Ahold Delhaize USA CEO Reveals Effect of New Strategy on American Brands, Part 1
As Ahold Delhaize revealed its new Growing Together strategy on May 23 to advance the business of the retail conglomerate over the next four years, Progressive Grocer was on hand for the momentous occasion at company headquarters in Zaandam, Netherlands. The following day, PG spoke with Ahold Delhaize USA CEO JJ Fleeman, who is based in Salisbury, N.C., about how the strategy would affect American operations, especially given the news that the revitalization of Stop & Shop will include the closure of an as-yet-undetermined number of underperforming stores “to create a healthy store base for the long term and grow the brand,” as Fleeman explained in his Strategy Day 2024 presentation on the U.S. business.
Progressive Grocer: Beyond Stop & Shop, you are working on price investments, enhanced customer service and targeted remodels across the U.S. business, and we know that at least in the case of Stop & Shop, there are some closures of underperforming stores in the offing. So, when can we expect to see those things roll out, and in what order?
JJ Fleeman: In the long-term strategy that we’ve built, we’ve built it over the next four years. And many of the things that we talked about yesterday, we’ve already started: For an example, most recently, we just started a private label focus and price investment in the Giant Food business. And we’ve already started to ramp up our omnichannel remodel programs in Food Lion, as an example. You'll hear some market launches coming soon. In terms of how we kind of sequence that, each brand will actually be a bit different. If you think about how we’ve built these plans, each brand has taken their own brand strategy, their own pricing strategy, and they’ve [each] built their own unique four-year plan. We’ve mapped that out over the next four years. So it really depends a lot on each brand. But each of those brands in some ways has already started today. You’ll see later in the year even more price investments from Stop & Shop. There’s a couple of stores that they’re testing right now with new signage, new pricing investments. They’ve got one zone that they’ve got tests in right now that they’re working on, as an example, and then they’re working to refine their remodels.
The Giant Co., which we talked probably a good bit about yesterday, entered the Philadelphia market a couple of years ago with a couple of new concepts. We’ve learned a lot from that, and now they’re applying that to their new remodel program as they start to move and dense up in a few other markets as well. Hannaford … just recently launched a pretty aggressive private label investment in one of their markets, and they’re getting ready later this year [to] move that into one of their additional markets.
That’s a little bit of a sample of the things that we’re actually already doing right now as a part of that. Then we’ll continue to evolve as we go from there. Of course, the thing that probably should be understood, or probably is already understood, is as you make these investments, you have to learn from each of them before you take the next move. So to the degree that we get an immediate win, we go faster, and to the degree that we haven't quite gotten it right, we continue to refine it before we take aggressive moves and go faster.
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PG: So there will be tweaks to these plans as you go along and you see the results of what you do.
JJF: Absolutely, because at the end of the day, what matters most for us is that the customer has a better experience and we're giving him or her a better outcome based off their shopping trip. That's what really matters to us.
PG: What are the particular advantages for the U.S. brands of Ahold Delhaize to be part of this larger company?
JJF: If you just start with the U.S. business, we have a No. 1 or No. 2 position on the East Coast today, and the reason why we have that is because of the strength of each of the brands, our store density, their store formats and the equity that they’ve built with customers, in some cases for 104 years. Since we’ve come together with Ahold Delhaize, there’s been a couple of things that have happened in the U.S. If I talk about the U.S. specifically, we’ve been able to align our private-brand assortments and get scale there. We’ve been able to align our technology and get scale there. We’ve been able to align our sourcing negotiations and get scale there.
We’ve been able to learn from this brand strategy, sharing it with the next brand strategy as an example. Food Lion has shared things that have benefited other brands, and vice versa, from their success. So those are a few highlights inside of the U.S. But if you take a look at the U.S. working with Europe, what we’ve been able to do is we’ve been able to build algorithms, for example, inside of the U.S. and share them with Europe so we can immediately apply them in most cases. If you’re not a part of a larger organization like that, it might take you years to build those types of algorithms. Private brand is a big one. We’ve learned a lot. We’ve taken wine assortments from Europe and Nature’s Promise [from the United States], and we’ve shared them back and forth.
I think that we’ve gained a lot of things. We’ve gained scale, we’ve gained insights, we’ve gained partnership and, more importantly for me, as we’ve gained learnings that allowed us to go faster, based off other people testing things in the market, we also get to see very tactical things, like how does pricing on private brand first tier work in a concentrated market, that we can learn and test and things like that. So those are a few of the benefits.
And, of course, we have the opportunity to work with CPGs on a bigger scale, and we have the opportunity, in some ways, when we buy shrimp and bananas and all those types of things. Of course, the larger the volume, the better result we can get for our customers.
PG: But at the same time – and this is one of the things I find fascinating about the Ahold Delhaize organization – there’s such a focus on local at each banner, and they all existed before they were part of the greater Ahold Delhaize family. Is it a challenge to maintain each brand's distinct local character, though, and how do you manage to perpetuate that? I'm pretty sure that the shoppers of each individual brand do not see it as part of a larger company. They just see it as their local store. What goes into preserving the local character of each brand?
JFF: I think that what you see us do is what other great brands do, regardless of their size, is we try to start with the clear brand strategy for each of those areas, geographies, customer base, customer segments, income population, growth by brand. It’s not done at an ADUSA level, it’s done at a brand level. That goes from pricing to private brand to assortment, all of those types of things. As a united company, we try to look across those things and say, “What are people doing that’s the same within the strategy that they want to execute?” Of course, what you’ll find is there’s a lot of things that are common to selling Tide or selling Clorox or those types of things. We try to take those things and try to maximize the benefit of that on behalf of all the brands.
So, it’s staying local, but leveraging our size and scale to be able to give a better cost for that brand. In some cases, we’ll take the unique differences of some of the brands. There’s a lot of examples, and we leverage it the opposite way. But where I think that we’ve really been able to accelerate local is when we’re giving brands things that they couldn’t have if they were on their own. If you look at what we’ve done with digital acceleration, e-commerce acceleration, there’s just no way that brands independently would be able to do that.
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In fact, if you look at a number of the independents that we compete with, albeit wonderful local players, they don’t have some of the capabilities that they’re going to need to be able to grow in the future, from my perspective. Now, they’re wonderful on the front lines and all those types of things. I love food retail, regardless of who it is.
Those are some of the ways that we start local. We try to maintain that presence. What we do in the U.S. in addition to that is we’ll say, “OK, we have this amount of capital, we have this amount of investment. How do we really take it and create real focus and growth in the areas that we could maximize to accelerate, so that when the opportunity comes for the next brand, that they have that opportunity, we can get and do the same for them?” So we run a portfolio as well.
PG: With regard to own brands, because that was a major focus of the presentations yesterday, it’s interesting when you think of own brands in the United States as compared with Europe, because for many years we were way behind in terms of penetration and customer perception of those kind of products. How have own brands grown at Ahold Delhaize stores in the United States, and why do you think that is? Also, are own brands marketed differently in the United States from in Europe, and how so? Or have we more or less caught up with Europe in terms of the consumer attitude toward private label?
JJF: If you look inside of the U.S., it’s one of our highest-growth areas. We’ve had 40 basis points of penetration growth just this year. There’s a lot of reasons for that. No. 1, I think we’re getting a lot better at it. As an organization, we focused in on the assortments that matter most to customers. We’re filling voids and categories where we didn’t have the right offering or we didn't have the right specification, or, in some cases, the packaging wasn’t as attractive as it needed to be. We really, really focused in on trying to fill those voids. With that being said, and being humble, we still have opportunities to do better at that, and that’s where we see upside from a marketing perspective. What we try to do, and what you’ll see us do even more of, is have private brand be at the center of the consideration set for consumers, whether you’re looking at an ad or whether you’re walking down an aisle, what level the products are, how they’re assorted, how they’re [merchandised], and those types of things.
What we’ve been able to do a lot more of recently is take brands like Nature’s Promise [or] Taste of Inspirations [and] we’ve been able to have own brands become something other than a price play or a value play. It’s become a premium; it’s become a differentiator. It’s become equal to or better than the national brand. I would be speculating a bit on the difference between the U.S. and Europe, but if you take a look at [Dutch grocery store chain] Albert Heijn as an example, they’ve had strategic partnerships in some of their categories for more than 50 years.
In the U.S., we’ve focused historically as a trade more on local suppliers and those types of things. Now we’re doing a mixture of local and really building long-term strategic relationships with own-brand suppliers. You’ll see us do more and more of that. Ninety-five percent of our baskets have an own-brand product in them today. Customers really like the categories; they like the innovation in the categories. I am excited about what we’ve done, but we have a lot of upside potential.
PG: Has your research uncovered any demographic differences? Are younger consumers less national brand loyal, or do you just see it across the board with American consumers being more accepting and more enthusiastic about private brands?
JFF: We see it across the board.
Read Part 2 of the interview (to be released on May 27) to find out how Fleeman is guiding Ahold Delhaize USA in the areas of diversity, sustainability and retail media.
