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Ahold to Rebuild U.S. Foodservice, Concentrate on Supermarkets

ZAANDAM, The Netherlands -- Royal Ahold is scaling back on its global ambitions, working to rebuild its tarnished U.S. Foodservice unit, and concentrating on achieving synergies in its supermarket operations, Anders Moberg, Ahold's c.e.o., told shareholders at today's annual meeting.

Ahold will also scrutinize its remaining assets and divest those that don't meet sales potential. "We have too many underperforming assets," he told shareholders. "There are some loss-making businesses that have no prospect of becoming profitable within a reasonable time frame. This can't go on. And believe me: there are no sacred cows!"

Moberg said Ahold will "scale back our global ambitions," while creating a new culture, espirit de corps, and a drive for synergies and organic growth.

He said U.S. Foodservice has an 11 percent share, or $18 billion piece, of the U.S. food service market, second only to SYSCO. "My current assessment is that it will take us 18 to 24 months to rebuild this company and restore its value," he said. "Only when we have a clear picture of the value of this business can we decide the role of U.S. Foodservice within the future strategy of Ahold." The division's new management team will install "necessary disciplines and strict internal controls to establish good governance and restore the business to health." During this time, Moberg foresees limited investment.

Divesting nonessential assets, like last week's sale of Golden Gallon convenience stores, will continue. Ahold will focus on leading operations and formats capable of further growth, and operations and formats that can be fixed to become market leaders. "Every business we are in must be capable of achieving market leadership, despite our financial constraints, within three to five years," he said.

Integration, such as point-of-sale systems in IT, will also be looked at on a global scale. "I see no reason for us to maintain expense and independent systems across the company, when we can implement the best practices already in use within Ahold," Moberg said.

In an unrelated development, Ahold today also released sales figures for its Stop & Shop division. For 2002, the division, which operates 333 stores in New England, New York, and New Jersey, had sales of $9.476 billion, up from $8.779 billion in 2001. Operating income was $714 million, compared with $564 million in 2001.
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