Sara Lee Hires Cargill to Supply Turkey to Cut Costs

Sara Lee Corp., Chicago, said it has hired Cargill Inc. to produce and process turkeys for its packaged-meat unit as it seeks to cut spending on factories and other capital costs. The company also said it will purchase about 14% of its turkey breast meat from Cargill, according to a Bloomberg News report. Sara Lee declined to disclose the value of the contract and said it will continue to handle about 60% of its packaged meat production.

Last year Sara Lee unveiled a plan to free up cash to buy back $3 billion of its own shares by selling factories and cutting other capital spending. The company has tried to shift production of packaged meat, textiles and other supplies to other companies in an effort to focus on marketing its own brands.

Sara Lee said it will seek to develop other outsourcing arrangements for packaged meat with Cargill. Minneapolis-based Cargill now produces $125 million worth of cotton, meat and flour for Sara Lee. The turkey meat contract calls for Cargill to help produce the Bil Mar, Sara Lee Premium and Mr. Turkey lines, which are sold to delis, supermarkets and other food-service customers.

Sara Lee's moves are aimed at increasing cash flow from packaged meat operations by $500 million. They also include Sara Lee's agreement with Southern Family Foods Llc to produce processed meat to Sara Lee's Bryan Foods unit.