Inflation is a hot topic in the industry right now, as evidenced by The Giant Co. President and CEO Nicholas Bertram’s recent op-ed piece for CNN, in which he discussed what the grocer was doing to keep prices down for consumers. In regard to sales growth expectations, there’s been a lot of talk about the high level of inflation being transitory and that at some point it will subside. Earlier this month, Progressive Grocer asked Kevin Holt, CEO of The Giant Co. parent Ahold Delhaize USA, when he thought that would occur, and how much of the €10 billion sales growth target of Ahold Delhaize is attributed to inflation versus volume.
“If we look at the inflation that we’re seeing today, we’re largely seeing it in commodities and labor, and that’s obviously taking a toll on our trading partners, who are then trying to pass through the price increases, and ultimately to the consumer,” noted Holt. “We saw this start earlier in the year with fresh, and then what I’ll call the non-fresh or the center stores come in more towards the end of summer. Now it’s the fall, and we’re seeing just an enormous amount of press on it, that type of thing. If you were to talk to the trading partners, you would certainly hear from them that they’re faced with a lot of that.”
At Ahold Delhaize, according to Holt, “we’re really focused on how do we take cost out of the business so that we can actually manage that margin and that pass-through. In many cases, we can’t pass through 100% of the inflation, or if we do, we do it by spreading it to different areas. So just because you have one thing go up doesn't necessarily mean you’re going to take the full increase on that one. You might spread it over other things. So we try to manage that, and then we also try to continue to look at how do we build our productivity and how do we grow the business so that we can actually accommodate the inflation until it subsides.”
And it will subside, he predicts. “We do think, based on everything that we know right now – and none of us have a crystal ball that could answer this – but we do think … by the time we get through Q2 of next year, we should be in a position where we’ll start to see some mitigation of that and we’ll start cycling that through,” said Holt. “That being said, if you look at the sales demand that we’ve had and that type of thing, it’s been pretty strong. As we think about going forward on the inflation side of this, the numbers that we were giving for the €10 billion, it’s sales growth. Those are between now and the end of 2025, and so we don’t anticipate that inflation will have the level of impact across that entire spectrum. We think that inflation will come back down to its more normalized levels that we would see around that 2% inflation, and then our volume growth would be something slightly larger than that.”