Ahold Sustainability Report
2004
P.O. Box 3050 1500 HB Zaandam The Netherlands
Telephone: +31 75 659 91 11 Fax: +31 75 659 83 50
Zaandam Trade Register No. 35000363 www.ahold.com Brands of our group
For more information:
Ahold Sustainability Telephone: +31 75 659 57 25 Fax: +31 75 659 84 05 E-mail: [email protected]
P.O. Box 3050 1500 HB Zaandam The Netherlands
Telephone: +31 75 659 91 11 With over 200,000 associates and 2004 consolidated net Fax: +31 75 659 83 50 sales of approximately EUR 52 billion, we are one of the Zaandam Trade Register No. 35000363 Design & Realization: Dart Design, Amsterdam world’s leading food providers. Printed by: Hollandia Printing, Heerhugowaard
www.ahold.com Ahold Delivering value, driven by values
Ahold encompasses an international group of local food retail and foodservice operators that do business under their own brand names. Each week our Company meets the needs of millions of customers, primarily in the United States and Europe. With over 200,000 associates and 2004 consolidated net sales of approximately EUR 52 billion, we are one of the leading food providers in the United States and the most prominent food retailer in the Netherlands.
We act for our customers Our customers have been our lifeblood for the last 118 years. We endeavor to earn our customers’ loyalty by delivering value and creating the best overall place to shop. We strive to make every day a little easier for our customers, bringing them interesting and innovative shopping experiences. We are actively engaged in helping the communities we serve.
We value our diversity We value the richness of our diversity and respect one another for who we are, how we think and what we contribute. We are committed to developing our associates. We place a high priority on open, honest communication with all of our stakeholders.
We have a passion for our business We love being in the food business. We love satisfying our customers’ daily needs. We cooperate to leverage our capabilities, our scale, our strength and our knowledge. We use our know-how to differentiate ourselves and create what we believe is an outstanding customer experience. We are never satisfied in our search for excellence and customer convenience: easy in, easy shop, easy out.
3313334_BW_06.indd13334_BW_06.indd 1 005-05-20055-05-2005 10:25:4210:25:42 Message from Anders Moberg Dear Stakeholder, As a food retailer and foodservice company, Ahold plays a part in the everyday lives of our customers and other stakeholders. We stay as close to our customers as we can, and therefore want to remain at the forefront of issues that impact society and the communities in which they live.
“ We are on a journey – to strengthen our company, to get closer to our customers and to further develop our approach to sustainability.”
3313334_BW_06.indd13334_BW_06.indd 2 005-05-20055-05-2005 10:25:4510:25:45 Message from Anders Moberg Ahold Sustainability Report 2004 3
Global developments in recent decades have raised sustainability to be fully integrated into the way we do awareness of the responsibilities of companies to a whole business, not just organized around reporting. In this new level – from a narrow focus on the environment to the report we strive to present a clear picture of how our recognition that corporations have a much wider impact company currently manages sustainability, discussing our on lives and society. For example, we’re realizing the dilemmas and how we work to create a balance between extent to which our decisions on buying, producing and our customer needs and priorities of other stakeholders. marketing impact individuals and society as a whole. Until the end of 2005, our company will be focused on The dilemmas confronting us are of an ever more complex rebuilding its foundation to create a stronger and more nature, while society’s expectations of companies competitive business for the future. We are creating a continue to rise. At the same time, our businesses common culture based on a set of core values that we operate in a highly competitive environment. Therefore, have developed together. We are installing much stronger we see learning how to operate in terms of a broader corporate governance structures. We are changing the way meaning of “sustainability” within the constraints of what we manage Ahold to bring our Group Support Office and is commercially possible, as a continuous process for our our businesses closer together. We are becoming more of company - and one that never stops. Dialogue with key a learning organization – learning from customers, stakeholders will continue to be an essential part of our associates and other stakeholders and applying this learning process. knowledge to the way we develop and implement our strategy. These processes will also impact how we handle You will see from our report that we are on a journey – sustainability in the future. to strengthen our company, to get closer to our customers and to further develop our approach to sustainability. This report is an important tool in our learning process, It is clearly in our interest to do the utmost to help our and will be used to educate and motivate associates to customers to live healthy lives: in other words, to do consider sustainability when making decisions in their what’s right for the customer. Health relies on many day-to-day work. It is also an important tool in our factors, including diet and lifestyle, and everyone needs dialogue on sustainability with external stakeholders. to take responsibility for the aspect over which they have I invite you to read our report send us your comments influence. As a food provider, we are committed to taking through our website at http://www.ahold.com. our full responsibility by informing consumers well about the products we sell and providing healthy choices.
Though our customers are always our primary focus, we also have a wider responsibility in society. For example, it’s difficult for producers in developing countries to get their products to market, for a number of reasons, including regulatory. We want to avoid creating additional barriers through food safety standards, and work to help farmers in developing countries gain access to our markets through projects like ASAP and Utz Kapeh and participating in Fairtrade.
In sustainability reporting, as in operating, we will continue to improve, so that we can report according to Anders Moberg market standards in the future. At the same time, we want Ahold President and CEO
3313334_BW_06.indd13334_BW_06.indd 3 005-05-20055-05-2005 10:25:5510:25:55 Key figures
Financial information: Dutch GAAP
(in EUR millions, except per share data) 2004 2003 2002
Net sales 52,000 56,068 62,683 Operating income 208 718 239 Net income / (loss) (436) (1) (1,208) Net cash from operating activities 1,571 1,931 2,455 Net income / (loss) per common share (0.31) (0.04) (1.24)
Associate information
(in EUR millions) 2004 2003 2002
Average number of associates in full-time equivalents 231,003 262,409 268,846
Salaries and benefi ts 5,574 5,849 6,771 Other social security charges 933 1,074 1,132 Pension costs 242 199 167 Total salaries and benefi ts 6,749 7,122 8,070
Store information 1
2004 2003 2002
Store count of consolidated subsidaries Stop & Shop / Giant-Landover Arena 563 543 525 Giant-Carlisle / Tops Arena 483 481 485 BI-LO / Bruno’s Arena 453 472 628 Albert Heijn Arena 1,628 1,622 1,620 Central Europe Arena 442 428 409 Other Europe 471 1,094 1,322 Rest of World 32 433 620 Total consolidated subsidiaries 4,072 5,073 5,609
Total unconsolidated subsidiaries 3,146 3,347 3,422
Total 7,218 8,420 8,943
1 Includes company operated supermarkets, franchise supermarkets, associated supermarkets as well as specialty retail stores, hypermarkets and convenience stores.
3313334_BW_06.indd13334_BW_06.indd 4 005-05-20055-05-2005 10:26:0610:26:06 Ahold CSR Report 2004 5
Report overview
How we manage Ahold Page 7 Ahold’s focus through the end of 2005 is on our Road to Recovery strategy, for enhancing our customer offering and improving our long-term competitive strength in all of our market areas. How we manage sustainability Page 15 Being a sustainable company means improving the quality of life of our customers and other stakeholders, now and in the future. The way in which we manage sustainability is closely aligned with how we manage our company. Being a food provider Page 19 Ahold’s definition of quality includes food safety, consumer health, and sustainable production with care for the environment, animals and human beings. Increasingly, our customers shop for healthy choices and products produced in a responsible way. We offer an assortment with choice for all our customers. Managing our workforce Page 33 Each Ahold company is committed to being “a great place to work.” We will be a company reflective and supportive of the communities we serve, where people are treated fairly and experience a fulfilling career through our business growth. Operations and the environment Page 37 Ahold companies are committed to managing well the direct environmental impact of our operations. We aim to minimize our impact where reasonably possible by promoting good environmental practices. Charitable support Page 45 Ahold’s operating companies demonstrate their commitment to the markets and societies in which they operate through direct participation in local community events and by sponsoring charitable causes.
Scope of this report
This report covers the following retail business arenas of the Ahold group: Stop & Shop/Giant-Landover, Tops/Giant-Carlisle, Albert Heijn and our joint venture partner, ICA AB. In addition, we will discuss selected aspects of the U.S. Foodservice sustainability approach, including corporate governance and business ethics. This report has not been independently audited or assured.
Function of this report
Ahold’s sustainability report serves a dual purpose as both an internal management tool and an external communication tool. Internally, the process of developing this report helps us to analyze where our companies stand with regard to the major sustainability issues in their markets and society. It also serves as an educational tool to update senior managers on sustainability trends and efforts in our company and industry and promotes the exchange of best practices and ideas within Ahold. Externally, this report aims to provide an overview of Ahold’s economic, environmental and social performance between 2002 and 2004 for our key stakeholders, including customers, investors, business partners, government representatives, NGO’s and other key representatives of society. It seeks to communicate our corporate values, principles, policies, governance and management practices as well as performance. Reporting on key performance indicators is done on an arena basis. In addition to providing an overview of the current status, it is forward looking as well, providing insight into how we intend to develop our approach to sustainability in the future.
Sustainable entrepreneurship and reporting are continuous learning processes. We aim to constantly strengthen our performance but we still have a long way to go. We realize that we are currently unable to report according to best practice market standards but will continue to improve our reporting so that we can do so in the future. We trust that this report underscores our commitment and will provide a platform for further growth and active dialogue with our stakeholders.
3313334_BW_06.indd13334_BW_06.indd 5 005-05-20055-05-2005 10:26:0810:26:08 One Company
/many brands
How do we bring the best value to customers? We believe that by leaving the distinctive brand offering of our companies under local control, we can remain closer to our customers’ needs. At the same time, we are working to harmonize our back-office processes and systems so that they take less management attention and are accomplished in a faster, better and cheaper way than possible on an individual company level. We believe that this approach will allow us to bring the best value to our customers; at the same time, it involves looking critically at all we do and making tough decisions about what should be harmonized and what we are better off handling locally.
3313334_BW_06.indd13334_BW_06.indd 6 005-05-20055-05-2005 10:27:3810:27:38 How we manage Ahold Ahold Sustainability Report 2004 7
How we manage Ahold
Ahold is an international group of local food retail and foodservice operators that do business under their own brand names. Our operations are located primarily in the United States and Europe. Our retail business consists of retail chains and sales to franchise and associated stores. The store format we principally use is the supermarket. Through our foodservice operations we distribute food and offer services to restaurants, hotels, health care institutions, government facilities, universities, sports stadiums and caterers.
Crisis of 2003 Road to Recovery strategy 2003-2005 Ahold found itself in a very difficult situation in the beginning of 2003. On February 24 of that year, we announced that our net earnings and earnings per share As outlined in our Road to Recovery strategy, Ahold’s would be significantly lower than previously indicated for focus through the end of 2005 is firmly set on enhancing 2002 and that we would be restating our financial our customer offering and improving our long-term statements for 2001 and 2000. We indicated these competitive strength in all of our market areas. This is restatements were primarily related to overstatements happening through a transformation of our structure, of vendor allowance income at our subsidiary, U.S. culture and leadership style. The entire company is aimed Foodservice, and the deconsolidation of five current or at building a business with strong financial, structural former joint ventures. We also announced forensic and organizational foundations, common goals and values investigations into several areas of the business. and an unwavering focus on the customer. We are improving sales growth, decreasing our cost base and building a sustainable platform for the future. Strategic review
Once the company was financially stabilized after the initial crisis, these events were to become a powerful Operating in a catalyst towards revisiting the Ahold strategy and making challenging industry changes to improve its future potential.
Out of this strategic review came the Road to Recovery Managing operations in the supermarket industry strategic plan, which defines our focus for the years is demanding. We carry a wide variety and large 2003-2005 on building a business with strong volume of products and an increasing assortment foundations for the future. of perishable goods, leading to complexity in the supply chain. Our stores handle a heavy volume of transactions and operate at relatively low profit margins. At the same time, competition in our industry is increasing, with the expansion and consolidation of discount formats in most of our market areas.
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Road to Recovery from actions that violate our business principles. We are going to great lengths to strengthen our corporate Sound financing Strong business governance and have made a great deal of progress in focus this area since the publication of our last Corporate Re-enginering Social Responsibility Report in 2002. You can read more food retail Restoring Controls, about our efforts in the Corporate Governance section of governance and financial strength this chapter. accountability Recovering U.S. Foodservice Redefining the role of Ahold Ahold historically operated as a financial holding Regaining market confidence company for a highly decentralized group of operating companies and joint venture partners, focused primarily on shaping the overall group, for example, through The objectives of the Road to mergers and acquisitions. Ahold is moving “from finance Recovery lie in the following to floor,” taking a more unified, hands-on, “one company” approach to the business. Our corporate headquarters has four key areas: begun to function as a Group Support Office (GSO) responsible for safeguarding, enhancing and shaping the 1 Restoring our financial health company. We are aligning our organizational structures Ahold needs to build a solid and healthy financial across all parts of Ahold to improve cooperation. The GSO foundation. We want to have the resources to be able plays a greater role in allocating resources and developing to invest for growth in our stores, distribution centers, talent by treating Ahold as one company. systems and people to achieve our strategy for customers, associates and shareholders. Moving closer to the business With the introduction of a Retail Management Team (RMT), 2 Reinforcing accountability, controls and we streamlined the management of our retail business. corporate governance The RMT consists of Ahold’s Corporate Executive Board, We are putting in place a stronger and more transparent the arena CEOs and key corporate senior management. corporate governance and organizational structure. The RMT addresses strategic issues that span arenas and We are increasing clarity of accountability and identifies opportunities to work together across arenas. improving controls in the company. The group sets direction, focus and provides feedback to Group Support and Business Support functions and Strengthening corporate governance provides input on Corporate Executive Board decisions. The reinforcement of accountability, controls and corporate This cooperation leads to more informed decision making governance is at the heart of our Road to Recovery strategy. and accurate target setting, as well as better alignment We strive to operate according to a high level of integrity across the businesses. and controls and protect our company and associates
Main litigation and investigations We have made progress on a number of legal challenges facing our company since the announcements of February 2003.
Finalized Outcome • U.S. Securities and Exchange Commission (SEC) • Settled, without a fine imposed • Dutch Public Prosecutor • Settled; fine of € 8 million imposed • Canica • Favorable ruling in arbitration, shares acquired • AIG • Reinstalled insurance coverage in the amount of USD 125 million, against net payment of €44 million • Euronext • Received serious written warning. Ahold does not agree but no appeal possible Pending Status • Class Action • Pending at the US Federal District Court of Maryland • Enterprise Chamber Procedure • Pending at the Enterprise Chamber, Amsterdam • US Department of Justice • Investigation is pending and to date aimed at former managers U.S. Foodservice
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3 Re-engineering our food retail business Dialogue with Stakeholders: We want to leverage our scale by using common processes and consolidated support functions where possible. Doing so will free up more time and Customers resources which we can instead invest in meeting our customers’ needs. Customers are our lifeblood. Our business is dependent on their Focus on our core business support, trust and loyalty. A permanent dialogue with our We have a divestment program in place to not only reduce consumers is a top priority. Some of our companies have our debt, but focus our business in terms of format, dedicated consumer affairs officers to drive this dialogue. location and competitive position. We are concentrating on They use a proactive approach to prevent problems by what we know best, the supermarket format, and scaling participating in the development of programs and policies that down our market area to include companies in Europe affect our customers’ experience in the stores and with the and the U.S. which have or are expected to gain number products we offer. They provide an efficient consumer response, one or two positions in their markets within 3-5 years. reporting about trends and problem-solving for our customers, store operations and other business units. Harmonizing operations to provide value to the customer Another important initiative in our Road to Recovery is There are many channels through which we engage our customers. the restructuring of our retail business into segments, These include store customer service, customer telephone which we call “arenas.” The arenas unite operating helpdesk, customer panels, focus group interviews, websites, companies in comparable markets, enabling us to realize printed information, satisfaction surveys and email. significant synergies within each arena as well as across arenas. In the U.S., for example, we recently established a new arena that integrates two of our major operating companies, Stop & Shop and Giant-Landover and the U.S. retail corporate functions into one business unit. keep the focus on our long-term success, which is in the We are harmonizing back-office processes and systems so interests of our customers, associates, shareholders and that they require less management attention and can be other stakeholders. We enlisted the support of not only provided faster, better and cheaper than would have been arena management, but also associates within the possible for an individual operating company. We are also organization in a broad-based effort to determine the core coordinating key performance indicators across our values of Ahold. They are based on the values of our functional and arena organizations. Alignment in the individual businesses. back-office will make it cheaper to innovate in our customer offerings, enable more focus on differentiation • Act Customer! and increase our speed to market. All of this will give the • Engaged Associates local associate more time and opportunity to get closer to • Integrity Always the customer. • One Team • Innovative Mindset Local control of our brand offering • Passion for Our Busines At the same time as we are working more closely together, our local companies retain control over elements that Having a common culture, built on these values, will help provide a distinctive brand offering to our customers, us to harmonize the way we work. A strong company including pricing, assortment, branding and the store culture will improve the way we function as a team and experience. We see sustainability as an integral part of expedite decision-making. our brand offering. A strong culture will protect the company by acting as a Building one Ahold culture natural deterrent for behaviors that do not fit within our We are establishing a common culture and core values for values. Associates can be empowered to make choices the Ahold group which clearly define who we are and that are right for the customer and the company. what kind of behavior is acceptable and unacceptable across the company. 4 Recovering the value of U.S. Foodservice Core values We are working to reestablish U.S. Foodservice as Ahold’s local companies have always had strong a viable, reliable and ethical company that delivers individual cultures; now we are better defining the values value to Ahold. We have a three-phase plan in place that we share as a group. Strong values are crucial to to recover the value of U.S. Foodservice:
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• Step one: improving internal controls and corporate Annual Report, the Corporate Executive Board consists governance of three members: a President and CEO, a CFO and a We have implemented numerous initiatives and changes Chief Corporate Governance Counsel. Members of the at U.S. Foodservice to clarify accountability, improve Corporate Executive Board are appointed for a maximum our internal controls and strengthen our corporate term of four years. The General Meeting of Shareholders governance. appoints, suspends and dismisses Corporate Executive Board members. Corporate Executive Board members • Step two: restoring profitability and cashflow are appointed for a term of four years and may be U.S. Foodservice implemented a comprehensive plan in reappointed for a term not exceeding four years. the following four key areas: organizational improvements, procurement enhancements, operational improvements and systems improvements. During this Supervisory Board phase, the company rebuilt its leadership team, reorganized its field organization, renegotiated vendor The Supervisory Board is responsible for supervising the contracts and implemented a centralized supplier policy of the Corporate Executive Board, the general course information system, among other accomplishments. of affairs of the company and the enterprise connected with it. The Supervisory Board is guided by the interests of the • Step three: pursuing profitable sales growth company and its businesses and must take into account U.S. Foodservice is focusing on customer and product the relevant interests of all those involved in the mix enhancements along with sales growth initiatives. company. This includes: • enhancing its ability to evaluate profitability per Appointment and composition customer in order to improve bottom line The composition of our Supervisory Board must be such performance; that the combined experience, expertise and independence • utilizing its category management process to increase of its members best enables the Supervisory Board to the percentage of private label product it sells in carry out its responsibilities. As we are an international targeted product categories; and retailer, the charter of the Supervisory Board provides • focusing on sales growth in the street sales category, that the composition of the Supervisory Board should which generates a higher sales margin than other preferably reflect knowledge of European and American sales categories. market conditions, financial institutions and corporate governance. See Ahold’s 2004 Annual Report for more details. If a Supervisory Board member is concurrently a member of another company’s supervisory board, the charter of our Corporate Governance Supervisory Board states that the main duties arising from and/or the number and nature of memberships on any other Corporate governance is one of the cornerstones of our company’s supervisory board must not conflict or interfere Road to Recovery strategy and essential to the process of with that person’s duties as a member of our Supervisory building a stronger, healthier company. Board. The same applies to the number of non-Ahold supervisory board memberships that person may hold. As part of the Road to Recovery strategy we have put in place a stronger and more transparent corporate Independence of Supervisory Board members governance structure, established associate compliance The Supervisory Board has decided that the members of the training and policies to clarify acceptable behavior and Supervisory Board must be independent as defined by the resolved a number of the investigations facing Ahold. Code. However, for a limited time before the General Meeting of Shareholders on June 2, 2004, the charter allowed for up to two members not to be independent as Corporate Executive Board defined by the Code. At the date of publication of Ahold’s 2004 Annual Report and since June 2, 2004, all We are managed by our Corporate Executive Board, which Supervisory Board members are independent as defined is supervised by the Supervisory Board. The Corporate by the Code. Executive Board as a whole is responsible for our management and the general affairs of our business and Remuneration its affiliated group companies. The General Meeting of Shareholders on March 3, 2004 adopted our remuneration policy for Corporate Executive Appointment and composition Board members. Details on this policy and information on The Corporate Executive Board consists of at least three the remuneration of individual Corporate Executive Board members. As of the date of publication of Ahold’s 2004 members can be found in Ahold’s 2004 Annual Report.
3313334_BW_06.indd13334_BW_06.indd 1010 005-05-20055-05-2005 10:28:2910:28:29 Composition of the Corporate Executive Board
Anders C. Moberg Hannu R. Ryöppönen Peter N. Wakkie
President and Chief Executive Officer Executive Vice President and Chief Executive Vice President and Chief Financial Officer Corporate Governance Counsel
A Swedish national, Mr. Moberg was A Finnish national, Mr. Ryöppönen A Dutch national, Mr. Wakkie was born on March 21, 1950. He assumed was born on March 25, 1952. Our born on June 22, 1948. Mr. Wakkie the position of acting Chief Executive shareholders appointed him to the joined Ahold as acting Executive Vice Officer on May 5, 2003. On September Corporate Executive Board on President and Chief Corporate 4, 2003, our shareholders appointed September 4, 2003, in the position of Governance Counsel on October 15, him to the Corporate Executive Board Executive Vice President and Chief 2003. That position was formalized in the position of President and Chief Financial Officer. Mr. Ryöppönen was when our shareholders appointed Executive Officer. Mr. Moberg is the formerly Finance Director of Industri him a member of the Corporate former Chief Executive Officer and Kapital Group. He is former Deputy Executive Board on November 26, President of IKEA Group, and he Chief Executive Officer of Ikano Asset 2003. Prior to joining Ahold, he was was formerly Division President- Management Group in Luxembourg a partner at De Brauw Blackstone International, at Home Depot in the and former Executive Vice President Westbroek, which he joined in 1972, U.S. Currently, Mr. Moberg is Finance at IKEA Group. specializing in mergers and acquisi- Chairman of the Supervisory Board of tions and corporate litigation. Clas Ohlsen AB and a member of the He became a partner of the firm in supervisory boards of Velux A/S and 1979 and was managing partner from DFDS A/S. During 2004, Mr. Moberg 1997 to 2001. Mr. Wakkie is a was also a member of the Supervisory member of the Supervisory Boards Board of Lego A/S, from which he of Schuitema N.V. and Wolters resigned effective April 15, 2005. Kluwer N.V.
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Dutch Corporate Governance Code General Meetings of Shareholders may be convened at On December 9, 2003, the Tabaksblat Committee adopted any time by the Supervisory Board, the Corporate and published the Dutch Code on Corporate Governance Executive Board or by shareholders representing at least (the “Dutch Corporate Governance Code”), which sub- 10% of our issued and outstanding share capital. stantially strengthens shareholders’ powers. The Tabaksblat Commission recommends that Dutch listed companies Shareholders are entitled to propose items to be put on adopt the “best practice” principles reflected in the the agenda of the General Meeting of Shareholders Dutch Corporate Governance Code. On December 30, provided they hold at least 1% of the issued and 2004, the Dutch Corporate Governance Code was outstanding share capital or the shares held by them confirmed as the code mentioned in section 391, represent a market value of at least EUR 50 million. paragraph 4 of Book 2 of the Dutch Civil Code. Adoption of such a proposal requires a majority of votes cast at the General Meeting of Shareholders representing On February 16, 2004, we announced our proposals at least one-third of the issued shares. aimed at compliance with the Dutch Corporate Governance Code and held an Extraordinary General Voting Rights Meeting of Shareholders on March 3, 2004, at which the Subject to certain exceptions provided by Dutch law or shareholders gave their consent to all the proposed our Articles of Association, resolutions are passed by a changes to our corporate governance structure. majority of the votes cast.
Ahold’s compliance with Tabaksblat Code Each of our common shares is entitled to one vote. We apply all of the relevant provisions of the Dutch Holders of depositary receipts with respect to our Corporate Governance Code, with the following cumulative preferred financing shares may attend the exceptions: General Meeting of Shareholders. The voting rights on the underlying shares may be exercised by the Stichting • We require Corporate Executive Board members to keep Administratiekantoor Preferente Financierings Aandelen shares obtained under a long-term incentive plan for Ahold (the “Administratiekantoor”), a foundation three years after vesting, instead of the five years organized under the laws of The Netherlands in the recommended by the Dutch Corporate Governance Code manner described further in Ahold’s Annual Report. in best practice principle II.2.3. This exception is included in the remuneration policy adopted by the Cumulative preferred financing shares General Meeting of Shareholders on March 3, 2004; On March 3, 2004, the total number of votes that could • The Vice-Chairman of our Supervisory Board has be exercised by the holders of depositary receipts accepted chairmanships and memberships of representing our approximately 369 million outstanding supervisory boards of several Dutch listed companies. cumulative preferred financing shares (“preferred Following the calculation method of the Dutch financing shares”) was reduced from approximately Corporate Governance Code in best practice principle 369 million to approximately 100 million. In other words, III.3.4 he is expected to hold six memberships instead their share of the total vote (as expressed as the sum of of the recommended maximum of five. This exception is the outstanding cumulative preferred financing shares caused by unforeseen circumstances and the Supervisory plus the common shares) was reduced from approximately Board expects that this will be resolved in due course. 19% to approximately 6%.
See our annual report or visit http://www.ahold.com for Shareholders’ rights further details.
General Meeting of Shareholders The shareholders exercise their rights through the annual or extraordinary General Meetings of Shareholders. Each year, in June at the latest, we must convene an annual General Meeting of Shareholders. Additional extraordinary
“ In 2004 Ahold improved its corporate governance structure significantly and now ranks among the best in Europe.”
Paul Frentrop, Director Deminor Netherlands
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Clarifying associate Since the program started we have received approximately responsibilities 2,000 calls from associates. Most of these (around 90%) were about routine Human Resources issues, while reports about work safety and violations of regulations Compliance training launched were less frequent. All reports are investigated and the One of our company’s core values is “Integrity Always.” outcome of the investigations is communicated back to We act openly and honestly – we say what we mean and we the reporter within an indicated timeframe (depending on do what we say. We understand our legal and regulatory the materiality of the report). As a result of the reports obligations, and place a priority on fulfilling them. made, certain policies were amended or developed, and in some cases disciplinary actions were taken. A web-based compliance training program was launched in May 2004. This program is aimed at about 15,000 Code of Professional Conduct and Ethics managers - the entire middle and top ranks of our High standards of organization. The goal of the program is to underscore the professional conduct and importance of integrity and to help our people in the real- ethics are essential for world business environment. Ahold to achieve its strategy and objectives. We expect In 2004, two courses, Financial Integrity and Conflicts of our associates to comply Interest, were completed, with 15,499 associates with the law, act with participating. In the U.S., training on anti-trust and on integrity and safeguard the making appropriate supplier agreements also took place. company’s reputation in every In March 2005, we rolled out a training course on the situation. Our new Code of new Global Code of Professional Conduct and Ethics. Professional Conduct and Ethics, launched in March Whistleblower procedure put in place 2005, provides an We are committed to providing an anonymous (if desired) introduction to important laws and fair way for associates and others to report to the and policies that must be appropriate parties unethical or illegal behavior and any followed. The code is designed actual or suspected violations of applicable law, rules and to help each associate: regulations or of Ahold’s Global Code of Professional Conduct and Ethics. During 2004, Ahold set up and • Understand and follow the basic compliance and implemented a single and uniform whistleblower integrity rules that apply to their jobs; and procedure that applies to both its U.S. and European • Know when and where to ask for advice. operations. In doing this, Ahold has put in place a strong, effective and consistent procedure that meets the The code organizes, summarizes and updates policies requirements of both U.S. and European rules and that have been in place since 2002 and has been regulations, in particular, the U.S. Sarbanes-Oxley Act of updated to comply with recent changes in the regulatory 2002 and the recommendations of the Dutch Code. environment. The code applies to Ahold, its companies The whistleblower procedure consists of a hotline program and management level associates. The code also applies that allows associates and others to confidentially report to independent third parties hired by or acting on behalf ethical, legal or business activity concerns. of Ahold, in cases where Ahold could be held responsible for their actions. The program provides for a centralized database for documenting the steps taken by us, or, depending on the The code has been drafted in accordance with the nature of the complaint, the Audit Committee of the requirements of the Sarbanes-Oxley Act and contains Supervisory Board, to investigate allegations reported via numerous other new features that are generally regarded the hotline. This means callers have 24 hour, 7 day per (by Ahold and others) as best practice. It is in effect as of week access to a skilled interviewer. As mentioned, March 1, 2005 and exists alongside local operating callers may choose to remain anonymous. All workplace company codes in the retail business. In case of a issues that have been reported, including, but not limited conflict between the code and the local Code of Conduct, to, those regarding accounting or audit irregularities, are the stricter rule applies. brought to the attention of our Audit Committee or an appropriate department. Reporting associates are also protected from retaliation.
313334_BW_06.indd313334_BW_06.indd 1313 007-05-20057-05-2005 12:18:1412:18:14 T aking a Common sense approach
Managing sustainability as we manage our company Being a sustainable company means improving the quality of life of our customers and other stakeholders, now and in the future. Ahold’s management of sustainability is in line with the reality of how we manage our company. This means that most aspects are not managed centrally, posing certain challenges for reporting. Sustainability targets and practices are more often than not managed on a local level, though in some areas we are moving towards, or have reached, a more harmonized, or even global approach. We feel this is the most constructive way of managing these issues for our company.
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How we manage sustainability
We last reported in terms of Corporate Social Responsibility (CSR report 2002). This time, we have named our report the Sustainability Report because we believe considering the concept of sustainability is a more holistic and complete way of looking at our business and its impact on our stakeholders.
Ahold’s vision of sustainability supportive of the communities we serve, where people are treated fairly and experience a fulfilling career For us, sustainability has two components. First, in line with through our business growth. the Brundtland definition1, sustainability is about • Minimizing the negative and maximizing the positive development or growth that provides for the needs of social and environmental impact of our supermarket today’s generation without compromising the ability of and logistics operations. future generations to also provide for their own needs. • Being a proactive corporate citizen through dialogue Secondly, it is about creating value and thus improving with key stakeholders and building strong relationships the quality of life of current and future generations. Our in the communities where we do business. ambition is for Ahold to continue to be a proactive and forward-looking company on sustainability. Why is sustainability important Sustainability is about balancing people, planet and to Ahold? profit. We cannot satisfy everyone and we don’t claim to have all of the answers to sustainability dilemmas. Our objective is to have clear and open processes that allow Sustainability is good for our business. Increasingly, for balanced decision making, so that we can come up people are looking for healthy choices and products with solutions that best serve our stakeholders. produced in a responsible way. By serving these needs we can create a competitive advantage for our local brands and differentiate ourselves from the competition. Our definition of sustainability Sustainability can open up new markets to our company through the development of innovative categories and Being a sustainable company means improving the products. quality of life of our customers and other stakeholders, now and in the future by: Operating our business as efficiently as possible, for example, in terms of energy usage and waste reduction, • Managing our business in a responsible, ethical and helps us to keep our cost base down, which is critical in a transparent way. low margin business like the food retail industry. • Giving customers the best value, unique and innovative products and services, and fresh, healthy foods Sustainability is rooted in our values. As a company, we take produced under responsible conditions. responsibility for our impact on the earth and society within • Each Ahold company is committed to being “a great the sphere of our influence. It is in our interest to place to work.” We will be a company reflective and contribute to a better environment for our customers,
1 Norwegian Prime-Minister Gro Harlem Brundtland chaired the World Commission on Environment and Development set up in 1983 by the United Nations. Its report “Our Common Future”, published in 1987 and widely known as “The Brundtland Report,” triggered a wide range of actions, including the UN “Earth Summits” in 1992 and 2002.
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associates and society. Doing business in a responsible One company approach way reduces risks to our operations and to our reputation that could negatively impact sales. In general, Ahold’s one company approach is carried out in different degrees of harmonization: global, between arenas and within one arena. We have also put in place Our approach to managing “matrix” organizations with dual reporting lines in sustainability selected functions. Our handling of certain sustainability issues has begun to reflect this approach.
In the first chapter, we outlined how the Road to Recovery For example, we manage business ethics and integrity at is changing the way we manage Ahold. We are transforming a global level for a number of reasons. First, the corporate our corporate headquarters into the Group Support Office executive board places a high priority on business to bring it “from Finance to Floor,” organizing our business integrity as a core Ahold value. Second, we need to meet in similar markets into “arenas,” and consolidating and group-wide requirements related to business ethics, which centralizing back-end functions where practical. are laid out in the Dutch corporate governance code and Our local companies retain control over elements that relevant sections of the Sarbanes-Oxley Act and rules provide a distinctive brand offering to our customers. adopted under it. Third, we want to manage business Ahold’s management of sustainability is in line with the ethics and integrity throughout the group in line with reality of how we manage our company. current best practices. Lastly, our stakeholders judge us by global standards in these areas.
In other areas, such as product sourcing, increasing harmonization is evidenced by cross-arena initiatives. For example, we have put in place a Perishables Procurement Organization to source perishables for our Dialogue with Stakeholders: entire U.S. retail operation, spanning two arenas, and the ICASS organization to jointly buy perishables for our Albert Heijn arena and ICA. On issues that have global Society consensus, such as food safety, our companies take a common approach, but manage the issue at an arena level.
We believe a sustainability program must address the issues that Our approach to Human Resources (as well as other are most relevant in local markets and society. To ascertain these functions) is becoming more coordinated through the priorities, we use different forms of dialogue to suit the varying development of a matrix reporting organization. In a needs of our stakeholders and businesses. matrix structure, the arena CEO and the GSO function head take primary responsibility for alignment. This Our northwestern European companies focus on the integration of results in each associate having two reporting lines, one social and environmental issues in the core business. They are in within the arena and one within the GSO functional dialogue with non-governmental organizations (NGOs), such as department. Managing talent and building a group-wide environmental and social activist groups, and local community culture are global issues; a matrix organization facilitates and consumer organizations. Through this interaction, we gain management of these issues as well as exchange of best knowledge, ideas for innovation and learn how to reduce risks to practices. our business. (see chapter “Being a food provider” for examples). Traditionally, our U.S. operations have promoted strong involvement in and dialogue with local communities (see chapter Local development of “Charitable Support”). They increasingly take a leading role in other sustainability issues as well. sustainability programs
We are in dialogue with Non-governmental Organizations (NGOs), Because sustainability is mainly considered to be part of consumer organizations and other sustainability partners through: the positioning of our companies, the arenas define and • information meetings drive their own sustainability programs. • in-depth cooperation with selected NGOs on standards and projects • membership/participation in external multi-stakeholder and
industry forums and organizations 1 The Sarbanes-Oxley Act (SOx) was signed into law in the United States on • membership on specialized committees 30th July 2002. It introduced highly signifi cant legislative changes to • active participation in the management of community based fi nancial practice and corporate governance regulation and stringent new rules with the stated objective: “to protect investors by improving the organizations. accuracy and reliability of corporate disclosures made pursuant to the securities laws”. The act is actually named after its main architects, U.S. Senator Paul Sarbanes and U.S. House of Representative Michael Oxley.
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This way, we ensure that we address issues of sustainability responsible for sustainability undertakes initiatives that in ways that meet the needs of our local customers and advance our goal to be a proactive and forward-looking stakeholders. The arena programs should be measurable, company on sustainability. This includes promoting the realistic, defensible and customer-driven. They aim to sharing of best practices among our arenas, developing capture customer value and/or address key challenges a common position on global sustainability issues that sustainability issues pose to the business. Since relevant to our business and organizing events to increase sustainability within each arena is handled according to awareness and stimulate action. A sustainability core local standards and priorities, issues sometimes receive group made up of senior representatives from our different levels of priority in different arenas. arenas works together with the sustainability department at the GSO.
Working to improve Global meeting on sustainability issues performance on sustainability regarding products In 2004, Ahold held its first global meeting on sustainability regarding products and the supply chain. In our 2002 CSR report we said that we would integrate Ahold decision-makers in procurement, marketing, quality corporate social responsibility into the mid-year manage- and food safety, public affairs, sustainability and ment review cycle during which operating company communications met to discuss sustainability issues and management report to the Corporate Executive Board. consumer health and well being. Speakers from the Due to the events of and following February 2003 and the industry and NGO community and internal benchmark resulting restructuring of our company, we have not made surveys on sustainability and consumer health provided progress on this process. input for lively discussions and productive working sessions.
Going forward, we have determined that we want to take a Together, the group expressed their support for Ahold’s more common approach to sustainability when it fits the ambition to continue to be a proactive and forward- needs of our arenas and is beneficial to the Ahold group looking company on sustainability. They agreed that this as a whole. The arenas will continue to drive their own will allow us to capture opportunities to create a sustainability programs. In addition we plan to develop a competitive advantage by serving our customers better. group framework on sustainability that will guide our They affirmed that the arenas define and drive their own group-wide approach to the topic. We foresee a gradual sustainability programs, which are measurable, realistic, implementation of such a framework over time. At the defensible and customer driven. Arena programs capture same time we realize that we need to educate our customer value and/or address key challenges that associates on sustainability and use the resulting knowledge sustainability issues pose to the arena’s business. better and more systematically in our decision-making. The group also determined that taking leadership in consumer health is the best and most sustainable GSO support and global strategy for Ahold to pursue. It builds upon our strength priorities as a full service, health-conscious retailer and is supportive of our future growth. The group agreed that we have much to gain by aligning our consumer health The overall role of the Group Support Office in terms of positioning and structures, in terms of generating sales, sustainability is to drive the development of the increasing customer loyalty and fulfilling our social sustainability framework. In addition, the GSO staff responsibilities.
“ We have been in dialogue with Ahold about their sustainability for almost ten years and sometimes this has been a bumpy ride.
Transparency on sustainable performance has always been the major theme in our discussions as our members need this information to decide whether to invest in Ahold or not. After a period of relative silence from Ahold in this respect, the company seems to be making an important new start with this sustainability report. VBDO feels that in the coming years this will lead to sustainability reporting that meets VBDO’s standards: an annual sustainability report, using the GRI guidelines, giving clear goals and quantitative information which is externally verified.”
Piet Sprengers, Chief executive officer VBDO (Dutch Association of Investors for Sustainable Development)
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540Cal/100gr What is healthy? Although our companies sell an increasing amount of what are perceived as “healthy” foods, we also sell foods that some consider unhealthy. Our dilemma is balancing how to meet customer demand for products while at the same time promoting health and well-being. Ultimately, the customer is responsible for a healthy lifestyle. Our responsibility and our aim is to provide a wide choice of products and information to assist our customers in reaching that goal. To this end, health and well-being has always been part of our customer approach at all of our operating companies.
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Being a food provider
As a food provider, our main focus is to offer our customers safe, quality food at excellent value. Increasingly people are looking for healthy choices and products produced in a responsible way. We provide an assortment with choices for all of our customers.
Ahold’s defi nition of quality includes food safety, consumer health, and production with care for the environment, animals and human beings. While our companies aim to be proactive and forward- looking on issues related to the quality of all of the products we sell, our own-brand products are our main focus. We have the most control over the supply chain of our own private label products and are primarily responsible for the quality of these products. Many also carry our own name and thus are closely tied to our brand and reputation.
Our stakeholders’ priorities Similarly, animal welfare concerns are more prevalent in our northwestern European markets, where our companies Food safety are actively addressing this issue. It is more of an emerging All of our customers expect food to be safe. Providing the priority in the U.S.; however, our U.S. supermarkets are safest possible products to our customers is, in all of our pioneers in this field according to the standards of their markets, a fundamental, non-negotiable priority. markets.
Consumer health Concern for sustainable seafood is equally important in Consumer health is a growing concern among our both the U.S. and northwestern Europe. customers and governments, but most prevalent in the U.S. and northwestern Europe. We see it as a major issue Attention to supplier diversity is unique to our U.S. that will dominate the global food industry for the decade operations, while labor issues in the supply chain are a to come. more predominant concern in northwestern Europe.
Social and environmental issues Customer and stakeholder demands for addressing social Food safety and environmental issues in the supply chain mainly exist in our retail markets in the U.S. and northwestern Europe, Ahold’s top focus is to always provide the safest possible where concerns differ per market. The main issues across products to all of our customers. From the retailer’s point our markets are the impact of agriculture on the environ- of view, the supply chain of growing, packaging and ment and biodiversity, sustainable fisheries, the impact of transporting food from producers to retailers has become production on human beings and animal welfare. increasingly complex. To satisfy customer needs, we are providing an increasing assortment of products, particularly Although organic products have an increasing popularity a wider variety of fresh produce, which requires sourcing in all of our retail markets, concerns regarding from different suppliers worldwide. Necessitated by this environmental issues in the agricultural supply chain are higher complexity, standards and practices have tightened more widespread in northwestern Europe. and food products are now safer than ever before.
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Like other sustainability issues, food safety is managed Our Ahold U.S. retail operations have endorsed the SQF locally at Ahold; however, the global consensus on food (Safe Quality Food) standard, which is similar to EUREPGAP safety has led to a common approach, common objectives and is expected to become its U.S. counterpart. and a great deal of cooperation and synergy between our arenas to optimize food safety management. The Ahold Stop & Shop gives preference to suppliers who adopt Food Safety Advisory Committee brings together top integrated farming strategies like “NutriClean®.” This is a specialists from each arena and the Group Support Office commercial initiative to minimize pesticide residues to drive synergies and knowledge exchange. through integrated pest management strategies and other methods. Stop & Shop’s involvement with the NutriClean Our food safety policy aims to cover food safety program dates back to 1991. throughout the complete supply chain, from farm and production level to our own operations, and even after our Production level: safe manufacturing practices customers take their products home. The HACCP (Hazard Production sites and units of food suppliers must be certified Analysis and Critical Control Points) principles form the according to a standard approved by the Global Food Safety basis of our policy at all levels. HACCP is a process that Initiative. For more information, visit www.ciesnet.com. identifies where potential contamination can occur (critical control points) and manages these points to Food safety in our own operations ensure the safest possible products. This process is We have the most control over factors impacting food designed to prevent rather than discover potential hazards. safety in our own operations. All Ahold companies have stringent in-house food safety programs and procedures Food safety at farm and production level and ongoing improvement plans in place to address how Food safety starts where the products are made. From the we safely distribute and sell products. While the point of view of the retailer, this is the most complex part overriding objective is prevention, Ahold companies have of the supply chain, as it is generally not in our hands, state-of-the-art recall procedures in place and are capable but in the hands of our suppliers. This is why we work of responding rapidly to crisis situations. closely with our private label brand suppliers to ensure our customers the safest possible products. We require We perform store inspections and audits to ensure that that these suppliers follow proper food safety practices. our locations are following proper food safety standards. Ultimately, suppliers of fresh fruits and vegetables must We also hold regular training for our associates on safe be certified to production or farm level standards. food handling practices.
Farm level: good agricultural practices As the supply chain becomes more transparent, food Albert Heijn and ICA are actively involved in developing becomes safer. However, transparency also results in the standard for good agricultural practices known as incidents becoming more visible and highly publicized, EUREPGAP. This standard is designed to ensure product sometimes creating the mistaken impression to some safety, reduced agrochemical use, environmental consumers that food is less safe. protection and labor safety. EUREPGAP integrates various systems used by European retailers. This translates into Food safety at home simpler, more effective and cheaper certification of Once food is taken out of our stores, it must continue to growers and avoids unnecessary price increases for be handled properly to ensure the safest possible product. consumers (see www.eurep.org for more details). Though we cannot control this part of the chain, most of Growers for all produce sold at Albert Heijn and all our companies use education, through consumer centrally bought produce at ICA must be EUREPGAP magazines, company websites and instore leaflets, among certified. Ahold also participated in drafting the other ways, to advise our customers how to handle food EUREPGAP Salmon standard for aquaculture. safely at home.
In order to ensure that all products from its suppliers across the globe comply with the current Dutch MRL Social and environmental legislation (Maximum Residue Level), Albert Heijn has product improvements issued a manual for suppliers. This guidance is important because growers, wherever they are situated, have to operate according to Dutch regulations and not only the Food safety is only one part of overall product quality regulations of their own countries. Extensive consumer and our sustainable approach to being a food provider. information on the way Albert Heijn manages residue We work hard to reduce our negative social and levels is provided at www.ah.nl. environmental impacts and increase the positive impacts
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when possible. As we have mentioned, we see private Moving towards greater harmonization label as our primary means to address sustainability In contrast to food safety, there is no global consensus on issues in the supply chain, as we have the most control what are the highest priorities with regard to over production of our own brand products. environmental and ethical issues. Because the priorities of our stakeholders and customers differ by market, We approach our social and environmental goals in the we believe a local approach is the most efficient way to supply chain through dialogue with stakeholders, by promote environmental and ethical issues and serve our working closely with our private label suppliers and stakeholders’ needs. Each arena defines and drives its developing product requirements on sustainability. own measurable, realistic, defensible and customer- For example, through dialogue with animal welfare driven sustainability programs related to products on organizations, Albert Heijn, in collaboration with private which we are able to make a difference. On issues label suppliers, improved living conditions for cattle and common to more than one market, we are beginning to poultry. In the U.S., our fish purchasing organization work together more closely. The Ahold inter-arena works closely with the New England Aquarium to adjust dialogue on sustainability is driven by a core group our sourcing processes to improve the sustainability of comprised of senior representatives from U.S. retail, our fish supplies. Albert Heijn, ICA and the Ahold Group Support Office.
Dilemma: When it comes to improving social and environmental performance we have varying levels of control and ability to make changes. It depends on a number of variables:
1. Does a reasonable solution exist? 2. Are we able to effect change? • Are we able to influence the supplier or sector to make changes? • Can we do it alone? (If we need to work within the sector, our influence depends on our size as a buyer of the manufacturer’s products relative to the total market). 3. Is the solution compatible with our customers’ priorities? • Can we convincingly communicate it to our customers? • Will they reward us and “buy it”? • As a result, will we remain competitive?
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Impact of agriculture on the Integrated Pest Management (IPM) and environment and biodiversity sustainable agriculture Integrated pest management is a comprehensive approach to farm management of conventional fruits, Organic products vegetables and other products. It aims to ensure good In all markets, we are experiencing a rising demand for agricultural practices, such as a minimal use of organic products. All of our retail arenas offer an organic chemicals, crop rotation and multi-culture rather than assortment. Through product availability and monoculture, to limit detrimental environmental effects. communication many Ahold companies have been driving The EUREPGAP standard for fruits and vegetables is forces in their markets behind the consumption of organic designed to increase consumer confidence in the safety products. Although the potential for organic food is of food. The main focus is on food safety and traceability. considerable, the higher prices for these products are a Additionally, this standard also covers environmental and barrier for many customers. Therefore, we are working occupational health and safety aspects of production. hard to address this issue in all of our markets. We are Growers for all produce sold at Albert Heijn and ICA must developing a new private label organic line in the U.S. be EUREPGAP certified. that is focused on offering a lower price organic selection than comparable branded products. Albert Heijn held a Sustainable fisheries two-week long organic promotion in February 2005 in Increasing fish consumption and overfishing are a big which fresh organic produce was offered at a 25 percent threat to many fish species, some of which are already discount and 25 organic products were permanently reduced facing extinction. A number of our companies have in price by between 5 and 35 percent. To stimulate developed responses to this problem that are tailored to consumption, many Ahold companies are also proactive fish species they sell and the specific needs and in their communication to consumers through instore opportunities of their markets. materials, consumer magazines, advertising and promotions. Our U.S. companies, in partnership with the New England Number of Organic Products Aquarium, have developed the EcoSound project, which is a comprehensive approach to dealing with Company 2004 2003 2002 sustainability, food safety and quality issues in fishing. ICA promotes sustainable fish sourcing as well. Its main Albert Heijn 275 300 300 areas of focus are dolphin safe tuna, organic tiger prawns ICA (Sweden) 440 450 441 and size limits on Baltic cod. Albert Heijn does not sell ICA (Norway) 96 90 – plaice and sole during periods of mating and spawning. Stop & Shop 1,278 1,069 880 Giant-Landover 385 289 203 Giant-Carlisle 333 313 312 Tops 1,173 163 162
Sale of organic products
Albert Heijn offers its customers a basic assortment of organic products as a choice alternative to its conventional assortment. With a 62% market share , Albert Heijn is the largest provider of organics in the Dutch supermarket channel (source AC Nielsen). Partly due to Albert Heijn’s efforts, organic products have become available to a wide public which in turn led to an increase in overall consumer demand for organics in the Dutch market. Albert Heijn considers this as a favorable development. In 2004 sales of organic products rose by 3% at Albert Heijn. The largest growth was in dairy (+7%), sandwich meat (+110%) and meat (+17%) A number of new products were introduced in 2004, including zucchini, cauliflower and ham.
Sales of organic products in our Swedish ICA stores rose by 17% in 2003 and in 2004 an additional 15.5%. This can be partly attributed to the success of ICA’s private label, ICA Ekologiskt and dairy products, which account for 130 of the total of 440 organic products that ICA sells.
The organic segment continues to grow in our U.S. retail markets. In 2004, Stop & Shop/Giant-Landover jointly launched a new private label range called “Nature’s Promise,” containing over 100 organic (USDA certified) and natural (made with natural ingredients only) products priced less than other brands. About 40% of the products are organic and 40% natural.
In the Czech Republic we have our own private label of about 20 organic beef products. We also have other organic products in our assortment, but not under our private label.
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Case: Ahold Sustainable Assistance Program (ASAP)
Company Ahold
Issue Lack of opportunities for African farmers to produce quality products for What issue/challenge is being western supermarkets addressed by this program
Solution The objective of the ASAP-pilot is to utilize the knowledge and expertise of How does this program contribute Ahold’s people around the world to make a positive impact in Africa, to solving the issue/challenge specifically Ghana, by creating sustainable business relationships with suppliers. On the basis of consultation in Ghana, ASAP had three initial targets: 1. Develop the viability of Ghanaian growers to export tropical fruits and vegetables: Utilize Ahold purchasing expertise to upgrade competitiveness. Buy Ghanaian products for Ahold stores on the basis of European standards. 2. Develop value-added shelf-stable products for local and/or export markets, to be manufactured by local entrepreneurs: Use Ghanaian and Ahold product development resources to develop value-added product(s), made in Ghana from Ghanaian ingredients, to be marketed in Ahold’s stores under corporate brands and/or in the Ghanaian and/or regional markets. 3. Support local organizations: Provide Ahold resources and knowledge as needed on a consulting basis to local trade organizations and NGOs.
Implementation The program runs from 2002 to 2005. It quickly became clear that ASAP’s Describe how you put this work could not be limited to Ghana if we were to provide a consistent source of program into practice products, as there is a limited availability of produce in a single country over • Objectives the full year. Therefore Burkina Faso was included to provide mango during • Time frame some periods when it could not be sourced from Ghana. However, to deliver • Scope mango for the full year, sources in both Africa and Latin America are needed. We learned that to make a meaningful contribution towards commerce and development and provide sustainable products for our stores, the scope of such a project should be wider than just one country.
Results Through ASAP and the involvement of our operating companies we were Describe the main current successful in bringing a number of products to our stores: and/or expected results from • Fairtrade & organic mango for Albert Heijn and ICA from Burkina Faso, this program: social, environmental South Africa, Brazil and Equador. or commercial • Cut fruit salads for Albert Heijn and ICA from Ghana. • Shea butter cosmetic products for our stores in the U.S., through the Sylvia’s line of beauty and hair care products. • Papaya for Albert Heijn and ICA from Ghana. • Fairtrade & organic avocados and grapes for Albert Heijn from South Africa. • Fairtrade & organic citrus for Albert Heijn from Egypt.
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Constraints or dilemmas Besides the introduction of products in our stores we are supporting the development Describe the main difficulties, of nutritious instant food products in small villages in Ghana and the sales and constraints, dilemmas you marketing of art from a women’s organization in the north. This is being done encountered throughout the program, through a collaborative network with local NGOs and the University of Ghana. and how you handled this The farmers need significant guidance to be able to produce and export the right quality and quantity of products to the western market. In order to establish sustainable relationships with farmers and producers, continuous commitment of Ahold and related partners is necessary for a long period of time. An example of that is our cooperation with ICCO, one of the major Dutch development organizations. ICCO is actively discussing the constraints with us and is also funding organizations that supply Ahold with organic and Fairtrade certified fruits.
“ ICCO is supporting small-scale mango producers in West Africa. Through the cooperation with Ahold, Albert Heijn became the first supermarket chain selling Fairtrade/organic mangos from this region.
We are very pleased with this collaboration. It gave producers access to a new market and consumers access to an excellent product from West Africa. We hope that this is just the start and that in the future more African producers will get the opportunity to sell their products through Ahold companies.”
Jack van Ham, General Director ICCO
“Working on the Ahold-ASAP project has demonstrated that impossible issues (challenges in development) can be tackled with persistent, honest, systematic commitment and effort laced with a high dose of faith, trust, mutual respect and integrity at all levels.”
Professor Samuel Sefa-Dedeh, University of Ghana and Program Director Ghana Private-Public Partnership Food Industry Development Program
“The partnership with Royal Ahold is one of USAIDs flagship alliances. It encompasses what we want to achieve – linking farmers to markets. We believe that alliances are a very powerful tool in assisting farmers to access markets.
Farmers get direct market information from buyers, so they understand exactly what they have to produce. Importers get a reliable supply of diverse products and the world benefits because these communities can thrive by taking advantage of trade opportunities.”
Carol Wilson, Agricultural Trade and Development Program Officer United States Agency for International Development
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Case: EcoSound project: sustainable fisheries
Company Ahold U.S. retail
Issue Harmful impacts of fishing on marine and freshwater resources and ecosystems. What issue/challenge is being addressed by this program
Solution The EcoSound mission is to ensure the sustainability and traceability of Ahold’s How does this program contribute seafood products through a process in which Ahold’s U.S. retail operations and to solving the issue/challenge the New England Aquarium work to reach realistic sourcing standards, ensuring social and environmental stewardship and traceability throughout the supply chain.
The EcoSound project audits domestic and international sources of seafood for environmental impact and sustainability based on the best available scientific information. The recommendations that emerge from these audits affect the buying decisions of Ahold’s U.S. retail arenas and help shift decisions towards products that are harvested in a manner that favors marine conservation.
Implementation The project aims to improve environmentally friendly buying practices, using the Describe how you put this following strategy: program into practice • Stop ad and promotional activities for overfished species. • Objectives • Shift sourcing of specific fish species towards regions with healthier • Time frame populations and better management. • Scope As a result of the project, we have stopped selling Chilean sea bass, reduced purchases of orange roughy by 75% and increased sales of Icelandic cod by moving most of our purchases to two suppliers who are direct purchasers of this Results species. Furthermore, we have shifted our purchases of New England cod to Describe the main current and/or source from environmentally friendly hook and line cod (which minimizes expected results from this program: bycatch of other non-targeted species and has no impact on the ocean floor) social, environmental or commercial and started promoting haddock as a replacement.
Constraints or dilemmas Some environmentalists may criticize us for not taking a harder stand and always Describe the main difficulties, constraints, refusing to sell threatened fish species. Through our EcoSound strategy, however, dilemmas you encountered throughout the we have reduced our pressure on various overfished fisheries to help the stocks program, and how did you handle this rebuild while still providing customers with choice.
Recognition The EcoSound partnership was recently highlighted in the October 2004 issue What kind of recognition have you of Seafood Business Magazine and in a February 2005 article in the Japan received for this program and by Times. EcoSound leaders were also invited to speak on the project at the 2004 whom (e.g. award or other)? World Fisheries Congress in Vancouver and at the 2005 International Boston Seafood Show.
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“We are moving forward with the EcoSound program because it is the right thing to do... we feel that the consumers in our markets are just starting to become more interested and concerned with the sustainability and environmental impact of seafood sourcing.
The EcoSound program is our proactive approach to addressing the environmental issues of seafood. The long term benefit for our environment will also be our long term gain with consumers as we are leading the way and not following.”
Chuck Anderson VP Ahold USA Seafood Procurement
“Projects in the Aquarium’s Sustainable Fisheries Initiative are intended to protect marine ecosystems and fisheries through collaborative efforts and multi-sector partnerships.
The EcoSound partnership facilitates a consumer-based marketing campaign that results in better-educated customers at the seafood counter, establishing and reinforcing the link between sustainable fisheries and consumers.”
Heather Tausing, Director of Conservation of the New England Aquarium, Boston
Impacts of production ICA’s objective is to have in its assortment most of the on people available Fairtrade products on the market. Currently, ICA offers eleven Fairtrade products. Under its own brand, ICA sells organic and Fairtrade bananas, oranges Fairtrade and avocados. Fairtrade is an international movement which seeks greater equity in international trade. According to the Our U.S. retail companies currently carry five different website of Fairtrade Labeling Organizations International types of Fairtrade coffee products. (http://www.fairtrade.net), “Fairtrade Standards are not simply a set of minimum standards for socially Addressing labor issues in the supply chain responsible production and trade. Fairtrade Standards go In addition to Fairtrade, our companies are involved in a further: besides minimum requirements producers must number of projects that try to ensure that the basic labor meet, the Fairtrade Labeling Organization guarantees rights of the employees of their third world suppliers are them a fair price, and, through progress requirements, respected, including Utz Kapeh. In the Spring of 2005, expects them to invest part of it in economic, environmental Ahold joined the Business Social Compliance Initiative and social development.” Ahold companies support this (BSCI), a European alliance of 40 retailers and importers. effort by including Fairtrade products in their assortment. Ahold and another BSCI retailer are leading a new project to develop a BSCI social standard for agriculture. Albert Heijn currently carries twelve “Max Havelaar” labeled products depending on the season, including Supplier diversity combined organic and Fairtrade oranges, grapes, mangos, Ahold’s U.S. retail business started its supplier diversity avocados and bananas. From 2004, Albert Heijn has initiative in 2001. This business strategy enables us to aimed to combine organic with Fairtrade certification ensure equal access to business opportunities for all because we have found this concept is more attractive to business enterprises, leverage minority and women owned our customers than Fairtrade alone. It is Albert Heijn’s businesses (MWBEs) to ensure that our stores carry the strategy to focus on value and meeting customers’ right products and build a closer relationship with our requirements for convenience, taste, and variation. customers to drive loyalty in the communities we serve. Albert Heijn is targeting the ability to offer the consumer The supplier diversity initiative is a key strategic objective a full year assortment of combined fresh organic and throughout Ahold’s U.S. retail and support organizations. Fairtrade products, a goal which is also facilitated by the ASAP program.
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The objectives of the program are to increase spending Ahold USA reported spending USD $71.4 million with with MWBEs and also the number of MWBEs with whom MWBEs in 2001. In 2003, Ahold’s U.S. retail and support we do business. Our strategy includes establishing goals companies reported spending $83.8 million. This increase and developing tracking and reporting systems to measure represents 8% annual growth since inception of the progress, educating both our own associates and MWBEs initiative. In 2003, the companies partnered with 161 and providing tools and mechanisms for MWBEs to diverse suppliers who provided items ranging from contact and do business with us. seasonings to personal protection devices for associates.
“ Consumers become world citizens by buying Fairtrade products from developing countries. Ahold can help them by selling and promoting these products.
To me, Albert Heijn is a pioneer that shoulders these responsibilities. Developing countries can still pose a few challenges for Ahold. Ahold can encourage suppliers in developing countries to produce sustainably. And Dutch development organisations can give local producers a helping hand.”
Agnes van Ardenne, Dutch Minister for Development Cooperation
Case: Utz Kapeh, social practices in the supply chain
Company Ahold Coffee Company
Issue Coffee is a developing country product which has been the object of years of What issue/ challenge is being public attention regarding social and environmental issues in its production. addressed by this program Retailers like Ahold’s companies in the Netherlands, Sweden, Norway and the U.S. were looking for a way to provide assurance of good practices in origin and traceability back to origin, to answer the questions of where does coffee come from and how is it made. The challenge is to do this in a way that works in highly competitive markets – so, low barrier to entry and market-oriented - while providing the credibility, transparency and accountability that companies need.
Solution The Utz Kapeh foundation was developed by producers and the Ahold Coffee How does this program contribute Company to establish an independent and credible system for assurance of to solving the issue/challenge baseline good practices in origin. By creating an independent foundation, credibility could be assured and supply chain risks and costs spread out over many buyers. Ahold Coffee Company then set out to gradually bring all of its producers into the program so that 100% of its supply would be certified by the Utz Kapeh program.
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The Utz Kapeh code is a set of internationally recognized economic, social and environmental criteria for responsible coffee production, such as minimal and appropriate use of pesticides, protection of labor rights and access to education and health care.
Independent third-party auditors are approved by Utz Kapeh and engaged by producers to assess compliance with the Code of Conduct. They inspect coffee producers, at both management and farm levels.
The program is complemented by a comprehensive, internet-based Track-and- Trace system. This creates the opportunity for coffee brands, retailers and end- consumers to trace back their coffee’s place of origin and it provides them with the assurance that the coffee they have purchased has been sourced from responsible producers. This direct link with origin is a real innovation in the coffee industry.
Implementation The Utz Kapeh program started in 1997. The objective of the Ahold Coffee Describe how you put this Company is to have all of our coffee certified. In 2003, we started buying program into practice 100% certified products. In 2005 at least 90% of our private label products • Objectives had an Utz Kapeh logo on the package. • Time frame • Scope
Results Since its introduction, the Utz Kapeh program has developed rapidly. Initially Describe the main current founded by Ahold and its suppliers in Guatemala, it has become an and/or expected results from independent, not-for-profit non-governmental organization (NGO), promoting this program: social, environmental sustainable coffee production to suppliers, as well as to other retailers and or commercial roasters.
The Ahold Coffee Company purchases around 16,000 tons of coffee for the corporate brands of Ahold retailers in the Netherlands, Sweden, Norway, the Czech Republic and the U.S. each year. One of these, Albert Heijn’s private label coffee, is the second largest coffee brand in the Dutch market. The Utz Kapeh Code of Conduct is now officially recognized by EUREPGAP and the leading NGOs in the Netherlands, the rest of Europe and Japan.
Constraints or dilemmas In the international coffee market there is no contact between producers and Describe the main difficulties, roasters. This is mainly because the supply chain is long, with many traders, constraints, dilemmas you importers and exporters in between, and price-setting is done at the terminal ncountered throughout the program, markets. This means that there has been a lot of blending of different kinds of and how did you handle this coffee parcels. Traceability is extremely complicated and most of the time not possible. Utz Kapeh however requires or enables a roaster to source coffee directly from certified coffee producers. This means that Ahold Coffee Company manages a fairly long supply chain. Full focus and attention and strong long term relations with the producers enable us to guarantee full traceability of our coffee.
Recognition Dutch minister approves of Utz Kapeh If possible, provide us with balanced quotes (positive and/or constructive comments) from The Dutch minister for Development Cooperation Ms. Van Ardenne has publicly both an external partner and internal program expressed her approval of the Utz Kapeh program. In a speech delivered at champion an EU conference on Corporate Social Responsibility on November 9, 2004, she told the audience that “the Dutch government encourages corporate social responsibility by supporting initiatives like... Utz Kapeh coffee.” Visit www.minbuza.nl to read Ms. Van Ardenne’s speech in Dutch.
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Animal welfare product. In addition, Albert Heijn sells only free-range eggs and has reduced the selling period for plaice (though not to Animal welfare is an important topic in most of our markets. the extent favored by the animal welfare organizations, as Our dilemma is that from an environmental and regulatory our customers want to purchase plaice around the perspective, controlled animal conditions need to be Christmas holiday). Albert Heijn’s Greenfields beef is maintained, while the animal welfare perspective demands produced in a way that is similar to free range and almost “more freedom” for animals. It is a challenge to meet organic. Albert Heijn also does not sell certain products regulatory demands, while making extra efforts to improve which have animal welfare concerns connected to their animal welfare. production, such as foie gras and quail eggs.
Animal welfare standards vary in our different markets because of different legal frameworks and expectations of consumers and society. “Over the past years, representatives of the Dutch Society for the Protection During 2004 the criteria for the ICA animal welfare program were reworked to ensure compliance with our internal of Animals and Albert Heijn have policies, Swedish and Norwegian legislation and European met regularly to discuss animal animal welfare regulation. The criteria include salmonella welfare issues. risk assessment, no preventative use of antibiotics and hormones and good animal husbandry. The latter stipulates These discussions delivered concrete that animals shall always be treated well and protected from results with regard to improving unnecessary suffering and disease, be adequately living conditions of cows, calves, supervised and be kept and cared for in a good chickens, rabbits and farmed fish.” environment that promotes their health and allows them to behave naturally. ICA uses these policies to monitor John Oosterhuis, compliance with requirements to the extent possible. Quality Manager, Albert Heijn
ICA’s animal welfare guidelines for its private label products were tightened in 2003, to include all products with the ICA brand name that contain meat, such as meatballs and pizza. All fresh meat sold by ICA is still covered by the Our U.S. retail companies fully support Animal Welfare national standards. EU regulations on animal welfare must Third-Party Auditing. They are committed to working with be met for ICA’s Euroshopper private label and other suppliers who have adopted, or will soon adopt, approved products that contain meat. Animal Welfare Policy Guidelines. Ahold U.S. retail will communicate its policy to suppliers. In 2005 the U.S. Albert Heijn focuses its animal welfare efforts on certain arenas are working towards establishing a formal third-party meat products, focusing on space and living conditions for inspection program to ensure that our suppliers adhere to animals. The company has a longstanding and ongoing their policy. The inspection program guidelines contain dialogue with the Dutch Animal Welfare/Protection measurable indices for humane practices in the rearing, organization, focused on achieving results. Concrete handling, and processing of animals in food production. progress has been made regarding living conditions of veal. Ahold U.S. retail will also work to develop stringent auditing Internet tracking is available for veal, which allows and monitoring compliance practices with the goal of consumers to enter the farmcode from the package at working to ensure the welfare of animals within the food petersfarm.com and find out about the origin of the processing chain.
‘ Albert Heijn has a long history of striving for a higher level of animal welfare, often above legal standards.
The Dutch Society for the Protection of Animals is pleased with the dialogue with Albert Heijn and that we can contribute to improving animal welfare standards of animal products sold by Albert Heijn. We expect that Albert Heijn will continue to aim for a better welfare of all animals in intensive livestock farming. We are gladly willing to work together with Albert Heijn to achieve this goal.”
Marijke de Jong, Dutch Society for the Protection of Animals
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Consumer health Most of our companies now have mission and vision state- ments on health and well-being and are well-positioned Consumer health a global concern individually to contribute to and capitalize on developments The food industry worldwide and its main stakeholders in this area. Ahold’s ambition is to offer its customers (manufacturers, retailers, government authorities, scientifically solid and socially sound products. To this end scientists, and consumer organizations) agree that obesity we cooperate with universities like Harvard and Wageningen and overweight are growing problems across the globe. University and organizations like the “Voedingscentrum” There is a consensus that the solution to this problem in the Netherlands and Nordic Nutrition Board (ICA). includes informing and advising people about the need for physical activity and healthy diets. The industry and Moving towards an integrated approach its stakeholders agree that a multi-stakeholder, At this time, we are trying to go even deeper into the cooperative approach to this problem must be taken. issue and moving towards a better-coordinated approach. There is not yet a global consensus on how to implement It is the ambition of Ahold’s arenas to work together on changes. For example, differing opinions exist worldwide corporate brand development and other ways to address on labeling, the use of consumer friendly icons visualizing customer needs in this area. An integrated approach is healthy products and requirements for making health required to effectively turn this into a competitive claims. Currently the issue of consumer health holds the advantage, thus making our approach truly sustainable. highest priority in our U.S. and northwestern European For example, Stop & Shop and Giant-Landover together companies. established a Health & Wellness manager’s position in July 2003 and formed a multi-discipline, executive-level Ahold’s approach wellness committee to develop business strategies and As we see the focus on health and well-being to be a tactics. You can read more about our approach in the major, sustained consumer trend, we want to be a leader section “Global meeting on sustainability issues regarding in this area, or even have a genuine impact on the products” in the chapter “How we manage sustainability.” overweight/obesity issue going forward. We believe promoting the health and well-being of our customers Making it easier for customers to eat healthy falls within our responsibility as a food retailer and makes foods commercial sense. Our proximity to customers (as Our operating companies have promoted consumer health compared to manufacturers who remain one level over the last decades by offering a variety of science- removed) gives us the opportunity to have a significant based information and education and developing health influence. Therefore, our companies started to address icons on products. Through the introduction of innovative this issue in a focused way several years ago. healthy products, such as convenient, ready-to-eat salads, fruits and meals, our companies help consumers to eat a Ahold companies are full service food retailers, meaning more nutritious diet. In some cases, we also remove that they offer the complete range of products for a unhealthy substances from conventional products, for healthy lifestyle. These include fruit, vegetable and instance, the removal of transfat, sugar or salt content in seafood products, which are key to a healthful diet as well private label products, which is done at Albert Heijn, ICA as whole grains and low fat dairy products, also and Ahold Central Europe. emphasized by dietary guidelines. In 2004 and continuing in 2005, Albert Heijn has been reviewing all information on the labels of its private label products with regards to allergens, calories, transfats. Ahold management trainee Where relevant and where packaging allows, a gender program on sustainability calorie table and health related standard icons for gluten- free or milk-free products are included in order to help In 2003 and 2004, a group of 21 Ahold consumers make healthier choices. management trainees from different European countries participated in a trainee program on ICA’s private label program is focused on making it easier Corporate Social Responsibility. The aim was to for the customer to find a healthier alternative in each involve our future senior managers and to make category. As part of this objective, ICA will launch a healthy sustainability part of their mindset. During the private label range, introducing the first 50 products in project the trainees developed a selection model 2005. The launch will be supported by an extensive for CSR business cases. They chose health as the marketing campaign. most urgent issue for the food retail business. As a result of this program, a number of projects have In the mid-1980s, health care personnel and ICA’s been developed, including a “5-A-Day” project for customers wanted to be able to find an easy guide to the Ahold Slovakia. healthiest choice in different categories in the stores.
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“From ICA’s side we are proud that one of our health initiatives from 1989 has formed the basis for this voluntary product labeling system in Sweden.
Green keyhole products are part of the ICA strategy for health offerings and we set targets for sales increase for keyhole products every year. We use the symbol in commercial campaigns and recipes to simplify healthy weekday meals for our customers. It is very well received and we notice sales figures well above average for these products. I am pleased that government, food industry, retailers such as ICA and consumer organizations agree on the keyhole label as an easy guide to better eating habits.”
Liesbeth Kohls, Vice President Corporate Responsibility ICA AB
In response, ICA developed the “green dot” symbol. • Consumer advisor column in sales circular Inspired by ICA’s program, in 1989 the Swedish government • Kids Corner fliers introduced the “keyhole” label for healthy alternatives in • School Tour program different food categories. ICA has always supported this • Educational coloring books symbol, which makes it easier for customers to make healthier choices. During recent years the keyhole has Albert Heijn will start with its ”2 fruit, 2 vegetables” also started to be used in advertisements to guide people project in 2005 promoting increased consumption of towards more healthful products. In 2003 between five fruits and vegetables in line with the recommendation of and ten percent of all advertised products were keyhole the Dutch Health Ministry. products, while in 2001 not a single product was advertised as such. Sales of green keyhole products In Slovakia and Scandinavia, Ahold companies provide increased by 15% in 2003 to 3.6 billion SEK and by “5 A Day” instore tour programs for school children, almost 17% in 2004 to 4.2 billion SEK. teaching the importance of eating fruits and vegetables.
Giant-Landover promotes healthy choices through its Healthy Ideas program, which was launched in May 2000. The objective is to position Giant-Landover as the source for health information, services, and products through con- sumer information, recipes, food guides, shelf labels and health related screenings and services. In 2003, Giant Carlisle/Tops also introduced the Healthy Ideas program. “ Food must taste good but also be good for the body. The green keyhole label shows the way to healthier products that are low Educating customers on the in fat or high in fibre and moderate in health benefits of fruits and sugar and salt.” vegetables
Stop & Shop/Giant-Landover and Giant-Carlisle/Tops promote the “5 A Day” program (eating at least 5 servings of fruits and vegetables each day). Stop & Shop/Giant- Landover do this in partnership with the Produce for Better Healthy Foundation (www.5aday.com). Programs are executed through events and promotional materials including: Inger Andersson, Director-General of the • Instore signs Swedish National • Radio spots Food Administration • Website promotions
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Tracey Williams (38) Store manager; Mon., Tues., Thurs.-Sat. 07.30 - 17.30
Full service / flexible workforce
Serving associates well in a competitive industry The food retail industry in which most of Ahold’s companies operate is characterized by high labor costs and low profit margins. In recent years, our industry has become more competitive, due to the entry of low cost discounters into most of our markets and with more food being purchased outside of the supermarket. This calls for companies to positively differentiate themselves in customers’ perception while operating as efficiently as possible. It also means focus on cost control and flexibility compete with attention to building workforce capabilities and personal development of our associates.
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Managing our workforce
Each Ahold company is committed to being “a great place to work.” We will be a company refl ective and supportive of the communities we serve, where people are treated fairly and experience a fulfi lling career through our business growth.
Associates are a key Greater alignment underway competitive asset Though we still maintain the localized structure in many of our Human Resources practices, we are moving Strong customer service orientation is a key competitive towards more coordination. factor in the food retail and foodservice industries. We have found that customer satisfaction is strongly linked to As part of our Road to Recovery, we are simplifying our associate satisfaction and commitment. Therefore, it is overall organizational design, to provide more clarity of essential that we attract, select, manage and retain responsibility and better accountability and to improve committed customer-oriented associates, in order to the way we work together. In our move “from finance to differentiate ourselves from our growing competition. floor,” Ahold is taking a more unified, hands-on, “one company” approach to the business.
Local management of Along with certain other functional areas, we are taking Human Resources an increasingly coordinated approach to Human Resources, as mentioned in the second chapter of this report, “How we manage Sustainability.” The Group Ahold companies operate in labor markets in various Support Office is putting in place reporting lines, which countries with different prevailing labor practices. extend into the operating companies in these areas, As a result, in the past, we have not taken an Ahold-wide resulting in a more matrix-like organization structure. approach to most Human Resource policies and practices. The Human Resources function is putting processes and systems in place so as to work in a more collaborative Our practice has been to address issues in ways that meet manner across Ahold. the needs of local markets, within the parameters of Ahold’s overarching strategy and common values. Increased sharing of best practices with regard to how we Wherever we operate, we seek to ensure fundamental manage our workforce will improve efficiency and provide labor rights and to maintain high employment standards better opportunities for associate development. so as to attract and retain the best talent.
While this decentralized structure makes us responsive and agile, it also poses challenges for reporting, as we do not generally have aggregated data to measure Human Resource-related results.
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Human Resources Leadership Team Building cross-arena definitions and systems The Human Resources Leadership Team was established One of our main challenges in managing cross-arena data in 2004 to facilitate working together as a more closely in Human Resources is the fact that our arenas often use coordinated function. This group consists of the Chief different key performance indicators for measuring and Human Resource Officer (a position created in 2003), evaluating associate performance. We are currently the Human Resources leaders in the arenas and certain developing common definitions for many of our Human corporate Human Resources functional leaders. Resources key performance indicators (KPIs) across the The role of this team is to improve synergies by sharing company. best practices, working towards standardization of certain processes and collectively developing and completing We have begun to develop a common “scorecard” as part company-wide initiatives. of the overall Ahold Business Scorecard, which has been put in place to manage KPIs across the company. The Human Resources related KPIs on this scorecard measure store labor productivity, number of open positions, Human Resources mission: turnover, percentage of internal fill, percentage of diversity and number of cross-arena moves for all Ahold companies. This scorecard came into use in April 2005. We are working on a more comprehensive Human Resources Human Resources will help to attract, retain and specific scorecard which will standardize definitions for develop a highly qualified and motivated workforce HR performance indicators and allow aggregated data on that continuously achieves higher levels of a wider number of associate-related issues. performance and competitive advantage. The fundamental role of Human Resources is to generate Taking a one-company approach to business value for our stakeholders through people. developing talent We are working on new IT solutions to help us better Principles manage talent development on an Ahold level. We • Our people will be highly qualified and customer currently use the “ExecuTrack” system Ahold-wide for oriented; they will focus their efforts on critical tracking and tracing the career development and business priorities in an aligned way, which will performance of our senior management and for enhance results. succession planning. We are about to implement an • Ahold will be a great place to work. We will be a online learning system, to enable associates starting at company reflective and supportive of the middle-management to access web-based training and communities we serve, where people are treated educational programs. fairly and can experience a fulfilling career in a constantly evolving and thriving business. • Our people management practices will be both Measuring associate practical and innovative; we will support the company’s core values, attainment of near term results through satisfaction capability building and longer-term strategy through the fostering of an innovative mindset. It is increasingly important to us to improve associate satisfaction. In order to track this, Ahold arenas execute their own associate satisfaction survey. ICA AB used a survey in 2003 and 2004, mainly focused on measuring As one of its first shared endeavors, the team has employee empowerment. Albert Heijn has performed an developed a new mission statement and principles for the employee satisfaction survey annually since 2001. This Human Resources function at Ahold, which fall in line survey measures store safety, work climate, work content, with the new company-wide common values currently management, work pressure, education and guidance and being finalized and rolled out. The mission statement and growth opportunities. Ahold Central Europe started an principles will be common to Human Resources employee commitment research program in early 2004 in departments throughout Ahold. collaboration with the University of Twente in the Netherlands. Stop & Shop does associate satisfaction The Human Resources Leadership Team has also played a surveys among store level associates. An identical survey key role in helping to define the values which will form will be done by store level associates at Giant-Landover in the basis for Ahold’s culture going forward, and in the first half of 2005. establishing management competencies reinforcing these values, which will be used in performance appraisal and career planning for Ahold management associates.
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Appraising job performance
It is our ambition that all associates receive performance appraisals. In Albert Heijn and Ahold Central Europe 100% of associates are appraised. Our U.S. retail companies appraise all non-union associates at a store level. For many of our associates, including our management development target group, an electronic tool for performance management is used across Ahold.
Associate impact from divestment and restructuring
Managing associate interests during divestment As part of our Road to Recovery strategy, we are refocusing our business through a program of targeted divestments. These divestments have required a great within an arena and more easily align across arenas. deal of management attention in the past two years. We We recently established a new arena in the United States have pursued careful, organized divestment processes in that integrates two of our major operating companies, line with all regulatory requirements. We are committed Stop & Shop and Giant-Landover, and the U.S. retail to meeting our obligations to associates and the local corporate functions. community during divestments. We are also working within the arenas to further harmonize Managing associates during restructuring and improve efficiencies. In Ahold Central Europe, we have Another important initiative in our Road to Recovery is been integrating the back office activities of our companies the restructuring of our retail activities into business in Poland, Czech Republic and Slovakia. Furthermore, we arenas, which unite operating companies in comparable have restructured the headquarters of Albert Heijn as part markets, enabling us to realize significant synergies of an efficiency program.
1 Average number of associates in full-time equivalents 2004 2003 2002 Retail Stop & Shop/Giant-Landover Arena 62,098 61,672 63,663 Giant-Carlisle/Tops Arena 28,278 27,801 28,993 BI-LO/Bruno’s Arena 23,882 24,607 26,868 Albert Heijn Arena 23,087 24,335 25,085 Central Europe Arena 24,343 22,595 20,489 Other Europe 17,204 18,106 21,407 Rest of World 21,274 52,154 51,106 Total retail 200,166 231,270 237,611
Foodservice U.S. Foodservice 28,658 29,042 29,034 Deli XL 1,869 1,804 2,003 Total foodservice 30,527 30,846 31,037
Group Support Offi ce 310 293 198 Ahold Group 231,003 262,409 268,846 1 Not including ICA and other unconsolidated joint ventures
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Maintaining a balance: customer needs versus energy use Trends in eating habits towards more fresh foods and prepared meals have resulted in increased customer demand for these products. Because we sell more fresh and prepared foods than some of our competitors, our energy usage is also higher, as it is necessary for cooling and preserving food. Efforts to reduce energy consumption in our stores also conflict at times with marketing needs and customer convenience. However, because we operate in a low margin business, our managers are very cost conscious and constantly seeking efficiencies. Therefore, managing costs and operating effectiveness helps to raise awareness of energy use.
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Operations and the Environment
Our customers demand a complete, continuously available assortment of fresh, safe, high-quality products. Meeting these requirements is key to achieving customer satisfaction.
To meet customer needs, while remaining cost efficient Local factors which impact environmental management and maintaining our competitiveness, we need to include different legal requirements, market requirements constantly improve our performance in delivering goods to (merchandising needs of stores) and the local our customers. We aim to combine the efficiencies that infrastructure available to support distribution and waste lead to cost reduction and contribute to competitiveness management. For example, our U.S. stores are generally with environmental goals of reducing waste and bigger than those in northwestern Europe and sell larger emissions. For example, an efficiently run distribution volumes of fresh and frozen products. Consequently they process facilitates store productivity and contributes to need different in-store equipment (coolers, freezers, etc.), preserving the freshness, safety and quality of our which impacts energy requirements. products for our customers. At the same time, it reduces waste and minimizes the amount of transport movement, Energy and refrigerants thus lowering our costs and lessening our impact on the Preserving and preparing safe, fresh, quality food and environment. creating an attractive shopping environment are part of meeting basic customer needs. This translates into energy Our most significant direct environmental impacts come use, which is one of our most important direct from our store and logistics operations. Our overall priorities environmental impacts. Supermarkets consume are to increase energy efficiency, manage coolants well, significant amounts of energy, because of the equipment recycle and reduce waste as much as possible and lessen needed for safely preserving (e.g. refrigeration) and the impacts of our distribution operations. efficiently preparing food (e.g. baking ovens).
Our companies are expected to reduce energy use and
Common issues, local related CO2 use emissions in their own operations where approach possible. They improve performance by tracking and benchmarking energy consumption and refrigerants used, investing in energy-efficient equipment, developing Our arenas are responsible for managing their own innovative solutions with vendors, exchanging best environmental impacts, setting priorities and capturing practices among arenas and training staff in energy opportunities. As environmental management is relatively saving practices. more mature than, for example, management of sustainability issues in the supply chain, there is overall Refrigeration, in particular, is essential to preserve consensus on what are the major operational issues: product quality and food safety. Certain refrigerants pose waste reduction, energy efficiency, minimizing ozone a risk for ozone depletion because of the possibility of depleting substances and efficient distribution. leakage. Our companies are expected to phase out Therefore all of our companies address the same issues, refrigerants harmful to the ozone layer and to manage although implementation differs according to market refrigerants and refrigeration systems well in order to conditions. minimize leakage.
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Tracking and benchmarking to monitor and analyze the energy consumption of each Ahold companies track and benchmark energy consumption store from the head office in Oslo. The system monitors and refrigerants used with the aim of improving energy the ventilation systems, heating cables and fans, cooled efficiency and lessening the impact on the environment. product displays and cold room temperatures. So far, Our U.S. supermarket companies, Albert Heijn and ICA energy consumption has been reduced by nine to eleven identify stores with unusually high-energy consumption percent in the stores that have been equipped with this and perform detailed energy analyses in order to take system. It will be fully implemented by July 2005. Similar corrective measures. systems are already in place at other Ahold companies.
In 2004, ICA Norway has equipped 275 of its stores with the CoolICA Intranet based system, which makes it possible
Instore electricity consumption (KWh/Sq M per year)
Company 2004 2003
Albert Heijn 365 365 ICA (Norway) 650 600 Stop & Shop 602 607 Giant-Landover 715 714 Giant-Carlisle 870 845 Tops 841 837
Differences in energy consumption between companies are due to many factors including varied assortment (e.g. amount of products needing cooling), use of instore food preparation equipment (e.g. baking ovens for bread), store format and climate conditions. Except for Giant-Carlisle and Tops, fi gures represent electricity consumption per square meter store area, which equals total electricity consumption divided by total store area. This difference in calculation makes consumption seem higher at these two companies.
Energy consumption CSR report of 2002. Forty stores have been built with The table below provides an overview of energy consumption these features, which have led to a reduction in energy in our supermarket formats over the past three years. consumption of seventeen percent compared to the previous store design. Refrigerants Ahold companies phase out refrigerants harmful to the The integration of Ahold’s Central European operations ozone layer. into one arena has led to joint purchasing and development of technical specifications for store equipment. Investment in energy efficient equipment As the highest standards among the companies prevail, Ahold U.S. retail companies have been rolling out energy this has translated into environmental gains. In the case efficient components that were developed as part of the of cooling racks, joint standards have brought equipment Low Energy Superstore we reported about in the Ahold in Poland to a more energy efficient level than before.
Refrigerants installed in stores (in kilograms)
HFC HCFC CFC Company 2004 2003 2002 2004 2003 2002 2004 2003 2002
Albert Heijn 106,162 94,052 90,150 38,346 41,822 46,742 98 309 309 Stop & Shop & Giant-Landover 348,563 – – 443,540 – – 5,244 – – Giant-Carlisle 86,016 84,713 79,566 75,820 75,675 70,534 0 36 59 Tops 55,409 – – 173,433 – – 1,682 – – The table shows that the phase out of CFCs (chlorofl uorocarbon) is almost complete. In addition, it illustrates a rise in the use of HFCs (hydrofl uorocarbon). HFC is a compound that does not contain chlorine and is therefore safer for the ozone layer.
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Distribution High load factors are an indicator of efficiency in trans- portation. ICA’s trucks operate with a load factor of 65-90 Efficient distribution systems are key to food retail, from percent when making store deliveries and those of Albert just-in-time product ordering systems to making optimal Heijn at about 75 percent. Both companies are aiming to use of truck capacity. increase efficiencies by picking up goods from suppliers’ warehouses or plants on the way back to the distribution Environmental impacts of transportation and distribution center, reducing the number of “empty kilometers” driven.
in our business are related to fuel use, CO2 emissions, air pollution and noise. Our companies aim to reduce ICA will restructure its logistics system over the next few their environmental impacts in this area through years, decreasing direct deliveries by suppliers to the increased efficiencies in the ordering and distribution stores, increasing coordinated transports and return process, optimal truck utilization, efficient route planning transports from suppliers while reducing the number of and safe driving. Good alignment of stores, distribution warehouses. As a whole, it is expected that this will
centers and suppliers contributes to product quality and reduce the CO2 and other emissions by 20 percent per sales, enhances efficiency and reduces waste. year, according to our calculations.
Efficient ordering and distribution systems At Albert Heijn the potential for efficiency gains is also All of our companies use continuous replenishment large on incoming goods streams (products travelling from systems, which establish seamless integration of store suppliers to distribution centers). About 150 suppliers ordering systems with those of distribution centers and are currently participating in a project to create a highly suppliers. Continuous replenishment not only requires efficient network for transport of goods to Albert Heijn in a centralization of product streams but also changes the similar manner to ICA. Due to the arena structure now in role of distribution centers. They become transit centers place, we are also looking for ways to combine transport where products stay for the shortest possible time before of products to Ahold specialty companies Gall & Gall and moving to the stores. Good alignment of stores, Etos, and Albert Heijn, which are all part of the Albert Heijn distribution centers and suppliers minimizes transport of arena. unwanted goods, saving fuel utilization and the associated costs and reducing shrink. Safe and efficient driving Our companies place requirements on drivers and outside Local factors impact management of haulers with regard to environmental efficiency and traffic distribution safety. For example, Giant-Landover presents monthly Distribution challenges are different in each of our awards to safe drivers. The company also conducts an markets, due to differences in infrastructure, store sizes annual safe driving truck rodeo and the winners participate and distances between locations, among other factors. in state and national finals. Over the years Giant-Landover For example, in the highly urbanized and densely has produced a number of winners in these state and populated Netherlands, accessibility is the major national contests. challenge while in Scandinavia, stores and distribution centers are located far away from each other, often in Waste remote locations. In addition, our European stores are on Product and transport packaging is a key factor in average much smaller than in the U.S. where we operate preserving the freshness, safety, quality and attractiveness fewer stores of a much larger size. of products. For this reason, waste generation from packaging, truck fleet maintenance and unsold products Wherever we operate, efficiencies can be gained is a significant environmental impact of the food retail. throughout the whole distribution process, from the Reducing waste is a significant environmental moment goods are ordered, until the time they are responsibility and often an economic opportunity. delivered to our stores. Constant innovation translates into better customer service, cost reduction and less Environmentally adapted product development is also environmental impact. applicable to packaging. The material we use as packaging material should be recyclable as much as Optimal truck utilization possible. A large part of our emissions as well as our operating costs comes from our transport systems and processes. In order to minimize emissions and reduce our costs we maximize the amount of products we deliver to our stores per truck, or “load factor.”
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Our companies reduce waste through continuous improvement of ordering systems, recycling and packaging reduction. Dilemma: Our stores have a very wide assortment of products, Recycling cardboard and plastic particularly fresh foods and a growing number of Recycling of cardboard and plastic takes place in all of prepackaged goods. Our dilemma is balancing our our markets. A notable example of how our companies ambition to reduce packaging with the requirements use innovation to address waste management is a of food safety and consumer demands for recycling program started by Giant-Landover, in which convenience products that require packaging, such plastic waste is converted into home construction as pre-cut and washed ready-to-use salads. material. In 2004 the company received the GMA We address this dilemma through innovations such (Grocery Manufacturers of America) award for waste as biodegradable packaging. reduction as a result of this program.
Recycled waste in tons (plastic)
Company 2004 2003 2002
Albert Heijn 1,598 1,381 1,509 ICA (Sweden) 1,364 1,324 1,351 ICA (Norway) 577 532 450 Stop & Shop 328 152 – Giant-Landover 1,637 1,620 1,562 Giant-Carlisle 883 795 792 Tops 213 103 189
Recycled waste in tons (cardboard)
Company 2004 2003 2002
Albert Heijn 37,850 35,458 35,458 ICA (Sweden) 1,452 1,392 1,223 ICA (Norway) 9,971 9,895 7,000 Stop & Shop 73,666 75,132 75,754 Giant-Landover 39,494 37,426 36,599 Giant-Carlisle 32,034 27,752 28,862 Tops 28,782 29,819 32,607
Recycling ICA Sweden are for distribution centers only
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Recycled waste in tons (organic)
Company 2004 2003 2002
Albert Heijn 23,889 21,325 19,115 Stop & Shop 2,619 2,704 1,241 Giant-Carlisle 1,268 1,458 1,346 Tops 608––
Recycling ICA Sweden are for distribution centers only
Waste not recycled in tons
Company 2004 2003 2002
Albert Heijn 10,900 10,500 10,250 Stop & Shop 70,236 73,223 – Giant-Landover 53,362 50,997 – Giant-Carlisle 41,418 36,181 33,611 Tops 35,134 34,200 31,074
Recycling ICA Sweden are for distribution centers only. Stop & Shop “waste not recycled” data is not complete. Store data for one store division is miss- ing.
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Case: Stop & Shop Cape Cod Composting Program
Company Stop & Shop
Issue Finding a cost effective alternative for organics disposal (traditional disposal is What issue/challenge is being done through a local pig farmer), and ways to meet State of Massachusetts addressed by this program recycling goals for the Stop & Shop stores in Cape Cod, Massachusetts.
Solution Stop & Shop developed two new systems for composting, using a 35-yard How does this program contribute compactor unit and 68-gallon toters designated for organic waste recycling. to solving the issue/challenge These solutions: • Provide a minimum of 15-20% savings over traditional disposal costs (pig farmer) • Remove a greater amount of recyclable organic waste when compared with traditional means • Increase sanitation and safety at store level • Provide an avenue for partnership with trade associations, non-profits, regulatory agencies, local business and, most importantly, the local communities in which we operate.
Implementation Time frame: started on October 20, 2000 and is ongoing.
Results The project is currently underway at all eleven Stop & Shop stores in Cape Cod. Describe the main current Two stores have compactor systems and the remaining nine use toters. and/or expected results from this program: social, environmental or commercial
Constraints or dilemmas Both composting methods have benefits and restrictions: Describe the main difficulties, constraints, dilemmas you Toter Method encountered throughout the program, Pros: Minimal upfront costs for this system make it more cost effective than and how did you handle this the traditional method. It is easy for any store to transition to this program. Cons: Less organics are removed from waste stream, as this system cannot effectively dispose of waxed corrugated cardboard and out-of-code meats and fish.
Compactor Method Pros: Removes the most organics possible from the waste stream and further reduces the use of landfills. Cons: This method cannot be used in every store because of space restrictions. Also, there are large upfront costs for installation, which requires a concrete pad, electrical hook-up and building modifications.
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Recognition In October 2004 Stop & Shop and all participating stores received an award from What kind of recognition have you EPA WasteWise partner for outstanding leadership in the recycling industry and for received for this program and by demonstrating commitment to waste reduction. EPA WasteWise Partner is a pro- whom (e.g. award or other)? active program run through the (Governmental) Environmental Protection Agency.
“The Environmental Protection Agency is pleased to support Massachusetts and the supermarket industry in finding ways to reduce the disposal of food waste and other recyclable materials that would otherwise clog our landfills or require incineration.”
Ira Leighton, EPA New England, Biocycle Magazine
“There are really no drawbacks. We are saving money and doing a good deed by keeping these organics out of the landfill. I hope to see it expand, here on the Cape and in other locations.”
Kristina Stefanski, Stop & Shop, Biocycle Magazine
Organic waste Directive. Albert Heijn has played a leading role for many Recycling of organic waste is more complicated than years in negotiating and implementing a covenant other types of recycling, as it requires a special between government and business aimed at reducing infrastructure which is not always available. Depending packaging waste. In 2003, new packaging guidelines on the available infrastructure, organic waste is either were introduced in light of this covenant and composted or used to generate renewable energy. communicated to suppliers.
Our companies often create new possibilities when lacking Albert Heijn is increasingly using more biodegradable adequate external facilities. Albert Heijn developed a packaging for its products, with eight organic products program by which organic waste is both fermented and currently falling under this category. The company won composted. Through fermentation, organic waste turns the BCPN (Belangenverenigingen Composteerbare into the environmentally friendly methane gas. Producten Nederland, or Dutch Association for Compostable Products) award in 2004 for its efforts in Packaging reduction this area. Ahold is also represented on the board of SVM Our European companies work closely with suppliers to Pact, the institution that coordinates implementation of reduce packaging waste, in line with the EU Packaging the packaging covenant in the Netherlands.
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…or an investment?
Does charitable support create financial value? Our U.S. retail companies have always been involved in their communities through contributions to local charitable organizations. Can we determine whether these contributions, in addition to the social and intangible value they generate, also create financial value for our companies? As there is no way to separate the effects of local community support from concurrent pricing, advertising programs and competitive factors, it is difficult to establish a direct correlation between charitable giving and increased sales and earnings. Giant-Landover, for example, tries to measure this impact by including community support efforts in its ongoing consumer tracking study, which repeatedly shows that the company has significantly higher ratings on community support than its competitors.
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Charitable Support
Ahold’s operating companies demonstrate their commitment to the markets and societies in which they operate through direct participation in local community events and by sponsoring charitable causes. Sometimes this happens in small ways at the individual store level. At other times it happens in the form of major charitable sponsorships and drives to benefi t the residents of the communities we serve.
Local priorities community. For example, they sponsor little league Involvement in society at Ahold comes in different shapes teams, ethnic events, senior programs and after-school to fit the different needs of our stakeholders and businesses activities. As these programs have evolved over the years, in the local markets where we operate. In our U.S. markets, we have developed strong partnerships with many local we have an active dialogue with and involvement in the media and business organizations. local communities. Often this is translated into strategic corporate philanthropy. In Europe, involvement in society is more often related to environmental and social issues Donations made through Giant-Carlisle/Tops arena in USD in the supply chain. thousands
Charitable giving in our U.S. arenas 2004 2003 2002 Our U.S. companies have always placed a high premium on reaching out to the communities they serve and being Customers 2,562 2,052 1,780 a good corporate citizen through charitable giving. They Associates 1,352 1,281 1,319
have developed several well-known local initiatives to Vendors 1,118 1,144 1,081 assist area food banks, schools, youth groups and health- Goods 27 28 23 related organizations. In addition, they make many Dollars 1,091 1,116 1,057 smaller donations to other organizations within each Company 13,129 14,115 12,816 Goods 7,888 9,615 9,176 Dollars 5,241 4,500 3,640
Total Goods 7,915 9,643 9,199
Tsunami relief Total Dollars 10,246 8,949 7,796
Grand Total 18,161 18,592 16,996 At the end of 2004, a tsunami in South Asia left millions of people homeless and in desperate need of aid. Our operating companies and the Our U.S. companies often support good causes in joint Ahold Group Support Office made donations to efforts with customers, associates and suppliers. various charities totaling approximately Euro 300,000.
In addition, some of our companies enlisted the support of customers and associates. For example, Stop & Shop and Giant-Landover gathered $322,000 from customer and associate donations, in addition to the company’s donation. The funds have been donated to the U.S. Fund for UNICEF and the American Red Cross.
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Case: Hunger relief initiatives
Company Giant-Carlisle/Tops
Issue Situation of adults and children in our operating areas who are economically What issue/challenge is being disadvantaged and hungry. addressed by this program
Solution We approach this issue through partnerships with regional food banks within our How does this program contribute operating areas, which provide a bridge between the hungry of our communities to solving the issue/challenge and available food sources. Food banks can provide nutritional food along with training and education to member agencies and their clients to efficiently distribute food products and meals via soup kitchens, food pantries and other emergency food providers.
Implementation Fund raising in the stores Describe how you put this Giant-Carlisle and Tops conduct solicitation of customers at the point-of-sale program into practice several times each year. 100% of the money collected is donated to local and • Objectives regional food banks. In 2004, total proceeds exceeded $1,316,000, which • Time frame provides over $21 million worth of products to the hungry. • Scope Turkey donations During the holiday promotion period, when Giant-Carlisle and Tops run their customer loyalty program “Earn a free Thanksgiving Turkey,” customers are given the option to donate their earned free turkey to a food bank. Additionally, Tops and Giant-Carlisle work with their turkey vendors to make a bulk donation of turkeys to the food banks. In 2004, over $116,000 worth of turkeys were donated.
Reclamation Every year, Giant-Carlisle and Tops send millions of dollars worth of products back to the distributor. These products are overstocks, close dated products, discontinued products and damaged products that cannot be sold at the store. A portion of these products, which are deemed by the distributor to be usable, are then donated to food banks. In 2004, over $4.4 million worth of products were donated through the reclamation process.
Feeding charities Non-profit organizations may apply to receive day-old bakery products from our stores to help feed the hungry.
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Results In 2004 a total of over $8.3 million in cash and products were donated by Describe the main current Giant-Carlisle/Tops. Such programs enhance customers’ perception of our and/or expected results from companies as community minded. Wholesome products that are not saleable to this program: social, environmental customers are efficiently channeled to worthwhile organizations rather than or commercial being wasted. Hundreds of thousands of adults and children are provided with nutritious food and healthy eating education.
Constraints or dilemmas Several factors must be considered in the solicitation of charitable donations Describe the main difficulties, from customers at the checkout counters. Some customers do not like being constraints, dilemmas you asked to make a donation as it makes them uncomfortable to say “No.” encountered throughout the program, Depending on their shopping patterns, many customers may be asked to make and how did you handle this multiple donations over a campaign period. In addition, younger cashiers are reluctant to continue asking customers after several have refused the request. To address these issues, we provide written instructions to help cashiers present the request to customers in the most favorable and non-intimidating manner. We set specific dollar goals for each store, and organize incentive contests to reach and exceed these goals. We also limit the number of weeks we run these programs to minimize the number of times a customer is asked for a donation.
“Giant is committed to supporting community needs with heavy emphasis on eradicating hunger and improving the quality of life for children. What better way to do that than by supporting our local food banks. We are proud to be able to help those in our communities who need us the most.”
Denny Hopkins Vice President Advertising and Public Relations Giant Food Stores
“Tops is committed to supporting the mission of the Food Bank of Western New York.
Their assistance and donations throughout the year make a real difference in the lives of thousands of those less fortunate in our communities including families with young children, seniors and the working poor.”
Clem Eckert, Executive Director, Food Bank of Western New York
“Tops has been an active contributor to the Food Bank of Western New York since its founding 15 years ago.
I represent Tops on the board of directors of the Food Bank and have the opportunity to see first hand the impact Tops’ fund raising and in-kind donations are having on the Food Bank’s human services programs. Tops’ partnership of giving with our generous customers and the Food Bank here in our home market is repeated with other food banks throughout our three state marketing area, benefiting hundreds of thousands of adults and children who are in need.”
Karl C. Oesterle, Senior Manager Community Relations, Tops Markets
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Forward-looking Statements Notice
Certain statements contained in this sustainability report are “forward- • our ability to remedy the defi ciencies identifi ed in our internal looking statements” within the meaning of the U.S. federal securities controls and the amount of resources required to implement and laws. Those statements include, but are not limited to, expectations as to maintain improved accounting systems and controls; changes in net sales and certain expenses and estimations of the factors • increases in competition in the markets in which our subsidiaries that may cause such expected changes; and joint ventures operate and changes in marketing methods • expectations as to reductions in our debt; utilized by competitors; • expectations as to the impact of operational improvements; • the potential adverse impact of certain joint venture options, if • expectations as to the impact of the fi nancial plan and strategy, exercised, on our liquidity and cash fl ow; including the arena strategy; • fl uctuations in interest rates in the countries in which we operate • expectations as to the impact of the U.S. Foodservice strategy and and in exchange rates between the Euro and the other currencies in recovery plan; which our assets, liabilities and operating income are denominated, • statements as to the timing, effects, and effectiveness of in particular, the U.S. dollar; improvements and other changes to our internal controls and • our ability to maintain our market share in the markets in which we corporate governance; operate; • expectations as to our fi nancial health; • the results of pending or future legal proceedings to which we and • statements as to the expected impact of divestments; certain of our current and former directors, offi cers and associates • statements as to pending legal proceedings and investigations; are, or may be, a party and the suffi ciency of our directors’ and • expectations as to our competitive position and the impact of offi cers’ liability insurance; competition; • the actions of government regulators and law enforcement agencies; • expectations regarding our growth; • any downgrading of our credit ratings; • expected improvements in food safety; • suffi ciency of our insurance coverage and any further increases in • plans for standards for agricultural practices; insurance premiums; • expected improvements in our sustainability reporting, programs • unanticipated delays in our compliance with IFRS or unforeseen and performance; impacts of IFRS; • plans for a group framework on sustainability; • our ability to successfully implement our sustainability plans and • expected improvements in educating our associates about unanticipated delays in our effecting such plans; sustainability; • the potential adverse impact of any disclosures made in this • plans for sharing best practices regarding sustainability; sustainability report on our results of operations and liquidity; • plans for offering more organic products and lower prices for these • and other factors discussed elsewhere in this sustainability report. products; • goals for social issues; Many of these factors are beyond our ability to control or predict. Given • goals of the sustainable assistance program; these uncertainties, readers are cautioned not to place undue reliance • specifi c plans regarding seafood, coffee products, meats and eggs; on the forward-looking statements, which only speak as of the date of • plans for improving animal welfare; this sustainability report. We do not undertake any obligation to release • and plans for coordinating human resources. publicly any revisions to these forward-looking statements to refl ect events or circumstances after the date of this sustainability report or These forward-looking statements are subject to risks, uncertainties and to refl ect the occurrence of unanticipated events, except as may be other factors that could cause actual results to differ materially from required under applicable securities laws and regulations. future results expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from Neither our independent auditors, nor any other independent the information set forth in any forward-looking statements include, accountants, have compiled, examined, or performed any procedures but are not limited to, our liquidity needs exceeding expected levels, with respect to the prospective fi nancial information contained in this amounts available under our credit facilities and our ability to refi nance sustainability report, nor have they expressed any opinion or any other our debt obligations maturing in 2005; form of assurance on such information or its achievability. They assume • our ability to maintain normal terms, or improve terms, with vendors no responsibility for, and disclaim any association with, the prospective and customers; fi nancial information. • our ability to successfully rebuild U.S. Foodservice and implement our cash fl ow improvement and debt reduction plan; For additional information on these forward-looking statements and the • our ability to reach agreements acceptable to us and/or to fi nd factors that could cause actual results to differ materially from future buyers for the remaining operations we are divesting, to address results expressed or implied by these forward-looking statements, see legal obstacles to the consummation of the expected divestments our public fi lings. and to satisfy other closing conditions to the expected divestments; • our ability or the ability of any of our arenas and operating We do not undertake any obligation to release publicly any revisions to companies to implement and complete successfully their plans and the information in this Sustainability Report to refl ect events or strategies or delays or additional costs encountered in connection circumstances after the date of this Sustainability Report, except as may with their implementation; be required under applicable securities laws and regulations. A portion • the effect of general economic conditions and fl uctuations in food of the information in this Sustainability Report has been complied from prices; third-party sources believed to be reliable. However, we do not make any • diffi culties encountered in the cooperation efforts among representation or warranty as to the accuracy and completeness of such our subsidiaries and the implementation of new operational information. improvements; • diversion of management’s attention, the loss of key personnel, the integration of new members of management, and our ability to attract and retain key executives and associates;
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For more information:
Ahold Sustainability Telephone: +31 75 659 57 25 Fax: +31 75 659 84 05 E-mail: [email protected]
P.O. Box 3050 1500 HB Zaandam The Netherlands
Telephone: +31 75 659 91 11 With over 200,000 associates and 2004 consolidated net Fax: +31 75 659 83 50 sales of approximately EUR 52 billion, we are one of the Zaandam Trade Register No. 35000363 Design & Realization: Dart Design, Amsterdam world’s leading food providers. Printed by: Hollandia Printing, Heerhugowaard
www.ahold.com Ahold Sustainability Report
2004
P.O. Box 3050 1500 HB Zaandam The Netherlands
Telephone: +31 75 659 91 11 Fax: +31 75 659 83 50
Zaandam Trade Register No. 35000363 www.ahold.com