Ahold Delhaize to acquire FreshDirect in US

Harriet Cohen
Senior Retail Analyst
@RetailAnalysis

Date : 19 November 2020

As it increases its focus on the East Coast market and looks to build its shopper numbers in the New York City metro area, Ahold Delhaize, in conjunction with Centerbridge Partners, have entered into a definitive agreement to acquire FreshDirect, a pure play ecommerce retailer in New York City. The acquisition will help Ahold Delhaize to focus on markets where it has a strong store density and strong market share.

Financial terms of the deal were not disclosed and the acquisition is expected to complete in Q1 2021. Ahold Delhaize said the acquisition will see it acquire the majority share, while Centerbridge Partners will be a minority investor with a 20% stake. After the acquisition Ahold Delhaize has said FreshDirect will retain its name and continue to operate out of New York City.

Online has been growth driver for Ahold Delhaize in 2020

Driven by consumer demand as a result of the COVID-19 pandemic, Ahold Delhaize, in its Q3 results, reported online sales growth of 114.7% in the US, which followed growth of 126.8% in Q2. Similarly strong increases in ecommerce sales have been recorded by Walmart, where they rose 79% in its Q3 results, and Target, who reported digital comparable store sales had risen 155% in its third quarter. While the same pace of growth is not expected in 2021 it is clear that shopper demand for online will remain at a heightened level in the US after the pandemic versus previous forecasts.

Acquisition supports Ahold Delhaize’s recent strategic refocusing

As part of the retailer’s Q3 results, Ahold Delhaize set out its aim to become an industry-leading local omnichannel retailer. As part of this refocusing of its short to medium term strategic priorities, the retailer said it was aiming to ‘increase [its] online capacity by nearly 100% in the US’, advance the range of omnichannel offerings it provides shoppers and to continue to help shoppers make health choices. The acquisition of FreshDirect will help support all these aims.

FreshDirect to help grow scale and local and fresh focus

With sales of US$888m in 2019, which could double in 2020 because of shoppers’ strong shift to buying groceries online during the pandemic, FreshDirect will add scale to Ahold Delhaize’s online operations, which were estimated to generate sales of US$1.1 bn in 2019.

Meanwhile, FreshDirect’s focus on fresh products, which account for more than 60% of its sales, will help Ahold Delhaize as it looks to support its health-focused aims too. Finally, as Ahold Delhaize noted in its announcement of the acquisition, FreshDirect ‘differentiates itself with direct and exclusive relationships with local farmers coupled with unique meal solution capabilities’, which echoes Ahold Delhaize’s wider aims as well.