MMR/September 11, 2017 9

News Delivers on Better Together Strategy By Jeffrey Woldt people are very focused on the company is currently focused on which included lowering prices, businesses of the brands and are completing the transition process hiring new associates and giving , — A not distracted by all the integra- of its U.S. operations. back to the community, as well year after the merger that brought tion work,” says , “We’re setting up the Ahold USA as the store upgrades, is part of Ahold Delhaize into being, the Ahold Delhaize’s deputy chief brands in a different form and a multiyear project designed to company shows every sign of de- executive officer and chief inte- fashion than we had before. We make “easy, fresh and livering on the promise that led gration officer. “That is one of the are building a new, brand-centric affordable.” to the deal. Strong second quar- reasons why our brands are doing model, a project that will be final- “Food Lion is investing $1.5 mil- ter results, released last month, well. ized by the beginning of 2018. We lion per store and has a highly dis- reflect an organization that is ef- “Another thing that has helped also have created Business ciplined approach to implemen- fectively leveraging its newfound sales performance is that if we Services (RBS). RBS provides sup- tation,” says Muller. The initiative scale to operate more efficiently, look at the U.S. market we see port services to Ahold USA and was started prior to the merger, develop synergies and capital- some inflation coming back to the Delhaize America local brands,” when he was CEO of Delhaize. ize on best practices among its table, which of course has a posi- he says. “The changes are going “Food Lion still has the original 21 retail banners in 11 countries tive effect for the top line. We also to do a lot for the U.S. brands. plan of achieving its targeted around the world. have the first good results on our The main drivers are how do we sales growth in three years’ time. Net sales for the combined com- synergy delivery, which gave us make sure that we have a service “In the fourth quarter, Food pany soared 67.3% in the quarter results in the second quarter of 30 organization that is combining Lion will relaunch 71 remodeled Frans Muller to 16.1 billion , while the bot- basis points more in the underly- scale and expertise for the great stores in Richmond [Va.] and will tom line rose 68.2% to 355 million ing margin.” local brands along the East Coast. have invested $800 million by us. But our businesses have com- euros. Pro forma results were solid As with most major mergers, One example is sourcing. In many then. Food Lion is completely in peted successfully for a long time — sales by that measure increased synergy savings are an important instances, it makes sense for the line with its projections. Inflation — in both Europe and the U.S. 3.4%, and underlying operating in- part of the equation. Muller and U.S. brands to choose to combine is a little bit different now than it “ has made a lot of noise come advanced 11.4%. Underlying Ahold Delhaize chief executive volumes to get better prices or was three years ago, but if we look in the U.S. market. Every new operating margin increased 3.9% officer expect the com- better quality or better specs for at real-volume growth, then Food competitive opening gives our on a pro forma basis, compared to pany to produce 750 million euros the same amount of money.” Lion is completely on target.” customers another choice, but I 3.6% in the same period a year ago. in synergies by 2019, 250 million Similar benefits for the brands is The program has touched more think our brands have found the That performance gives man- euros of which will be reinvested expected from the reorganization than 50% of Food Lion stores in right recipe. For example, if you agement confidence that, guided in the retailer’s brands, which in of RBS shared service functions in need of renovation. The remain- go to a Food Lion you see the new by its Better Together strategy, the U.S. include Stop & Shop, Gi- such areas as information technol- der will be addressed within the center store, organics, the bak- Ahold Delhaize is on track to so- ant, Martin’s Food Markets, Food ogy, the development and deploy- next two to three years, a commit- ery, the deli. You see the service lidify and enhance its position as Lion, Hannaford and . ment of digital capabilities, pri- ment that will account for a sig- components. You see our produce one of the world’s leading food re- Muller reports that much of the vate label programs, and a broad nificant portion of the $1 billion a and meat areas. It’s just a differ- tailers. That ambition extends to work of integrating Ahold and range of not-for-resale products year that Ahold Delhaize invests ent proposition. At the same time, expanding its already formidable Delhaize has been completed. and services. The synergy savings in the U.S. market. Improvements our brands have to make sure presence in the hypercompetitive Headquarters operations in Bel- generated by those initiatives will, are also under way at Ahold USA they measure pricing very care- U.S. market. gium and the Netherlands have in turn, pave the way for acceler- brands’ stores. fully with our top 280 SKUs. The “The results of this quarter are been combined, as has the sup- ated investment in the brands. “The Ahold USA brands worked brands will not give customers a mainly thanks to the fact that our port organization in Europe. The “The money will be used in very hard in the last years on the reason to switch, and that’s why both Europe and the U.S.,” says fresh offerings, the meat, the pro- they are always very alert.” Muller. “There are several things duce and the bakery, and a lot has If Ahold Delhaize’s business- we are going to do. For example, been done. But in this dynamic es’ ability to compete with the stepping up our marketing ef- market there is still a lot of ambi- likes of Lidl, Aldi and Walmart forts for omnichannel; price in- tion to improve the shopping ex- is reassuring to Muller and his vestments where needed; data perience,” Muller says. “Now they colleagues, so, paradoxically, is analytics, artificial intelligence see some opportunities in devel- Amazon’s stepped-up activity in and robotics; and supporting oping private label, reconfiguring the grocery sector. our brands in delivering a better the center store and revamping “What does Amazon’s acquisi- store experience.” our loyalty systems. tion of Whole Foods tell us?” he If the company’s recent track “With Stop & Shop and the Gi- says. “It tells us that there are record is any indication, those ant brands, they’ve already made more parties in the market who investments should go a long way progress on pricing and price think that omnichannel — a store toward moving the businesses perception. They’ve introduced network combined with a digital forward. New evidence of Ahold the Wow program to Stop & Shop, online environment — might be Delhaize’s skill in deploying as- with stronger promotions with the strongest way forward. It tells sets emerged earlier this summer more convincing communication us that things go faster and are when Food Lion, which operates on price at the shelf, as well as more disruptive than we might about 1,000 in 10 making more investments in or- have thought. It tells us also that southeastern and Mid-Atlantic ganic ranges, fresh baked goods with Ahold Delhaize’s businesses’ states, completed the renovation and meal solutions.” No. 1 and No. 2 market positions of 93 locations in the Greensboro, The U.S. businesses of Ahold in brick-and-mortar food stores Ahold USA’s Giant chain has made progress on price perception N.C., market. The store remodels, Delhaize have chosen a propi- along the East Coast, plus all the tious moment to elevate their of- store pickup solutions they offer ferings in the United States. Al- and Peapod still being the leader ready heated competition among in online grocery in the U.S., that grocers and other food retailers our businesses already have a lot has intensified with the entry of of ingredients that are needed to Lidl; the announcement of a ma- be successful with an omnichan- jor capital investment plan by nel strategy. Aldi; the completion of Amazon’s “It’s creating a momentum in the acquisition of Whole Foods Mar- market, and for our businesses it’s ket; and the new partnership be- creating an acceleration of their tween Walmart and Google to fa- plans, within the framework of the cilitate voice-activated shopping. Better Together strategy. It makes Despite the challenges, Muller it easier for investors to see why remains confident. “We see the we would like to speed things up competition coming, of course, and intensify efforts in areas like especially in the southern part of digital, loyalty programs and the the U.S. and on the East Coast,” store experience. We’re quite con- he says. “The new developments, fident that we had the right direc- together with the presence of tion, but nobody can tell me that Walmart, the biggest discounter in this is routine and just another the world, Aldi, the second-biggest boring moment. It gives our busi- discounter in the U.S., and thou- nesses extra energy to accelerate Hannaford, like other Ahold Delhaize banners, puts a premium on fresh categories, including seafood sands of dollar stores, don’t help what they are doing.”