Ahold, the American-Dutch food-retailing giant, isn't the first retailer to figure out that there's some wisdom in operating in more than one trade channel, but, when it comes to this country at least, it's moving more rapidly down that road than is any other retailer. Ahold, which has a strong retailing presence on the Atlantic seaboard with the five chains it owns, may have come to something of an epiphany when, late last year, it abandoned an effort to acquire Pathmark Stores, a chain in the region of New York City. Ahold apparently was spooked by what it considered to be a new analysis brought by the Federal Trade Commission to the proposed deal: Previously, the FTC had examined buyout proposals on a store-by-store basis to determine which individual locations would need to be divested. In the instance of Pathmark, an analysis of the entire market was used, which implied that numerous locations would need to be divested, and divested to an operator that would be sufficiently concentrated to maintain a high level of market competitiveness.
In actuality, the FTC never forbade the deal, but Ahold evidently took away the lesson that a new means of growth in this country would have to be found. So maybe it was all a blessing in disguise since Ahold then turned its attention to operating in multiple channels.
In recent weeks, Ahold closed on its acquisition of U.S. Foodservice, the nation's second-largest food-service distributor. (Opportunities for synergies between that company and Ahold's supermarket chains is obvious on its face, especially since the food-service business is in Maryland, or roughly in the center of Ahold's retail presence.) Ahold also said it would acquire two small convenience-store chains and a majority interest in Peapod, the on-line grocery retailer. Ahold isn't the only food distributor with a multichannel presence. For instance, Kroger Co. operates in numerous formats from supercenters to convenience stores. And many wholesalers are moving from wholesaling alone and into various retail activities.
But Ahold has jumped with particular speed in this direction and it seems reasonable to surmise that Ahold will continue in this direction. Is it a good direction?
Certainly, multichannel operations would help insulate any retailer from a sharp-edged competitive attack in any one channel. Indeed, many industry observers attribute the severe downsizing now under way at Winn-Dixie Stores to the growing presence of Wal-Mart Stores' supercenters in its core operating region. See the front page for more on Winn-Dixie.
The reverse side of that strategy is that a single company may not possess the management expertise required to skillfully operate in a variety of business environments -- at least that's the view from this country. But in much of rest of the world, it's common for companies to operate retailing formats far more diverse than those in Ahold's new portfolio.