Ahold Eyes New Chapter of Growth Opportunities

AMSTERDAM — Ahold considers its extensive global operation to be well into its next chapter, one whose main plot line involves creating new opportunities in the United States and Europe.

However, to reach this chapter, the Netherlands-based operation first needed to make sure all parts of its organization were on the same page, which was easier said than done at a company spread across two continents with a range of retailing formats and online shopping.

“It’s one strategy framework for the whole world of Ahold now,” said Dick Boer (above right), chief executive officer, in a recent interview with SN.

That framework impacts the American operation, Ahold USA, whose units include Giant-Carlisle, Giant-Landover, Stop & Shop and online retailer Peapod, and the European businesses, including Albert Heijn in the Netherlands and numerous banners elsewhere on the continent.

“There’s a complete alignment on how to move further as an organization and business,” said Boer, a company veteran named to the top spot in October 2010. “That’s our biggest accomplishment over the past year: Designing and refining strategy, and creating clear opportunities.”

Those opportunities wouldn’t have been possible just a few years ago, when Ahold was still rebounding from the disastrous impact of a 2003 accounting scandal, but the passage of time and a series of smart strategic moves have positioned the company for growth, according to executives.

“We feel comfortable we’ve regained our credibility,” said Carl Schlicker (left), chief operating officer, Ahold USA. “The foundation is solid financially. So now it’s about how do we grow the business.”

Ahold announced this month that in the latest fiscal year it grew net income by 19.2% to 1 billion euros, or about $1.33 billion U.S. Operating income in the U.S. grew 8.7% to $1 billion on a 6.6% rise in sales to $25.1 billion.

“When I look at the U.S. numbers, I’d say we really had a good year,” Boer said.

However, the company warned of challenges ahead this year as the still difficult economy impacts both the U.S. and Europe.

In a report following Ahold’s release of year-end results, the analysts at J.P. Morgan Cazenove said, “The clouds we expected are gathering,” citing in particular “falling volumes as consumer confidence weakens further in both the U.S. and Holland.”

Boer, nevertheless, took a glass-half-full approach to the near-term outlook.

“We said we’re seeing low growth for the first weeks of [first-quarter] trading, but it’s still growth. We still see some growth on both sides of the Atlantic.”

Ahold’s growth path has been a major question mark for equity analysts and investors, said Patrick Roquas, an analyst with Rabobank Securities, Amsterdam. After rebounding from the earlier serious financial challenges stemming from the 2003 scandal, “a key concern of the past three years was how do they go forward?” he said. “I believe the company’s recent strategies outlined last November provide a lot of initiatives to grow in a mature industry.”

This ranges from new stores and formats in Europe to acquisitions and customer loyalty efforts in the U.S., he said.

Ahold’s pricing strategy is a big factor in its recent success, said John Rand, director of retail insights for Kantar Research.

“I think they’ve done a really good job of repositioning the company, and repositioning pricing was critical because they were perceived as high priced,” he said. “They’ve moved away from a pure high-low model, and it’s had an impact.”

Throughout the economic downturn, Ahold has benefited in the U.S. from its expertise with loyalty marketing and understanding customers, Schlicker said.

“The period when the economy worsened was the same time when our capabilities in these areas were improving,” he continued. “Over the last couple of years that involved our ability to understand and segment the customers and deliver offers in multiple ways, in addition to improvements in quality, service and assortments.”