North American Fresh Bakery

Jim Nolan
CEO

1
 Sara Lee Fresh Bakery at a glance

$2.2B BUSINESS
• 41 bakeries
• 4,600 routes
• 12,000 employees
• Product mix – over
60% of sales branded
• 50 brands

Sara Lee is the #1 fresh bakery brand in the United States

2
 Fresh Bakery is an attractive category

• $12B+ fragmented category

• Potential for lower costs through increased industry
capacity utilization
• Highly profitable category for retailers, with the
potential to be even more profitable
• We have the tools to continue to win in the
marketplace and to drive productivity
– The brand has broad appeal and significant
upside potential

3
 Steady progress financially

Adjusted Operating Segment Income ($MM)

$70
$63
$ 6
$56

FY03 FY07 FY08 FY09

Lost money

Note: “Adjusted” numbers are non-GAAP financial measures. See table at the end of this presentation deck for a
reconciliation to reported numbers.
4
 Top brands are winning
while private label is steady

Dollar share

Top 10 brands Private label

42.0
37.2 38.4
35.3
33.1

26.2 26.4 26.2 25.9 26.5

2004 2005 2006 2007 2008

Source: Private Label: IRI Fresh Bakery Department Supermarket Reviews dE

Top Brands: IRI Total Retail Vision and Infoscan
5
 Fresh Bakery has a clear mission

BOOST OPERATING MARGINS!

Boost Operating Margins
boost operating margins

… while building a strong

foundation from which to grow

6
 Three interconnected strategies
to boost operating margin

Local market profitability

ability
eld profita
Fie

Local scale
1. Build our brands
2. Drive category management
3. Accelerate productivity
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 1. Build our brands

8
 The Sara Lee brand is powerful

Sara Lee branded retail sales ($MM) #1 brand in the fresh bakery category
8.5
Nature's Own 6.2
Pepperidge 6.0
Arnold 4.6
Oroweat 4.2
Wonder 3.6
Thomas 3.4
Martins 1.9

Total branded retail

Sara
SaraLee
Leebrand
brand
Dollar Share of FDMW
FY03 FY04 FY05 FY06 FY07 FY08 FY09

Source: IRI Total Retail View and Infoscan, 52 weeks ended 7/26/09
9
 Sara Lee brand FY10 priorities

Drive brand equity Innovate

10
 Integrated marketing initiative

On-line

Print TV

On-pack

New products
In-store
Mi
Microsite
it

Radio

11
 Video Placeholder:
Disney Channel Commercial – Soft & Smooth
(Run Time :45)
13
 Sara Lee Soft & Smooth with DHA/Omega 3

DHA/Omegag 3 is proven
p Currently found in
infant formula,
formula yogurt,
yogurt Coming to Sara Lee
to improve brain health Soft & Smooth Bread
milk & juices

Source: Oxford Durham Study, 2005

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 EarthGrains 100% Natural Thin Buns provide a
differentiated offering

100% Multi-Grain 100% Whole Wheat

• More health benefits: 100% • Better taste: No sucralose

Natural, 100% Whole Grain
• No
N hi
high
h ffructose
t corn syrup
• Fewer calories

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 Strong portfolio of national and regional brands

National Brands

Local/regional/specialty brands

16
 2. Drive category management

17
 Fresh Bread is the #1
profit-driver for U.S. retailers

Most profitable categories (Gross profit; $ in billions)

$4.9 Fresh Bakery

products
contribute 4.9%
of total store
$3.8 profits
$3.5
$3.0
$2 7
$2.7

$0.9

Bread Cereal Salty snacks Packaged meat Beer Carb. Bev.

Source: Willard Bishop SuperStudy, 2009

Source: Willard Bishop Grocery SuperStudy, 2009.
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 Category management fundamentals

• Assortment
• Promotion and display
• Role of private label

• Pricing

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 Pricing has been affected by many factors

Commodities

Economic
Environment

Competitive
Landscape

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 Commodity costs are down vs. prior year
• Spot market wheat costs are down 50% vs. last spring

KCBOT wheat
h t futures
f t (Monthly average price)
14

12

10

2
Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul-
00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09

But actual costs are only down a few pennies per pound
Source: Nearby KCBOT Futures
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 Pricing is not the only variable

Weekly change in retail price (Commercial fresh bread)

0.15

0.10

0.05

0.00

(0.05)

(0.10)
27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 1 2 3 4 5 6 7 8

FY09 FY10
Week of fiscal year
Source: IRI, FDMx
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 We have the insights to help retailers manage
their category

Item assortment Price management

A
Average # off P
Private
i t L Label
b l Items
It by
b Segment
S t Wh t Price
What P i Optimizes
O ti i Velocity
V l it and
d Profit?
P fit?
PRIVATE LABEL PRIVATE LABEL 20OZ WHITE PRIVATE LABEL PRIVATE LABEL 24.1TO32OZ PRIVATE LABEL 20OZ WHOGRAWH TRAD FB COM

 Retailer   Retailer   Retailer   Retailer   Retailer   Retailer Penny 

 Unit Cost  Margin  Penny Profit   Unit Cost  Margin  Penny Profit   Unit Cost  Margin  Profit 
$1.19 $1.79 $1.79
$0.58 51.3% $3,130,108 $0.96 46.4% $1,419,987 $0.83 53.6% $202,945
$1.29 $1.89 $1.89
$0.58 55.0% $3,377,514 $0.96 49.2% $1,511,925 $0.83 56.1% $217,091
Source: IRI Total U.S. Grocery 52 weeks ending 03.08.09 $1.39 $1.99 $1.99
$0.58 58.3% $3,592,444 $0.96 51.8% $1,595,396 $0.83 58.3% $230,532

We understand Fresh Bakery price elasticity by item/by retailer and can quantify
the impact of price changes to unit movement and retailer profit

Feature ad frequency Display strategies

Average # of Ads Per Market Cumulative Weighted Weeks

(Latest 12wks ending 3/8/09) Any
y Display
p y – Private Label Fresh Bread
Fresh Bread Buns & Rolls Breakfast

Private Private Private

Branded Label Branded Label Branded Label
Top 10 Retailers 25 6 4 4 5 1
Bottom 10
Retailers
13 11 1 4 3 1
Recommended
Ad Ratio 4:1 1 : 1* 5:1
(Branded:Private Label)

Source: FeatureVision Ad View, *Ratio likely to change during bun season Source: IRI 52wks 03.08.09

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 This category-based approach is paying
dividends with the largest retailers

Sara Lee Fresh Bakery dollar sales growth (FY09)

11.5%

5.2%

T
Top 10 R
Retailers
t il All Other
Oth Customers
C t

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 3. Accelerate productivity

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 Productivity initiatives are designed to offset
inflation and deliver improved margins

Inflation COSTS Productivity

FY07 FY08 FY09 FY10

Lean manufacturing PLANNING ROLLOUT STRENGTHEN

Route optimization PLANNING ROLLOUT

Warehouse automation PLANNING ROLLOUT

Handheld replacement PLANNING ROLLOUT

Business process ROLLOUT

outsourcing

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 For FY10 . . . Fewer, bigger, more impactful initiatives
under the Accelerate umbrella

RADICAL SIMPLIFICATION

• Geographic based
• LEAN go to market approach

• GOAL IS: Create the optimal

– Manufacturing network
– Service and delivery frequency
– SKU portfolio

Geographic specific Cross-functional Market

diagnostics work teams action plan

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 Radical simplification project plan
Development of market change plan Implementation

May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10

Pilot
Market 1
Market 2
Market 3
Market 4
Market 5
Market 6
Market 7
Market 8
Market 9
Market 10
Market 11
Market 12
Market 13
Market 14
Market 15
Market 16
Market 17
Market 18

Early results are encouraging

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 Three interconnected strategies
to boost operating margin

1. Build our brands

2. Drive category management
3. Accelerate productivity

29
 We win where we bring our competitive
advantages together in a local market

Sara Lee competitive advantages Value in combination is powerful

M k tA
Market Market B Market C Market D

Sara Lee Brand

Regional / Specialty Brands

Customer Relations / Category

Leadership Program

Local Operating Cost Efficiency* 89% 95% 99% 89%

Field profit index vs. average performance: 1.7x

*% vs. company average, $/lb
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 Fresh Bakery profit growth equation

Price/mix Productivity
Profit and
Volume less less
growth
g + commodity y + operating
p g cost = margin
growth
inflation Inflation

31
 Reconciliations of Non-GAAP
Non GAAP
Measures to Reported Numbers

32
 Fiscal 2009 vs. Fiscal 2007 Results
North American Fresh Bakery

Dollar Percent
(i $ millions)
(in illi )
Full Year Change Change
2009 2007
North American Fresh Bakery
Net sales $ 2,200 $ 1,856 $ 344 18.6%
Adjusted net sales $ 2,200 $ 1,856 $ 344 18.6%

Operating segment income $ 33 $ 14 $ 19 NM

Operating margin % 1.5% 0.8% 0.7%

Increase/(decrease) in operating
segment income from:
Exit activities, asset and business dispositions $ (5) $ (4) $ (1)
Transformation/Accelerate charges (1) (20) 19
Accelerated depreciation - (2) 2
Impairment charge - (16) 16
Pension partial withdrawal liability charge (31) - (31)
Adjusted operating segment income $ 70 $ 56 $ 14 25 8%
25.8%

Adjusted operating margin % 3.2% 3.0% 0.2%

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 Fiscal 2009 vs. Fiscal 2008 Results
North American Fresh Bakery

Dollar Percent Dollar Percent

(in $ millions)
Fourth Quarter Change Change Full Year Change Change
2009 2008 2009 2008
North American Fresh Bakery
Net sales $ 560 $ 554 $ 6 1.0% $ 2,200 $ 2,028 $ 172 8.5%
Adjusted net sales* $ 560 $ 554 $ 6 1.0% $ 2,200 $ 2,028 $ 172 8.5%

Operating segment income $ 24 $ 29 $ (5) (17.8)% $ 33 $ 60 $ (27) (45.5)%

Operating margin % 4.4% 5.4% (1.0)% 1.5% 3.0% (1.5)%

Increase/(decrease) in operating
segment income from:
Exit activities, asset and business dispositions (5) (3) (2) (5) (3) (2)
Transformation/Accelerate charges (1) - (1) (1) - (1)
Pension partial withdrawal liability charge $ - $ - $ - $ (31) $ - $ (31)
Adjusted operating segment income* $ 30 $ 32 $ (2) (4.9)% $ 70 $ 63 $ 7 10.8%

Adjusted operating margin %* 5.5% 5.8% (0.3)% 3.2% 3.1% 0.1%

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 Please visit
Pl i it th
the IInvestor
t R Relations
l ti
section on www.saralee.com for
additional investor information.

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