Heavy interest in Sara Lee rescue
More than 40 interested buyers have lined up for iconic frozen baked goods and desserts brand Sara Lee, which buckled after it struggled to pass through price increases to its customers from the higher cost of doing business.
FTI Consulting was appointed voluntary administrator of the local Sara Lee business on October 17 with the aim of finding a buyer for the brand, established in 1971.
Sara Lee in Australia fell into voluntary administration on October 17. Getty
Sara Lee makes products at its manufacturing facility in Lisarow, NSW, where it employs almost 200 staff. Annual sales are about $122 million, with the bulk coming from the frozen desserts channel.
FTI’s Vaughan Strawbridge, Kathryn Evans and Joseph Hansell have been meeting with management and staff seeking to reassure them that operations will continue while a buyer is found or a recapitalisation takes place.
“Production will continue, people are still employed; importantly, we will be paying the wages on time,” Mr Strawbridge said.
“We didn’t have a lot of time prior to the appointment here to get our head around the business, but we know we have a good business.”
Mr Strawbridge said invoices were still rolling in, so FTI was firming up the unsecured creditor position. He added that investigations were continuing, but the business faced difficulty amid the rising cost environment.
“There’s no surprise that the cost of doing business has gone up from raw materials, energy, logistics, and that’s just all the inflationary pressure,” he said.
“They have price increases that go through to customers and ultimately to end consumers, and that has resulted in reduced level of sales.”
Sara Lee is owned by New Zealand private equity firm South Island Office, which bought the business in 2021 from global giant McCain Foods for an estimated $95 million.
Christchurch-based South Island Office later merged it with The Original Foods Baking Co. Only the Sara Lee brand in Australia is in voluntary administration.
Mr Strawbridge said since the business was acquired, its parent had faced challenges extracting the broader operations out of former owner McCain.
“It has had to set up its head office function and back office. A lot of functions have been extracted out of the old McCain business, including logistics providers and cold storage. Those costs have been higher than first anticipated,” he said.
Following the failure of Scott’s Refrigerated Logistics, the cost and availability of cold storage transport across Australia has gone up.
Mr Strawbridge added that there were other difficulties too: a factory where the ice-cream was produced was destroyed in the Lismore floods that resulted in more costs re-establishing supply, and lost sales.
He said there was improved demand for Sara Lee’s products, which range from baked cheesecakes to ice-cream and sticky date puddings.
“We are running a sales process. We have had a huge amount of interest in the business,” he said.
“It’s been a good mix of local and international trade buyers, local manufacturers that own their own brands. And we’ve also got a good mix of financial investors who are interested as well.”
The first meeting of creditors will take place on Friday.
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