Brenda Barnes gave up one chance of becoming CEO, when in 1997 she left a fast-track post as head of PepsiCo's (PEP) PepsiCola's North American division to spend more time with her children. But on Feb. 10, Barnes got that title at Sara Lee (SLE), the same day the Chicago conglomerate announced the biggest reorganization in its history (see BW Online, 2/10/05, "A Crash Diet for Sara Lee").
Barnes, 51, who started at Sara Lee last July in the No. 2 post, succeeded former head C. Steven McMillan faster than expected. The scope of reorganization was also surprising: Sara Lee will shed brands totaling 40% of revenues, including its apparel division, in hopes of reversing stagnant sales by concentrating on more productive brands in food and household products. In an interview with BusinessWeek Chicago Correspondent Robert Berner, Barnes gave her take on her return to the executive ranks and where Sara Lee is heading. Edited excerpts from their conversation follow:
Q: What's it like coming back after seven years?
A: It really feels like I took a two-week vacation. You just get in the groove very quickly. Coming back to work, I didn't think it was a major shock to my system.
Q: What's the biggest change in the food and consumer-products industry since you have been out?
A: It's more intense. More competitive. You have to be better, more in touch with the consumer. The premium that's put on newness and meeting expectations is higher. There is far more need for convenience with the consumer. Everybody is time-starved.
The value component is very important. Are you getting something for your money that is of the quality and expectation you have? The time frame between a new idea and someone else having it has gotten shorter.
Q: How much faster is that time frame?
A: It's hard to [answer] because you have to do it by category. But as soon as you have a new idea, you have got to be on to the next because someone will be there right behind you.
Q: Is the consolidation of the retail industry today with the likes of Wal-Mart Stores (WMT) an even greater issue for companies like Sara Lee today than when you left PepsiCo?
A: I don't find that to be the case. The trade was consolidating for many years, and the powerhouses of today are the powerhouses when I left Pepsi.
Q: What are some key things you learned at PepsiCo that will help you at Sara Lee?
A: I think the world of PepsiCo. What the company is extraordinary at is developing brands and making them very exciting to the consumer in a big and bold way. And again always innovating, whether its flavors or packaging. They have always been good at that. That's one key area I learned and valued from my experience there.
Q: Could you give me an example?
A: When I was at Pepsi it was a time when a lot of alternative beverages were getting popular, and we were buying up the franchise bottler network. That made it a very different company than the one it was just a few years before. You had to modify and change what you were doing, changing from a big marketing company to very large operating company, and not just selling PepsiCola but selling waters juices and teas.
Q: The reorganization Sara Lee announced is far greater than the incremental changes it discussed several months ago. What changed?
A: What changed was looking and realizing...that bolder and bigger changes were necessary, and incremental changes weren't going to get us there. Our transformation plan is built around three pillars of change. The first one is to set the company up from an organization standpoint, clustered around consumers and customers by geographic market. That's opposed to lining up the company on lines of business.
Just take North America for an example. We're bringing together our bakery, coffee, and meats division into one integrated food company centralizing it and moving everybody to Chicago. That probably wouldn't have happened if you didn't establish the company built around the consumer.
The other is to make sure we're really focusing on categories where we think we can have great growth and higher margins. That is: food, beverage, and household products. Then we're spinning off our apparel bueisnss and divesting brands that we don't think have long-term No. 1 or No. 2 positions.
Then the third thing is really setting up an operating company that has a way of driving efficiencies by doing things such as centralizing procurement and using the money we free up there to fund growth.
Q: What's Sara Lee's biggest risk going forward?
A: If you ask me what would be keeping me awake at night it would be making sure we implement it all flawlessly. That's the challenge. It will be doing it with a vengeance. We'll be tracking ourselves to make sure we get it done and get it done well. That's the most challenging part I see going forward.
Q: Did you expect to rise to the top of Sara Lee this fast?
A: When I came in, I hoped that would be the case someday. Yes, it happened faster than I expected. I'm ready to go.