Journal , June 25, 2001.
Weber, Joseph, "No Cakewalk at Sara Lee: The Incoming CEO Has a New Plan—but Will It Suffice?" BusinessWeek , June 12, 2000, p. 56.
—Kenneth R. Shepherd