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12/16/2021

How Ahold Delhaize USA Banner Is Taking ‘Giant’ Steps Forward

Giant Food President tells PG about parent company's brand’s expansion, sustainability and self-distribution goals, as well as how it maintains its uniquely local character
Bridget Goldschmidt
Managing Editor
Bridget Goldschmidt profile picture
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Giant Steps Ira Kress
Giant Food President Ira Kress

Giant Food President Ira Kress went one-on-one with Progressive Grocer Managing Editor Bridget Goldschmidt for a wide-ranging interview on the Landover, Md.-based chain’s goals with respect to expansion, sustainability and self-distribution, in addition to how the Ahold Delhaize USA brand retains its own distinct brand identity in the market area it serves.

Progressive Grocer: What is Giant Food’s expansion strategy going forward in terms of store openings versus investments in omnichannel capabilities? We had heard a lot during Investor Day about how a lot of the company’s investments would be in updating and broadening its omnichannel capabilities, in addition to, of course, opening new stores. But I was just interested how that worked out for the various brands of the company, for instance, with Giant Food.

Ira Kress: First, every strategy we have from a big-business perspective now is an omnichannel strategy. So I’d like to get folks to really start to think about that much more broadly than the prior brick-and-mortar versus e-commerce [mindset]. And I’ll speak to why I feel that way and how that will play out at Giant Food.

One of the uniquenesses of Giant Food specifically is our geography. We’re greater Washington- Baltimore metropolitan area. We happen to be surrounded by sister brands, be it Stop & Shop to the north, even The Giant Co. to the north and to the west, and then Food Lion to the south. We’ve got this little thing called the Atlantic Ocean to the east, and we haven’t figured out how to build on oceans yet. I say that in jest, but in the way people used to think about geographic expansion, we don’t have a broad geographic expansion strategy. However, we do have an expansion strategy both in terms of our store base and as it relates to what you referenced, omnichannel capabilities, which is in some ways an expansion of our store base itself.

We have 164 stores today. On average, we may add a couple of stores per year in terms of actual raw store count. But our focus has been on the communities and neighborhoods that we serve, focusing on what we consider white space within our market area today. Because again, we’re not going to expand further west or further south, if you will, from our current store base. But we look at store opportunities in terms of building brick-and-mortar based on that white space, which there is not a ton of in our market space, but there is some. We’re not going to go from a chain of 164 stores to a chain of 200 stores in the next two years. That’s not the way we will expand.

What we will do, however, is continue to replicate and enhance what we’ve been doing to expand and grow more market share and grow customers and grow sales. A lot of that is focused on a remodel or a replacement store strategy. We’ve been doing that in a very deliberate and successful way over the last couple of years. We’re remodeling anywhere from eight to 12 stores a year. These are not [just a case of] go in, paint and paper. These are extensive remodels. When they’re complete – and we do them while the stores are open, so they take upwards of about 12 weeks to complete in some cases – they are akin to a brand newly built store. They have all of our newest amenities and features.

Then secondly, we have a replacement store strategy where we don’t have what we believe is an ideal place to remodel in place, where we can’t expand, we can’t grow our interior footprint of the store, or even our exterior footprint of the store, which we’ve done in some cases with our remodels. Sometimes that replacement strategy is, like the recent example in Fort Washington, Md., where we literally leveled the store and built on the same site. We didn’t increase our store count, but what we did was double the size of our store and have a brand-new store on site on location.

We also did that in a recent Manassas, Va., store where we had a store literally a stone’s throw across the street, undersized, and [we considered] what it would take to attempt to make that the right size and remodel it. Instead of doing that, what we did was we acquired a site across the street that was a vacant Shoppers Food site that they exited. We completely gutted it and effectively had a brand-new store in Manassas and closed our old store.

Those have been tremendously successful for us and tremendously beneficial for the customers at the same time. And again, that’s brick and mortar. But at the same time, each of those opportunities have allowed us to expand our omnichannel capabilities. We have Giant Pickup, which is leg one of our three-legged stool with respect to e-commerce. And we have that in all of our remodels and new store openings. We’re up to now 159 of 164 stores available for Giant Pickup where, again, customers can order the product, full store assortment, same as in-store pricing. And within four hours, [they can] come to pick up that product at the store. Again, brick- and-mortar affords us that opportunity to get closer to the customer with e-commerce.

We have also expanded our Giant Delivers capabilities. We have a warehouse, an e-commerce fulfillment center, in Hanover, Md. We recently launched a cross dock in the Delaware market, where we’re actually partially fulfilling those orders out of Hanover, delivering them to Delaware, and then using that as the hub for the spoke. And we are continually adding additional ZIP codes in our Delaware market. And sometime next year – it’s not public yet – but we will open another e-commerce fulfillment center in Virginia to allow us to more rapidly fulfill delivery orders to a segment of our northern Virginia customers, in particular northern, western and southern Virginia customers.

So that is the expansion. But it really does blend both brick-and-mortar and e-commerce, which is why I keep referring to omnichannel being really everything in what we’re doing in terms of the overall expansion. And then within e-commerce, we continue to expand not only feature and functionality, but again, market share and customers through enhancements, not only what I just referenced with the Delaware cross dock or the Virginia e-commerce fulfillment center. We launched the Ship2Me marketplace, which is, again, an expansion of the food business. We’ve expanded by customer acquisition and reduction of minimum-order values and fees across our deliverers and pickup business; the ability to pay for e-commerce pickup and delivery through our channels and through Instacart’s channels with SNAP benefits or EBT.

So again, those are all of the ways in which we’re expanding, without trying to speak very specifically to what’s omnichannel, what’s e-commerce, what’s brick-and-mortar. It really is a combination of all of those, but less around a pure geographic expansion.

PG: What can you tell us about, in addition to what you mentioned about Giant Pickup and Giant Delivers, the features and amenities that shoppers can expect in the latest iteration of Giant Food stores, these new stores or these remodeled stores that you’ve been rolling out?

IK: They evolve, every single one we do. From the remodeled stores that we launched in February of this year to the ones that we just launched in November, they continue to evolve. But we have what we believe to be a great format model now.

There’s a significant focus on fresh within those stores, and that ranges everything from local produce to what you would typically see in terms of a fresh market feel and look to it, but also huge expansions on prepared food on the fresh side, be it ready-to-eat, ready-to-heat, ready-to- take-home and -cook. So we’ve expanded, if you look at our deli, our prepared foods business, that area of our fresh business has probably seen the most expansion. It used to be what’s for dinner? And you had rotisserie chicken, or you had fried chicken. We have paninis, pizzas and a whole hot bar, or packaged hot foods ready to eat, from Asian to American.

We’ve also focused really significantly on expanding what I’d call either healthy or trendy solutions, and that’s in fresh and nonperishable: natural and organic, gluten-free, keto – you name it. We’ve continued to modify that assortment, not just by bringing in an item here or an item there, but making destination departments out of them, so destination organic departments in our produce, destination natural departments in our center store, destination gluten-free and keto sections within our center store. We’re not only putting the full range of product in these remodels as we’ve redone them, but we’re segmenting them departmentally and highlighting them.

We’ve even done it with our HBC departments through an initiative that we’ve been rolling out over the last several years, not only with remodels, but retroactively going back to our HBC departments, to make sure that we’ve got the right variety in the most trendy items, if you will, from an assortment perspective. Which, again, changes month to month based on the community needs of that particular store community.

We’re also calling out those departments in a much larger way: comprehensive decor package, digital engagement with our customers in store with Deli Express and pharmacy refills online. We’ve had self-checkout for a long time. We continue to upgrade the way in which our self-checkout process works on our front ends, but also the ScanIt! mobile technology, so the customers can scan the products [and] bag them themselves. I won’t say it’s simply walk out technology – they have to simply make one transaction at a self-checkout register – but it is just about walk out technology in terms of their ability to scan and shop as they go.

Between the decor and the navigation of our store and the layout, and then the amenities that we are adding to them, particularly in our fresh departments – service meat counter, service seafood counters – we’re continually looking to see what else we can add. What else do the customers want? We put smoothie bars in. We have Starbucks in many of our stores. We obviously have our full-service pharmacies in over 150 of our stores today. We have PNC Bank locations in our stores.

The cherry on the top for us is this focus, because of our specific customer base in this market, on healthy living, which means something very different to every single customer. We have a team of licensed nutritionists that are not only available for consultation – not necessarily in every single store, but every single store has access. Every single community has access to this team of healthy-living nutritionists for personal consultation and helping them meet their specific needs as well.

What we continually get in terms of feedback is, wow. When a customer walks into one of our remodeled stores, it’s oftentimes a real wow, because they know what the old store looked like, and they see that transformation happening in real time. I just went through the two grand openings that we had in Manassas and Fort Washington, and customers were blown away. We’re seeing that type of reaction time and time again.

Not every store is the same. Conceptually, the format and the decor and the amenities, we know what we want to be able to do in each and every store. We don’t always have the exact same space in each and every store to do it, and we tailor what we put in, both in terms of amenities and assortment, to best meet the needs of that specific community where that store’s either being remodeled or redeveloped.

PG: You had touched a little bit on Ship2Me in your first response, which I understand has officially rolled out. I just wanted to get a little bit more information about that particular digital marketplace, how Giant Food intends to use it, and also how Giant Food was chosen as the brand to which this concept would roll out, because I understand it will be eventually adopted by the other brands.

IK: You’re right, we have, in fact, launched Ship2Me. In terms of how Giant Food was chosen, part of that was simply us raising our hand the highest [and] saying, “Yes, we’re willing to be first to market with this.” At the end of the day, we have a very unique customer segment, one we think has the best match for this type of marketplace, given some of the more unique and on-trend options that customers are looking for. It’s part of the extension of our PRISM platform, which is our proprietary software that we use for our internal e-commerce channels. It was really a combination of us wanting to provide this to our customers as quickly as we possibly could and the market itself.

It’s a really unique offering, in terms of what you see out of traditional supermarket retailers, for sure. We’ve got tens of thousands of items offered today, and we’re continuing to add items literally daily. There really is no max or end in sight, and the concept and design is literally that endless-aisle concept, to be able to expand our assortment and our offering for our customers well beyond what we could ever put into our stores, not only well beyond what can go in the stores, but well beyond traditional groceries.

In terms of what items will be made available to customers, a lot of that will be dictated by what items most resonate with customers. What we’re seeing thus far are those unique, hard-to-find, specialty or specialty health grocery items. We’ve seen a nice increase in customer search and add for those particular items. We also have seasonal items available, and kitchen and dining items available, and home decor items available.

When you think about pet and baby in particular, the pet and baby aisles in the traditional supermarket retailer or in a Giant Food, well, we’ve done a really nice job expanding that assortment to a degree. There’s only so much space you can dedicate to it. And those are also two categories that you’ve seen specialty players come out with, whether it’s Chewy [or others.] Ship2Me affords us the opportunity to offer that expanded variety set to our customers without having to completely redo our stores, and frankly, not having the space to do that. The only way we could do it is if we doubled the size of our stores, which isn’t practical, either.

So, it’s a really unique opportunity for us. It’s a system that the algorithms within it actually continually give feedback not only to us, but the customers who use it, where those items will start to go higher up in their search once they’ve purchased them before. And then we’ll be able to evaluate that over the longer term, not only to see what items do well and what items don’t do as well and update the assortment on Ship2Me, but it’s even possible that we could update the assortment within our stores if there’s enough consumer interest. Typically, you have to bring the products into the brick-and-mortar, let it sit on the shelf, see if customers like it [or] don’t like it, delist it, all those things. This actually provides us a lot of insight into that without ever bringing the product into the store.

I think there’s a lot of learnings here. We have just broken ground on the launch. [We’re] only several weeks in. And we have a pretty significant marketing campaign that we will launch early into next year to continue to test and learn. Ultimately, it will be the consumer that decides, is this a value to me? We think there is value to it, and we’ll continue to harness and unleash what the opportunities are with our customers.

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Giant Steps Giant Food Store
Giant Food's replacement store in Fort Washington, Md.

PG: How is Giant Food addressing sustainability in line with parent company Ahold Delhaize's goals?

IK: First and foremost, the focus on sustainability is not a new focus to Giant, and it’s not in terms of the interest and demand, in many ways, for our customers. In our market specifically, it has been something that both our customers are focused on and we have focused on as well, and I do consider part of our DNA because of the passion that we’ve had and the passion that our customers have had around it.

We are certainly a big piece of the Ahold Delhaize umbrella, and a big piece in working to achieve the very lofty goals that Ahold Delhaize has put forth with respect to overall sustainability. For us, it covers everything from offering healthier choices for our customers, eliminating food waste in our systems, food transparency in how we sell our products, what we sell, and what we tell the consumers about what we’re selling, and then climate action. We’ve taken action in every single one of those areas. We certainly have more to do, but we’ve taken pretty significant action in each of those areas. 

Certainly, for years and years, we’ve had this relentless focus on eliminating waste, but doing so in a way that also supports our communities. We’ve worked for ages with the five Feeding America food banks in this marketplace, and we continue to expand efforts there. We launched a Fresh Food Recovery initiative last year that not only allowed us to continue our donation of products from stores, but we actually expanded the departments and products to which we could sell these close-dated, or even, in some cases, out-of-date items that can be frozen and provided to the food banks. Again, there’s five Feeding America food banks to provide nutritious food for the food-insecure, and particularly around the dairy department. We’ve expanded that significantly, and that’s enabled us to get away from these more unhealthy donated food items, soda and chips and candy and things of that nature.

The focus on plastic, reusable and recyclable plastic or elimination of plastic, it’s certainly a significant focus for us as well. We’ve made good strides in the elimination of plastic bags within our stores. That is not chain-wide at this point. We have counties and jurisdictions where we have eliminated plastic bags. We have had a huge focus on the reusable recyclable bags. I guess there was a roadblock, or a bump in the road, if you will, as a result of COVID, because of the reusable-bag concerns that customers and/or the CDC had. But we are revamping those efforts as we launch into 2022 to continue that overall plastic bag reduction. And we’ve made a public commitment to use 100% reusable and recyclable plastic packaging for all of our own-brand products by the year 2025. And we continue to work with our support brands within Peapod Digital Labs and Retail Business Services to ensure that we can meet that commitment. There has been a lot of attention given to the net-zero carbon emissions commitment by 2040. Again, that’s not a new action item for us. That is something that we’ve been working against.

I spent a lot of time talking about our new stores and our remodel stores in terms of what the customers can expect. One of the other things they can expect as we’re touching these stores and building new [stores], replacements or remodels, are the refrigeration conversions that we have been making and will continue to make. We are either switching out the refrigerant to an emissions-reducing refrigerant and/or making complete refrigeration case replacements when you look at our frozen food and our dairy and our meat departments in our new and remodeled stores. We’ve got a plan to continue to do that, and hopefully, the technology will continue to evolve so that those emissions can even be further reduced. We’re using the best available low-emissions products today. But again, the there’s lots of work to be done on the technology side with respect to cases in particular and refrigerants that go into them.

We’ve retrofitted – I think we’re up to about 90% of our stores now – with LED lighting across them. Not only are we doing that in our remodels and new stores, but we’ve actually retroactively gone back, the same thing we’re doing with refrigerants. We’re going back, even if we’re not remodeling stores, and replacing those refrigerants over time. We are adding doors on many of our refrigerated cases in our stores, in our dairy departments and our packaged produce departments, which from an energy efficiency perspective and product freshness perspective, has been beneficial to us.

Separately, we’re testing a host of new technologies. I mentioned some of them with the case refrigeration technology. We’re also testing electric-powered delivery trucks out of our Giant Deliveries business. We have moved forward in a big way installing EV-charging stations through a partnership with Volta, where we have about 50 stores today that each have two of those EV-charging stations, front spaces in our parking lots. We continue to expand that and have more stores planned to be implemented next year. 

On the consumer side, in terms of transparency, it’s not only what you do, it’s what you tell our customers we’re doing. We were the first brand within the Ahold Delhaize USA umbrella to launch HowGood [and] we also have Guiding Stars, both of which are either nutrition or sustainability ratings for products within our stores. Guiding Stars is really focused on providing customers that easy opportunity to choose food and recipes with the most nutrition. It’s got a rating system of one, two or three stars. HowGood is a rating system for products within our stores, but it’s really focused on allowing customers the easy opportunity to identify brands that support a more responsible, ethical and transparent food system. Their rating is good, great and best. Those are not only available in store, but online now through our PRISM channel as folks are going for e-commerce shops within our marketplace. 

We’ve done a lot. A lot more to do, and certainly bold commitments for the years to come.

PG: How far along are Giant Food facilities in the transformation to self-distribution, and how is this change affecting stores and the consumers who shop in them, if they even perceive any difference? 

IK: Well, I hope on the surface, there won't be much for customers to see by way of actual self-distribution transformation. But Giant Food is in a little bit different spot. Each of the brands are in a little bit different spot, I guess. Where Giant Food sits today is we already have our own internal self-distribution on fresh. So out of Jessup, Md., we own and operate a fresh food facility. What we have outsourced today through our C&S Wholesale Grocers partnership is dry goods, frozen food and GM/HBC. Those are all slated to transition to a self-distribution model midyear next year.

For us, even here, too, it’s a little bit different. While C&S Wholesale Grocers procures that product for us today, and they warehouse and select that product for us today, Giant Food transportation drivers actually deliver that product to our stores. That never shifted, even when we outsourced the dry groceries and the frozen and GM/HBC. We deliver those products to our stores today. The biggest benefit and change for us and for our customers in that regard is that ultimately, we will have much better control and line of sight over the inventory via the ownership of procurement for all of these products, and therefore, be directly dealing with the CPGs and the vendors, versus having that inventory control and oversight being done by a third party. And it will provide a level of end-to-end visibility and ability to manage across a broader network of ADUSA in terms of product availability and transfer of products across facilities. You basically get to manage that broad-scale inventory in a much better way right across the network.

In terms of the customer impact, minimally, [we aim to] do no harm. The customers should not see any negative impact in terms of our on-shelf available ability and inventory. Hopefully, this will produce even better on-shelf availability. When I say those words in today’s environment, they don’t come out really well because the on-shelf availability in today’s CPG and supplier world is tough, no matter who’s doing it. Internal, external, it doesn’t matter. But the reality is if I step back to pre-pandemic, we will have the ability to move inventory from building to building in the ADUSA network. So, should we have too much of X in one facility, we can move it to another facility, or if we don’t order enough because we own the procurement process and a buyer falls short, we can draw upon the overall ADUSA network to fulfill that. Ultimately, it should certainly lead to better, not worse, but minimally no less on-shelf availability than what our customers see today.

Then the biggest benefit for customers, they won't necessarily attribute to self-distribution, but the reality is we should see lower costs on items throughout our stores, or certain items throughout our stores, because of that control of inventory from end to end. Again, our collective ability as an overall ADUSA organization to procure that product at scale. So not only do you have better control of it, but we should certainly see improved costs coming from that.

PG: At a time of increasing homogenization of the shopping experience, how does the Giant Food brand maintain its uniquely local character? I know that an important aspect of all of the brands of Ahold Delhaize is maintaining that uniqueness of each one of them. How do you do that?

IK: We are local. We have been in this marketplace since 1936. The Giant name is synonymous with a local supermarket operator, and we think the best local supermarket operator. As a matter of fact, our vision is to be the most trusted and loved local food retailer in our community. Everything we do is focused on reinforcing and demonstrating that localness. It starts with local leadership. I’ve been with the organization for 37 years, but all of our leaders are local to Giant Food. We’re not being managed or led from anywhere other than our headquarters in Landover, Md.

We spend a ton of time understanding and responding to the local customer needs, and that’s not the greater Washington-Baltimore-metropolitan-area local customer needs. It’s the local Fort Washington customer, it’s the local Manassas, Va., customer. We do that through feedback at store level, through our merchandising team, through our assortment, and certainly through the data and analytics that we get through the customer-purchasing behaviors. Then we look to local strategies to meet those very specific community-by-community local customer needs. That can come in the form of the amenities I talked about that go into those local stores. It can also go into the product assortment that we put into those stores.

For us, the business itself is local. Our advantage is that of scale where it matters through the Ahold Delhaize USA umbrella support brands; Peapod Digital Labs, Supply Chain, and Retail Business Services. The customers don’t even know the support brands exist, and that’s fine. They don't have to understand what PDL or Supply Chain or RBS are. What we have to do is show them the value they unlock for us because of the scale and support they offer to us.

I think you’ve written about the comment “Think global, act local.” Our thinking globally is around scale. Frankly, we had a hurdle to climb to convince our customers we were local. You remember the Ahold acquisition back in 1998 and some of the things we saw as we integrated these organizations. Customers believed we were being run out of Zaandam, or frankly worse, we were being run out of Quincy Mass. And for a while, we were. Our assortment was, and the leadership was. 

What’s been transformative over the course of the last really five to six years now, but it’s just getting better and better every single year, is what we’ve been able to demonstrate to our customers. We are the local team. And not only are you going to see that local team in action in your stores and in your communities and at your community events, which we serve tons of nonprofits across our organizations, from military support to pediatric cancer care and research, and social equality, and food insecurity. We are there at the table. We’re not just writing checks from afar. We’re proving that day in and day out by being visible in those communities and giving.

We’re also proving it day in and day out by being responsive to the requests that come through. It’s no longer “No, we can’t carry that local mumbo sauce because we’ve got to give that to Quincy to make a decision against.” You want it, we want it, we get it. We’re doing that with tons of local vendors in market to, again, demonstrate our localness through our assortment, but also demonstrate our responsiveness to that local consumer need. We work with a ton of local suppliers: coffee companies, I mentioned hot sauce, we’ve got ice cream manufacturers. We’ve got over 50 local farms we work with to procure products from.

We’re doing it not only through the customer, but we’re doing it literally through the community, not only in terms of support for the very communities we are so privileged to serve, but through business relationships with businesses within the community. That’s something we’re really proud of. It is exactly how we not only maintain, but grow that uniquely local character, particularly in a day and age where there’s not really any local supermarkets left, when you look at my marketplace in particular; Safeway, with the acquisition from Albertsons. This is very far from their headquarters. [Kroger wholly owned subsidiary] Harris Teeter, out of the Carolinas. So, we have an opportunity, and frankly, we believe we deserve to own local. But we’ve got to earn it, and that’s what we’re focused on.

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