Ahold Q1: key strategies driving growth

Date : 01 June 2016

As Netherlands-based Ahold announces first quarter results showing total sales rose 4.3%, 3.5% at constant exchange rates, to €11.8 bn, we look at the numbers and the initiatives driving growth.

The numbers…

Ahold reported that total sales rose 4.3% to €11.8 bn with growth across all its markets. In the US total sales increased by 4.0%, 3.0% at constant exchange rates, in the Netherlands they were up by 4.9% and in the Czech Republic by 2.5%, 0.4% at constant exchange rates. The retailer said that the figures were driven by comparable sales growth across all three markets and ‘ a continued strong increase in online sales’.

The initiatives…

By country Ahold highlighted market specific developments that aided its performance, such as the addition of 25 A&P stores in the US, but why the retailer is winning at the moment can be focused on three key programmes:

Evolving the in-store offer: Ahold has been investing strongly in its in-store offer to appeal to new and existing shoppers, trialling new formats, such as bfresh in the US, and updating existing stores, such as its XL offer in the Netherlands. In the quarter the retailer said that in the US, its ‘solid performance’ was aided by ‘the rollout of… new bakery departments’, ‘further deployment across [its] Produce, Bakery and Dairy departments and had made improvements to its ‘Nature’s Promise brand to broaden [its] natural and organic offering’.

Meanwhile, elsewhere the retailer said that in the Netherlands it had launched a range of ‘new and innovative products… in various categories, including meat, fresh juices and bakery, while in the Czech Republic, it highlighted how ‘the implementation of [the] Favorite store concept in the larger former SPAR stores… has been well received by customers’.

Investing in price and promotions: Ahold has consistently highlighted the competitiveness of all the markets it operates in, which has required it to invest consistently in prices, while also running innovative promotions that drive footfall. By market this saw the retailer note that it had ‘initiated [its] latest round of price investments [in the US], lowering prices on over 1,000 items’, while in the Netherlands it said it had benefited from two collectable promotions: a cutlery collection campaign and a grow-your-own-garden promotion. Ahold said that the latter two campaigns had ‘resulted in more transactions and volume growth’.

Specifically in relation to Etos Ahold said it had launched its new loyalty card and app called ‘My Etos’. For shoppers, the ‘My Etos’ card combines personalised offers, advice and discounts ’with a healthy perk: a pedometer that motivates and rewards customers when they exercise’.

Building online scale: During the quarter Ahold said that it generated 4.7% of its net sales through its online stores. The retailer said online net sales rose 22.1% at constant exchange rates, and by 27.4% for net consumer sales, again at constant exchange rates. In the Netherlands, bol.com and ah.nl saw growth of ‘over 30% in net consumer sales during the quarter’, while in the US ‘Peapod reported double-digit sales growth, further expanding its customer base in New York City. Peapod’s strong sales growth was aided by the recent addition of a line of private label fresh meal kits, which it said it had delivered more than 100,000 of since their launch.