Ahold Delhaize’s Strategy Focuses on Acting Locally, Thinking Globally
At its comprehensive Investor Day virtual event on Nov. 15, international retail conglomerate Ahold Delhaize had plenty of lofty goals and solid achievements to share. The Zaandam, Netherlands-based company, which has a presence across Europe, in Indonesia, and on the East Coast of United States, operating a total of 19 local “brands,” or banners, noted that it planned to add 10 billion euros in sales growth and reach fully allocated e-commerce profitability by 2025, having raised its cap ex spend and financial guidance accordingly.
At the event, Ahold Delhaize President and CEO Frans Muller laid out the company’s chief objectives: “Between now and 2025, we have four big priorities we are doubling down on for the next four years: Serve our customers through deeper digital relationships, accelerate our omnichannel transformation and continue to be the best local operator, lead the transformation into a healthy and sustainable food system, and create a one-stop shop for smarter customer journeys. These priorities tie straight to our vision to create a leading local food-shopping experience.”
As far as what it’s already accomplished, in all of the countries where it operates, Ahold Delhaize brands are No. 1 or No. 2 in their respective markets, while in the United States, the company has reached the 65% mark in its supply chain transformation to self-distribution, a move that will give it full control of its supply chain and an optimized network at scale. The transformation is slated to wrap up in April 2024, with 26 facilities in the integrated self-distribution network.
“We’ve been in the business of serving customers for more than 150 years and have a long track record of always delivering for our key stakeholders,” asserted Muller at the Investor Day event. “This has been the case in both good times and in bad.”
What accounts for this stunning success in an often precarious industry? Muller credited “a strong operating model with our leading local brands, supported by service brands who operate at scale and that leverage their best capabilities globally.”
This advantage is brought home by Ahold Delhaize USA CEO Kevin Holt, who discusses the company’s inner workings and expectations, here and abroad, with Progressive Grocer.
“Actually, that’s a really important value point that we have between our operations in Europe and our operations in the U.S.,” affirms Holt, using Selma Postma, chief digital officer, Ahold Delhaize Europe and Indonesia, as a prime example. “Selma actually is in the Netherlands, and she now runs the digital practice for Europe, but we had her in the U.S. for two years and she ran [e-commerce division] Peapod for us, and then we had her at Stop & Shop. So we basically take that executive learning and have allowed that experience set so that when Selma goes back, she’s in a better place.”
Local Brands
In the United States, Ahold Delhaize currently has eight companies, each with their own distinct histories and characters:
Food Lion Salisbury, N.C.: established 1957, 1,029 stores, 404 pickup points
FreshDirect Bronx, N.Y.: established 2002, e-grocer
The Giant Co. Carlisle, Pa.: established 1923, 186 stores, 159 pickup points
Giant Food Landover, Md.: established 1936, 164 stores, 144 pickup points
Hannaford Scarborough, Maine: established 1883, 183 stores, 102 pickup points
The Stop & Shop Supermarket Co. Quincy, Mass.: established 1914, 408 stores, 319 pickup points
Peapod Digital Labs Chicago: established 1989, e-commerce engine of Ahold Delhaize USA
Retail Business Services offices in Quincy, Salisbury, Carlisle and Scarborough: established 2017, shared services company of Ahold Delhaize USA
Of course, that information exchange doesn’t end there. “We continue to look at how do we build that experience set and exposure for our executives in order to get more well rounded in the global view of what we’re trying to do,” explains Holt. “We also have picked some key areas that we think are important, and one example of that would be automation. From an automation point of view, we’re both moving more and more towards automation and everything that we do from our supply chain. We’re also looking at micro-fulfillment centers, or what we call home shopping centers.”
Beyond sharing executive expertise across brands and continents, Ahold Delhaize strives to make use of that mastery in a meaningful, practical way. “What can we do together to … have the very best experience set around what’s working, what’s not working?” muses Holt. “How do we build our three- to five-year plans? How do we then work with vendors on a global level, from global contracting [to] how we would do those kinds of things? Then, how do we share best practices and trends against what’s happening across the globe? This is how we actually apply that to some of these key areas that are really important to us, where we think there’s a great deal of synergy. That’s possible both from a capability side as well as from a learnings point of view.”
Holt brings up a further advantage of this way of working: easy access to proprietary technology and other processes. “If you think about our machine learning and all of our AI intelligence-type work, we’ve built a common platform,” he points out. “So, if we build an algorithm in the U.S., that algorithm is published and it’s available to our folks in Europe, and vice versa. That’s been very successful for us in terms of being able to share the data science side of the business that we’re also working with as we think about things like personalization and a lot of other areas, insights and the kinds of things that we’re talking about, the media platforms that we’re talking about building, and how we would move forward with those.”
One area in particular where the company’s European operations have proved beneficial to the U.S. brands is sustainability. “We wouldn’t, I don’t think, be there if it wasn’t for our European colleagues, because they’re ahead of us on that,” notes Holt. “So we’ve learned just a great deal from them that we can actually apply in the U.S. around everything from plastics to clean label, to all of these things that are just incredibly important to us and we believe will be very important to our consumers. This is why we brought HowGood in for looking at sustainability by item. This is why we have our Guiding Stars [nutrition guidance program] that you can actually use to navigate, and we built that into our digital sites as well.”
He sums up the ability to draw on Ahold Delhaize’s international know-how as “a great opportunity for us and … an area where I think it’s that quiet competitive advantage that we have.”
Domestic Doings
Meanwhile, in the United States, the rollout of rebranded Stop & Shop stores has hit something of a snag. “We’re still committed to the remodel program for Stop & Shop,” says Holt. “With COVID, it actually impacted us a great deal in our ability to stay on path with the number of stores that we wanted to do. So we had to retract that in order for us to be able to do that, because the permitting, all of those things, and in a lot of those larger markets, it can become pretty difficult with everybody remote and things slowing down as municipalities … are really focused on their COVID response. … Then, being able to get the contractors in, having people work and that kind of thing, shut us down, too.”
Despite the delays, the company was able to focus on other elements, among them continuing to refine assortment builds in terms of modernization, depth and breadth; the current categories that are most important; and how to avoid out-of-stocks in those categories to ensure that customers get the items that they want.
“There’s a great deal of learning we’ve been able to pick up, and that’s all being applied then to the remodels as we go forward,” observes Holt. “But our intention is to continue to do the remodels. We’re looking at 50 to 60 remodels a year, [and] we’re at about 150.”
Over at sister banner Giant Food, a new digital marketplace, Ship2Me, is making its debut. The solution, according to Holt, “sits on the platform of Prism, which is our commerce platform, and its intention is for us to be able to offer an extended aisle. That extended aisle is made up of goods and services that will be important to consumers in their local communities around the needs that they have. An easy example … would be baby, pet, those kinds of things, where there are a great deal of assortments we could offer that we wouldn’t carry at the main store. So those assortments will be available, and for those consumers who have pets or have babies, they would be able to really benefit from that. As we build out our personalization, we would have that relationship with that consumer that would allow us then to curate those assortments uniquely for them, so that when you go to your homepage on whatever type of device that you have, it would … basically then curate for you the kinds of things that would be important to you for your shopping experience.”
Asked what future plans for Ship2Me entail, Holt replies: “Longer term, we also see adding into it services of local operators and potentially looking at partnerships and those kinds of things. Also, featuring some of our local growers and that kind of thing with products and so on that they might build that are unique to them that we could actually fulfill, and we might not carry all of those in our store. So that’s the idea behind how we’re thinking about that. We will be taking that across all of the Prism brands. So, as we roll Prism out everywhere, we will have the extended aisle available to all of them.”
Still, that solution would be tailored to each brand. “Our entire strategy has been built on, and continues to be built on, the idea of being uniquely local in the neighborhoods that we serve and being able to really resonate the attributes of our brands,” emphasizes Holt. “That’s why we’ve kept our brands all independent. We haven’t put the same name across them all, because we really believe they’re uniquely different. At the same time, we’re trying to build that scale and leverage on the platform level in order to be able to get the investments that we can do through value unlocks, and so we’re well on our way to achieving that.”
Still Growing
Formed by the momentous merger of two Europe-based retail conglomerates in 2016, Ahold Delhaize is known for such recent high-profile acquisitions as pure-play e-grocer FreshDirect in early 2021, and 62 former Bi-Lo and Harveys stores from Southeastern Grocers last year. Talking about the company’s future expansion prospects in regard to new markets, Holt says: “We’re always looking to say, ‘Are there white spaces where we should be building stores or acquiring stores that we can actually put into our format?’ So that’s something that we continue to look at where it makes sense. There are opportunities like that occasionally that we get in some of the northeastern areas, and when we have those, usually that’s through acquisition. It’s once in a while that we’ll find a new store location that’s kind of a white space for us, and we’ve taken advantage of those, [as with] Giant Co.’s recently opened [urban flagship] store [in Philadelphia]. So that’s how we’ve been approaching this in terms of our growth.”
As for Ahold Delhaize’s favorite way of going to market, he’s unequivocal in his answer: “Onmichannel. ... It’ll be all grounded in digital, and that digital experience will be from outside of store, pre-shop, to shop to post-shop. It doesn’t matter what channel they want to use for that. So, if you’re on your digital device and you come into the store, we would switch over to in-store mode, and so as you’re walking in the store and so on, we’d be able to continue to tell you, ‘Here are some items. Oh, you went past that. This item is something you normally buy.’ … Our preferred method of growth is to have that available to the populations that we serve.”
In imagining the future of grocery shopping, Holt sees more of the same, pointing to such factors as personalization and the digital experience growing ever more important, with brick-and-mortar stores existing alongside a greater number of fulfillment centers.
“I’ve been in the industry for a long time, and our industry’s always been an iterative industry and it’s always been low-margin and it probably will continue that way,” he observes. “So we’ve always had to be really good day-to-day operators. But I think as we look at the omnichannel environment we have today, and we look at all the different possibilities around how consumers have changed and the technologies that enable the future, there’s just an enormous number of opportunities ahead of us.”
