Sara Lee Gets Rid of Coffee-Foodservice Unit

Sara Lee Corp. (NYSE:SLE) announced on Monday that it was selling its foodservice coffee and tea operation in North America for around $350 million to The J. M. Smucker Co. (NYSE:SJM).

The sale is part of Sara Lee’s plans to slim down its businesses. In the recent months the company has sold most of its businesses, in the hopes of narrowing its businesses. Sara Lee is planning to split apart its Jimmy Dean international coffee and tea businesses and the Hillshire Farms brands.

Jan Bennink, the Executive Chairman of Sara Lee said that the decision to get rid of its foodservice coffee and tea operations, which was a major part of the company was a continued effort in renewing the company’s focus on sustainable growth and as a part of the packaged foods company to create a pure play company in the shortest possible way. The transfer of the business operations is set to be completed by the beginning of next year.

The sale of the foodservice coffee and tea operations was accompanied by the decision of the packaged foods company to discontinue the Senseo coffee business in the North American markets. From March 31 next year, the Senseo coffee will cease to exist. The company will either sell or shut down the currently existent assets of Senseo, however the company did not announce any potential bidders for this business.

The sold foodservices operations unit of Sara Lee employs close to 700 people and generates annual net sales of approximately $530 million in the current year. Around 450 people from Sara Lee will be transferred to Smucker as per the agreement by the end of this year or after the completion of the acquisition.

Apart from selling its foodservice beverage unit, Sara Lee and Smucker have agreed to a licensing agreement in which the two companies will work on developing coffee technologies together. The deal will help Sara lee receive continuous income stream for the next decade, totaling close to $50million, along with royalties. This will help Sara lee grow constantly and help cover the company’s research and development costs.

Smucker’s owns coffee brands such as Folgers, which is its largest in terms of annual sales. The acquisition according to the Chief Executive Officer of Smucker’s will help strengthen the position of the company in the coffee market in North America. The acquisition will add liquid coffee to the company’s portfolio, which already has single serve, roast and ground and ready to drink coffee.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.