Omnichannel growth. That was the overriding theme of the Ahold Delhaize (AD) Investor Day meeting held virtually on November 15. The meeting was originally scheduled as a live event to be held in New York City.
Headlined by AD chief executive Frans Muller, a group of speakers – including Ahold Delhaize USA executives Kevin Holt, CEO of the U.S.; JJ Fleeman, president and chief e-commerce officer of Peapod Digital Labs; Chris Lewis, president of ADUSA supply chain; Meg Ham, president of Food Lion; Nicholas Bertram, president of The Giant Company; and Gordon Reid, president of Stop & Shop – told investors and the media that it has robust growth plans over the next four years.
“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 the one-stop shop for smarter customer journeys. These priorities tie straight into our vision to create the leading local food shopping experience. Leading, at the very least, means being the number one grocery brand in all the markets we serve,” Muller said from his home base of Zaandam, The Netherlands.
During the nearly four-hour meeting, Muller noted that he expects the international retailer to add another $11 billion in sales by 2025. Moreover, the 61 year old chief executive who has been at the helm of Ahold Delhaize since 2018 predicted that online sales will double by 2025 and that the retailer’s e-commerce business will be profitable by then, too.
Part of the reason Muller expects e-commerce revenue to increase significantly is AD’s targeting of urban markets where it already maintains a strong brick and mortar share that will be enhanced by major e-commerce investment. He cited Philadelphia and metro New York as examples of those potential opportunities.
“As we look throughout our portfolio, the new urban centers are critical points of influence for customers. They drive cultural influence for the surrounding area to drive commerce, and they are the focal points for busy customers’ lives. With our proven model from Europe, we have the unique opportunity to win in these urban markets. The plan we have just executed to win in Philadelphia is a first export of this to the U.S. Those learnings will now be taken to drive a clear win in New York’s strategy, creating an ecosystem encompassing Stop & Shop, FreshDirect and their partners to offer a unique proposition,” Muller stated.
In the Philadelphia area, The Giant Company (TGC) has added more stores and gained market share in recent years. However, in the past two years it has really ramped up its efforts in Center City by adding four hyperlocal Heirloom Markets and earlier this year debuting its first supermarket on 23rd & Arch Street. Upcoming in the near future are another Heirloom Market (South Street) and three other conventional Giant supermarkets (Broad & Washington; Columbus Boulevard; and N. Broad & Spring Garden). Earlier this month, TGC opened another store on Cottman Avenue in Northeast Philadelphia.
To complement its brick and mortar growth, TGC this month debuted its automated 124,000 square foot e-commerce fulfillment center on Island Avenue in Southwest Philly to serve its giant Direct online customers. The new facility allows the retailer to be 57 percent more productive than at its other manual “pick” warehouses. And along with same-day delivery and rapid delivery options, the new fulfillment depot will allow TGC to deliver groceries to eight South Jersey towns, a first in the company’s 98-year history. In his presentation, Nick Bertram, who was accompanied by Glennis Harris, the company’s senior VP of customer experience, termed Philadelphia, “our first true omnichannel market.”
During his talk, Gordon Reid, who was named Stop & Shop president in 2019 after a six-year stint with sister retailer Giant Food, noted the importance of creating a stronger omnichannel presence in metro New York with his own stores and the recent acquisition (January 2021) of large online pure play FreshDirect. He also briefed the virtual audience on the progress made by Stop &Shop since 2018. Of Stoppie’s 406 supermarkets in New England and metro New York, 120 units have been remodeled. Those refurbished stores have yielded an annual sales increase of 6 percent. Other keys to Ahold Delhaize USA’s largest brand are its focus on fresh, its improvement in assortment optimization and its ability to upgrade its target marketing.
In his presentation, Kevin Holt spoke of the importance of the “connected customer.”
“Let me describe to you what we mean by a connected customer,” Holt noted. “Our customers’ lives are constantly in motion. They’re looking for convenient and personalized solutions to save time in their day so that they can enjoy the moments that matter. Our strategy is built on providing relevant omnichannel solutions so our customers can enjoy the moments that matter in their lives. Our strategy is resonating. Over the last two years, we’ve seen significant digital growth across all segments of our customer base. In fact, we’ve seen our digitally engaged customers grow by 56 percent in the last two years.”
The other U.S.-based division president to appear was Meg Ham, who has been president of Food Lion since 2014. According to her boss, Muller, Food Lion has been the most productive of all of ADUSA’s brands for several years and Ham detailed several reasons why. The Salisbury, NC-based merchant, which has now produced 36 consecutive quarters of same store sales increases, began its transformational journey a decade ago when it established its “Easy, Fresh & Affordable’ remodeling program, an effort that involved upgrading more than 1,100 Food Lion stores from Georgia to Pennsylvania. Ham credited her company’s investment in people and its evolving improvement in ecommerce as critical reasons for its turnaround and ultimate long-term success.
JJ Fleeman and Selma Postma, chief digital officer for Ahold Delhaize Europe & Indonesia, gave a joint presentation about Ahold Delhaize’s ability to unleash the power of data to serve its customers through deeper digital relationships. Fleeman predicted that Ahold Delhaize would be able to generate an additional 1 billion euros ($1.13 billion) by 2025. Fleeman said by leveraging its digital assets, AD would be able to grow its digital media advertising, create a growing revenue stream by selling its data insights and creating new digital revenue streams to produce financial growth.
Addressing ADUSA’s decision to shift to a fully integrated self-distribution network by the end of 2023, the veteran supply chain executive provided a progress update. It has already reached its 2021 target of transforming 65 percent of its center volume to self-managed supply and is on target to reach the 85 percent level by the end of next year. The massive $450 million project was first announced in December 2019. Included in the network are 25 warehouses and food processing facilities, 28 e-commerce fulfillment centers, and more than 1,500 click-and-collect locations.
“As we expand, we’re deploying key technology capabilities to optimize the supply chain. At scale, we’ll have a fully deployed transportation management system, which is driving efficiency across the network, reducing overall miles on the road and getting product to stores and e-commerce centers faster,” Lewis explained.
Other highlights of the meeting included the announcement that AD will explore the possibility of a sub-IPO for bol.com, the company’s e-commerce general marketplace. If that were to happen, Ahold Delhaize said it would remain as a large shareholder.
A few days before its Investor Day event, Ahold Delhaize released its third quarter earnings.
At its U.S. properties (supermarkets and online), overall sales grew 6.8 percent compared to Q3 in 2020, and comp store revenue (ex-fuel) increased 2.9 percent. On a two-year comparable sales stack basis, growth was 15.3 percent, similar to the 15.8 percent growth for the full year 2020.
Online sales in the segment were up 52.9 percent, driven by the continued expansion of click-and-collect facilities and the FreshDirect acquisition. Excluding the FreshDirect acquisition, U.S. online sales grew 26.2 percent in constant currency, building on top of the significant 114.7 percent growth in the same quarter last year. Underlying operating margin in the U.S. was 4.8 percent, down 0.2 percentage points at constant exchange rates from the prior year period, which had benefited from unusually low shrink levels and favorable sales mix owing to a surge in demand related to COVID-19.
“Our Q3 results once again showed the resilience of our business model, with our brands building further on 2020’s COVID-19-related sales gains, as various societies across our markets reopened in the quarter. During these ever-changing times, we remain proud of the significant efforts of associates in all our brands and businesses, who continue to tirelessly serve our communities. In Europe and the United States, our businesses faced additional disruptions in Q3 related to the Belgian floods, tornadoes in the Czech Republic, fires in Greece and Hurricane Ida in the U.S. We would like to send a special thank you to the affected associates for their continued dedication to their communities during these difficult times, and for truly living our core values,” said Muller. “We continue to focus on making additional investments to meet associate, customer and community needs and remain on track to deliver on our pledge to contribute 20 million euros ($22.6 million) million in charitable donations, spread evenly between the U.S. and Europe, during 2021. We also continued to support COVID-19-related health and safety measures, which remain a top priority; we invested 66 million euros ($74.8 million) in these measures in Q3. The pandemic has shown us the importance of maintaining food and product supplies to local communities – a vital role that we remain focused on fulfilling, together with our brands and suppliers. Q3 Group net sales of 18.5 billion euros ($21 billion) remained elevated; this was exemplified by the U.S. segment, where comparable sales excluding gasoline grew 2 percent on top of last year’s double-digit growth. Many consumer habits formed during the COVID-19 pandemic favoring food-at-home consumption and a focus on healthier eating are proving resilient, and we continue to make significant investments to address these trends. We continue to solidify our position as an industry-leading local omnichannel retailer by executing our strategy to improve supply chain, advance omnichannel offerings, and enhance omnichannel productivity.”
Additionally, Ahold Delhaize raised its annual cap-ex level, increasing it from 3 percent to 3.5 percent of sales.
