Sara Lee sees bread margins doubling

By Brad Dorfman

CHICAGO (Reuters) - Sara Lee Corp (SLE.N: Quote, Profile, Research, Stock Buzz) plans to double its margins in the bread business over the next few years, with an expanded product line, including tortillas, helping increase profitability, a top executive said on Wednesday.

The company's bread business has margins in the low-to-mid-single digits, CJ Fraleigh, chief operating officer of Sara Lee North America, said.

"We think that that can double in the next few years," Fraleigh said at the Reuters Food Summit in Chicago. "Three-plus years."

Fraleigh also said the company would expand its bread offerings, including putting a tortilla into wider distribution. The company currently sells tortillas in a limited number of markets.

"In three years we will have a top-quality competing product in every major bread segment," Fraleigh said.

Sara Lee sells bread under its namesake brand and several regional brands. The adjusted operating margin in the bread business fell to 1.5 percent in the first half of the fiscal year that ends in June from 2 percent for all of fiscal 2007.

Soaring wheat costs and a lag in the effect of the most recent price increase by the company pressured margins that already are well below that of regional baker Flowers Foods Inc (FLO.N: Quote, Profile, Research, Stock Buzz).

Fraleigh said the company is employing a number of methods to improve margins, including adding warehouse automation, improving its distribution system and getting more sales in local markets.  Continued...