Key to this strategy is the continued success of Sara Lee branded bread. Launched in October 2002, the Sara Lee brand name quickly has been established as a market leader in the bread aisle. The company continues to generate excitement with this brand and its other bread brands, such as Earth Grains and IronKids, by launching innovative new products. In the last six months, the company launched two new lines of bread products aimed at consumers seeking extra fiber and whole grain fortification.

The nationalization of the bread aisle behind a few brands represents one aspect of Sara Lee’s transformation plan. The plan, schedule to be enacted on July 3, also will rearrange the organization of the baking business into three divisions:

• North American Retail will include the company’s bakery, packaged meat and Senseo coffee retail businesses in North America. CJ Fraleigh, who recently joined the company as chief customer and marketing officer, will lead this business, which represents $4.5 billion in annual sales.

• North American Foodservice will consist of the company’s bakery, coffee and meats foodservice businesses in North America. James Nolan, who formerly served as executive vice president of U.S. operations for PepsiAmericas Inc., will lead this $2.2 billion business.

• Sara Lee International will include the bakery and beverage businesses outside of North America.

Sara Lee executives said the transformation will organize its business operation around consumers, customers and geographic markets; focus the company’s portfolio on food and beverage; and increase operational efficiency.

“Under our transformation plan, we will concentrate our financial and management resources on a smaller number of business segments where we are well positioned for substantial growth,” Brenda Barnes, Sara Lee’s president and chief executive officer, said. “As a result, Sara Lee will undergo a significant portfolio change, pursuing the disposition of our businesses that do not fit with our strategic focus within the food, beverage or household products categories.”

Barnes was tapped to lead the transformation plan, and will serve as the company’s president and chief executive officer. She replaced Steve McMillan, who will remain chairman through October 2005.

One of her first duties will be trimming Sara Lee’s portfolio by spinning off its apparel business and selling other global portfolios, including its European meats and U.S. retail coffee businesses. She also will oversee the relocation of Sara Lee Bakery Group from St. Louis to Chicago.