Sara Lee Corp. (SLE), a global consumer packaged goods company, has recently announced plans to shut operations in India, following its decision to exit the consumer products business globally to focus primarily on food products.
In India, Sara Lee had tied up with Godrej Consumers Products Ltd. to form a joint venture called Godrej Sara Lee Ltd., in which the former had a 51% stake. Godrej Sara Lee is a leading consumer products company with an 80% market share in the hair gel space, and the second-largest market share in the shoe-care segment. The joint-venture manufactures, markets and distributes Sara Lee’s international brands like Ambipur, Kiwi and Brylcream in India.
With the possibility of Sara Lee exiting India operations, its partner is planning to buy out the venture. Godrej Consumers expects to utilize the right of first refusal in the joint-venture, which gives it the first right to buy Sara Lee’s stake before the offer is made to others. The move is also aimed at preventing the Sara Lee products moving out of the portfolio.
Experts believe that Sara Lee is unlikely to discontinue its brands in India and would pay the value of the licensed brands like Brylcream, Kiwi and Ambipur to its partner. Godrej Consumers is also planning to buy Sara Lee’s household and body care businesses in Indonesia, Thailand, Malaysia and Singapore.
Sara Lee is currently reorganizing its business operations across the globe to focus on key food, beverage and household products segments and enhancing its operational efficiency. By exiting the less profitable businesses, Sara Lee expects to emerge as a smaller but leaner company by fiscal year 2010. Despite global economic weakness, the company is on track to complete its restructuring. We maintain our Outperform recommendation of the company.
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