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For years, the European brand name Dim was synonymous with Women's hosiery. Today, Dim is almost as well-known for underwear and T-shirts as it is for panty hose. The new product lines are part of a marketing plan that's strikingly similar to the strategy of the American hosiery giant, Hanes. And that's no coincidence. Hanes and Dim are both owned by the same company: the Sara Lee Corp.
Best known as the maker of desserts that nobody doesn't like, Sara Lee has quietly built up a cache of U.S. apparel companies with powerful brand names like L'eggs, Champion, Isotoner, Bali, and Playtex. In recent years, the Chicago-based conglomerate has taken its recipe for success to Europe. In addition to Dim, Sara Lee has snapped up the U.K. hosiery maker, Pretty Polly, and Spain's top underwear manufacturer, the Sans Group. It also has taken a minority interest in Germany's largest hosiery company, the Vatter Group.
In every case, the strategy is the same. Sara Lee makes a quick entry into a market by acquiring a product leader with a well-known brand name. It then builds market share by expanding into a line of related products, creating what it calls a "megabrand." The whole line of products benefits from a heavy dose of advertising and common packaging designed to promote brand loyalty. The resulting economies of scale help keep costs down and prices low.
By limiting its acquisitions to fragmented industries and practical products, like hosiery, underwear, and intimate apparel, Sara Lee also avoids going up against major competitors. "They're going into a business, establishing dominant position, and not competing with big guys like Philip Morris, Nestle, and Unilever...it's brilliant," says PaineWebber analyst Roger Spencer.
The formula's success has been proven over and over again in the United States, and it seems to be working just as well, if not better, in Europe. The European operations, which also include several lines of food products, are the most profitable part of Sara Lee. In 1991 sales from the European divisions were $3.2 billion, accounting for about one-quarter of the company's total sales (see Figure 1). (Figure 1 omitted) Pre-tax income in Europe was $387 million, nearly half the sum earned worldwide. Sara Lee now ranks as the...