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Ahold Delhaize has released its Q4 results, reporting that net sales increased by 3.0% at constant exchange rates to €16.6bn. Meanwhile net sales for the full year increased by 2.5% at constant exchange rates to €62.8bn.

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IGD was invited to Ahold Delhaize’s Capital Markets Day in New York, where we heard directly from the retailer’s Management Board on its ‘Leading Together’ strategy. We also saw first-hand how it is ‘reimagining the Stop & Shop’ brand in Connecticut.

The key highlights we took away from the event were:

  • From ‘Better Together’ to ‘Leading Together’ strategy
  • Target to double net consumer online sales to €7bn to 2021
  • US online target of 30%+ growth by 2020 through Peapod
  • New micro fulfilment centre at Stop & Shop in partnership with Takeoff
  • European target to double ecommerce share of sales to 15%+ by 2021
  • Technology to focus on experience and efficiencies
  • Health and sustainability at the heart to 2025
  • Self-funded growth through ‘$1.8bn Save for Our Customers target 2019-2021’

Source: IGD Research. Shown left to right: Wouter Kolk, CEO of Ahold Delhaize Europe & Indonesia and CEO of Albert Heijn; Jeff Carr, CFO; Frans Muller, President and CEO; Kevin Holt, CEO Ahold Delhaize USA

President and CEO Frans Muller: from ‘Better Together’ to ‘Leading Together’

The event was opened by President and CEO Frans Muller, who began by sharing insights on what AholdDelhaize have achieved since the merger of Ahold and Delhaize, including sales and margin growth, as well as net synergies.

Moving forwards, he announced the introduction of Ahold Delhaize’s ‘Leading Together’ strategy, as the retailer aims to strengthen its position and gain market share. This new strategy focuses on four key accelerators, underpinned by people.

Source: Ahold Delhaize (p6)

1. Omnichannel growth - target to double net consumer online sales to €7bn to 2021

To deliver on this commitment, local brands will offer an omnichannel solution and share best practice across the business, despite different levels of development.

Stores remain vital, with Ahold Delhaize highlighting Food Lion’s 24 quarters of comparable sales growth, a turnaround at Delhaize Belgium, as well as Albert Heijn Hoofddorp being shortlisted for the IGD Store of the Year Award 2018.

Source: Ahold Delhaize (p18)

Elsewhere, Ahold Delhaize USA’s Stop & Shop brand has not performed as well as that of its other brands recently. This has resulted in the launch a new strategy, ‘Reimagining Stop & Shop’, which sees the brand refocus on the above five pillars. The concept has been piloted in Hartford, Connecticut, while Stop & Shop will roll out learnings to 400+ stores over the next five years.

Having seen the new concept as part of the Capital Markets Day, look out for our store visit report on Retail Analysis soon.

Meanwhile, omnichannel growth will also be supported by click and collect and home delivery expansion, as well as partnerships with technology companies. For example, this has seen the retailer partner with the Google Assistant. According to Muller, such partnerships offer a much broader proposition than what Ahold Delhaize can deliver alone.

Meal solutions will play an important role too, as Ahold Delhaize works on ‘increasing our share of stomach’. The retailer sees the following three tactics playng a key role:

US ambitions – online target of 30%+ growth by 2020

JJ Fleeman, recently appointed President of Peapod Digital Labs talked about its priorities going into 2019 and beyond as it looks to accelerate online growth. By 2020, Ahold Delhaize USA hopes to deliver online growth of 30%+, up from a 10% growth estimate for 2018.

This will be supported by Peapod powering Ahold Delhaize’s US brands, although the brands will be able to input to give their websites a local feel.

Other opportunities include the roll out of click and collect to 600 stores, as well as enhanced delivery options. By 2020, 65% of customers will be able to receive same day fulfilment, with this percentage being even higher in key metropolitan areas.

Selma Postma, General Manager of Albert Heijn online has been appointed as Brand President of Peapod in the US as Ahold Delhaize looks to drive the future growth of online in the US.

New micro fulfilment centre in partnership with Takeoff

Elsewhere, logistics investment will see the introduction of a new micro fulfilment centre at Stop & Shop. This has been developed in partnership with Takeoff and will be operational in January 2019.

As part of the Capital Markets Day, we were invited to see a preview of the solution in-store. This has seen a section carved off a Stop & Shop store in Connecticut, which will be used to fulfil online grocery orders in a predominantly automated way.

Source: IGD Research. Shown is Takeoff Chairman and CEO Jose Vicente Aguerravere presenting the new micro fulfilment centre at Stop & Shop

Through the partnership, Stop & Shop will be able to fulfil online orders, more efficiently than the in-store pick model, as well as offering a wider assortment for shoppers.

The Takeoff facility will carry 15,000 products, which represents 90% of the products sold online. Of the 15,000 products, around 12,000 will be fulfilled through Takeoff’s automated solution, while the remainder will be fulfilled through Takeoff’s manual handling area. A small number of products will be picked in-store.

At capacity, the Takeoff solution will be able to fulfil 4,000 orders weekly and offer delivery within one hour. Capex costs are lower than other providers, at around US$3-US$5m for the pilot facility.

Elsewhere in the US, last month Albertsons announced it would also partner with Takeoff for robotic ecommerce fulfilment.

Europe – goal to double European ecommerce share of sales to 15%+ by 2021

Wouter Kolk, CEO of Ahold Delhaize Europe & Indonesia and CEO of Albert Heijn shared an ambition to more than double Ahold Delhaize's European ecommerce share of sales to 15%+, from the 7% achieved in 2016.

This target includes both food and non-food sales and will supported by leveraging the retailer’s capabilities in western Europe, sharing best practice more widely.

IIn the Netherlands, the retailer forecasts sales at its online grocery business ah.nl to have increased to €600m in 2018, delivering a CAGR of 23% since 2016.

2. Technology – ‘enriching experiences’ and ‘increasing efficiencies’

The second key area of focus is on technology, with Ahold Delhaize continuing to focus on ‘enriching experiences’.

This will include personalised offers, optimised ranges and removing friction from the in-store experience. Ahold Delhaize has been innovating in the use of technology in-store, which has seen the roll out of its 'tap to go' payment system at AH to go convenience stores in the Netherlands, as well as experimentation in large stores too.

Meanwhile, ‘increasing efficiencies’, will see a focus on logistics, distribution centres and admin automation. This will include a new Albert Heijn mechanised distribution centre in early 2019.

‘Accelerating research in AI and Robotics’

In April this year, Ahold Delhaize announced the creation of its Artificial Intelligence (AI) laboratory AIRlab, which has opened at the University of Amsterdam Science Park.

The retailer will now scale its investment in this area further with a new partnership with Delft University of Technology (TU Delft) in the Netherlands.

This will see it comprise ‘a robotics research programme and test site for developing state-of-the-art innovations in the retail industry’. For instance, ‘scientists will study how employees can teach their robots to do repetitive tasks or develop methods to optimise the motion and coordination of mobile robots and of delivery vehicles’.

Meanwhile in the US, Peapod has created Peapod Digital Labs as it invests in digital, ecommerce, technology and experience. Similarly, this has seen the division bring in leading minds from universities like MIT and Harvard.

3. ‘Healthy & Sustainable’ – ‘improving health and driving sustainable consumption to 2025’

The third area of focus is around health and sustainability, both of which remain firmly on the agenda. From a health perspective, Ahold Delhaize will roll out nutritional guidance across all markets. In the US, it has adopted the ‘Guiding Stars’ programme earlier this year. Meanwhile, in Belgium, Delhaize became the first retailer to launch the government-backed ‘Nutri-Score’ food label.

Private label will pay an important role, with a commitment to make ‘own brand plastic packaging 100% recyclable, reusable, or compostable’. Meanwhile, US private label quality will be enhanced, with products using no artificial flavours, colours, preservatives, sweeteners, MSGs or high-fructose corn syrup.

4. ‘Portfolio & Scale efficiencies’ sees new ‘€1.8bn Save for Our Customers target for 2019-2021’

The fourth area of focus is on building a strong portfolio of brands that can be #1 or #2 in each local market. This and market share growth will be supported by a ‘€1.8bn Save for Our customers target for 2019-2021’.

Source: Ahold Delhaize (p31)

To keep up to date with the latest developments at Ahold Delhaize and other leading global grocery retailers, sign up for IGD’s free Retail Analysis international newsletter.

We were so impressed with Albert Heijn’s new concept supermarket that it's been shortlisted for the 'IGD Store of the Year Award' at the IGD Awards 2018. Find out about what makes this store special, including its focus on fresh execution and digital integration.

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Ahold Delhaize has reported its 2018 Q3 results, with net sales increasing by 3.6% at constant exchange rates to €15.8bn. Net income also increased by 26.7% at constant exchange rates to €459m.

USA: +3.2% to €9.6bn

In the USA, net sales increased by 3.2% at constant exchange rates to €9.6bn, while comparable sales (excluding gas) increased by 3%.

…partially impacted by Hurricane Florence

It is estimated that Hurricane Florence had a 0.5% impact on comparable sales growth, resulting in an adjusted growth of 2.5%. Hurricane Florence also partly offset the underlying operating margin in the country. However, this still increased by 0.2% versus the same period last year, partly driven by improved promotional efficiency.

Highlights: Stop & Shop and Food Lion remodels, meat processing and online

During this period Stop & Shop implemented the first phase of its repositioning strategy by remodelling its stores in Hartford, Connecticut.

Food Lion continued to roll out its ‘Easy, Fresh and Affordable’ strategy to a total of 712 out of 1,029 stores. The latest phase of the rollout included 168 stores in Virginia’s Norfolk and greater Roanoke. The banner also expanded its ‘Food Lion To-Go’ collection service in North Carolina and Virginia.

The retailer’s Retail Business Services division has also announced plans to build a 200,000 sq. m meat processing facility. The project will account for over US$100m of investment and create over 700 jobs in Rhode Island.

Elsewhere, online sales in the country rose by 11.8% at constant exchange rates to €185m. This was partially attributed to Peapod as it experienced improving sales trends.

As Peapod appoints Selma Postma as president…

In related news, Peapod has appointed Selma Postma as its president, effective 1 January 2019.

Postma previously served as general manager of Albert Heijn Online where she helped “to accelerate online sales to more than 20% annually”. Her leadership helped the company evolve into a omnichannel retailer, with a press release highlighting the optimization of ah.nl, as well as the Appie mobile app and other solutions.

Peapod is “confident her expertise will accelerate the ecommerce experience for Peapod customers and continue to grow sales”.

Netherlands: growth of 5.8% to €3.5bn

Meanwhile, in the Netherlands, net sales increased by 5.8% to €3.5bn, while comparable sales increased by 5.9%.

Highlights: checkout free stores, blockchain and online

Albert Heijn to go opened its first checkout free stores, allowing customers to pay at the shelves and avoid waiting in line. The retailer has also used blockchain technology to improve transparency.
 

Source: Ahold Delhaize

Bol.com and Albert Heijn saw positive growth with net consumer online sales increasing by 33.2%. The two online websites also offered a streamlined service by combining online initiatives.

Belgium: growth of 1% to €1.3bn

In neighbouring Belgium, net sales increased by 1.0% to €1.3bn, while comparable sales increased by 0.6%. Online sales increased by 18% during this period too.

Highlights: Nutri-Score food label and store remodelling

Delhaize introduced the Nutri-Score food label to help customers understand nutritional information more easily. The retailer hopes to introduce the label to all private label products within two years. Delhaize also remodelled five of its stores to a new concept, which includes the ‘Fresh Atelier’ food-to-go concept.

Source: IGD Research

In Central and Southeastern Europe, net sales increased by 3% at constant exchange rates to €1.5bn. The retailer attributed this to comparable sales growth of 0.6% and the addition of 123 stores, most of which were convenience stores. Romania and the Czech Republic also reported strong growth.

In the Czech Republic, a new urban supermarket concept was developed featuring fresh, healthy foods and an easy shopping experience.

…while Greek performance remained negative

Meanwhile at a regional level, sales were impacted by Greece’s negative comparable sales performance. However, sales trends did improve compared with Q2 2018.

CEO Frans Muller: “strength of our great local brands

Frans Muller, CEO of Ahold Delhaize, commented, “We are pleased with these results, demonstrating the strength of our great local brands, which is underpinned by their leading market positions. We are proud of the strong engagement of our 370,000 associates serving local communities and especially those that were affected by natural disasters”.

Wouter Kolk steps into his role as CEO of Ahold Delhaize Europe and Indonesia three months early, while Delhaize Belgium has announced its new executive committee.

Wouter Kolk becomes CEO of Europe and Indonesia

Wouter Kolk has started his new role as CEO of Ahold Delhaize Europe and Indonesia. Kolk has stepped into the role three months early. The retailer said his early appointment is to enable it ‘to fully capture the growth opportunities we have in Europe’.

Kolk will be responsible for supporting the company’s local brands, delivering new strategies for Europe and developing digital, ecommerce and purchasing initiatives. He will work with a small team comprising a financial director, HR director and a director of strategy. The positions are in the process of being filled.

Executive committee reshuffle in Belgium

Delhaize Belgium, meanwhile, has separately announced several changes to its executive committee.

From 1 January 2019, the committee will be made up of the following people:

  • Xavier Piesvaux – CEO Delhaize
  • Dieter De Waegeneer – Executive Vice President Operations. This new function combines the responsibilities for both corporately-owned and affiliated stores, distribution centres and supply chain
  • Françoise Burlet – Executive Vice President Commerce. This will see her take responsibility for product, marketing, quality and store concepts
  • Thierry De Vleeschouwer – CIO Belgium & Central and South-Eastern Europe 
  • Siger Spaans – Senior Vice President Finance
  • Els Steen – Senior Vice President Legal Belgium & Central and South Eastern Europe 
  • Illya Van den Borre will be the new Senior Vice President Human Resources & Corporate Affairs

 

As part of the changes, Delhaize said the following members would be leaving the company:

  • Marc Debussche, who has decided to retire on 31 December 2018 from his role as Executive Vice President for product, marketing, quality and store concepts.
  • Kris Van Strydonck, Senior Vice President Strategy for Network Development & Ecommerce. Kris will leave the company on 30 November 2018

 

Commenting on the changes, Delhaize’s CEO, Xavier Piesvaux, said, "With these changes Delhaize wishes to speed up the execution of its renewed commercial strategy. We anticipate further evolution in retail and place our customers and employees more than ever at the centre of our organisation.”

Changes come at key time for Ahold Delhaize in Europe

Ahold Delhaize’s H1 results showed the retailer was performing well across Europe, with its operations in Belgium continuing to show a positive upturn, with net sales increasing 3.4% and comparable sales up by 2.7%. Delhaize has also just launched a new store design, which focuses on shoppers’ expectations and needs. Embedding these changes and sustaining growth will be important, especially as speculation builds about Netherlands-based Jumbo’s potential entrance in 2019, and price pressure from Colruyt is maintained.

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