Sara Lee Profit Sinks, Partly Due To Ad Spend Hike

Rising costs for meat, flour and the like pushed Sara Lee's first-quarter profit down by 40%, yet the packaged-food giant's per-share earnings topped analyst expectations by one cent.

The company also cited the 21% increase it made in its marketing budget to support brands like Jimmy Dean and the Sara Lee line of baked goods.

Sara Lee had increased ad spend by 24% in its final quarter, particularly for campaigns behind Hillshire Farm deli meats with its "Go Meat!" effort by TBWAChiatDay; new Senseo coffee flavors and Jimmy Dean sandwiches.

For the quarter ended Sept. 29, net income was $200 million, or 28 cents a share--down significantly from the year-ago period's net of $333 million, or 44 cents a share.

CEO Brenda Barnes told analysts Wednesday morning: "Marketing and research-and-development spending increased significantly to develop and support new, innovative products that will be the bedrock for a successful fiscal 2008." She also said the company has been able to charge more for its Sara Lee products.



Major new product launches in the first quarter included Hillshire Farm Deli Wraps and Premium Hearty Slices and Jimmy Dean D-Lights breakfast sandwiches. The Jimmy Dean brand reported significant sales growth and maintained its leading position in the total U.S. protein breakfast category. During the first quarter of fiscal 2008, Sara Lee increased its total packaged meats market by 1.0 share points to 22.2%/, according to IRI share data (12 weeks ending Aug. 26).

Sara Lee Soft & Smooth 100% Honey Wheat bread was launched in the first quarter to help the Sara Lee brand strengthen its position as the No. 1 fresh bread brand in America, with a 7.9% share, according to IRI share data (12 weeks ending Aug. 26).

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