Long before most U.S. supermarket companies had unveiled SKU rationalization efforts, sweeping price-reduction programs and expanded private-label efforts, Ahold was well on its way to implementing its Value Improvement Program at its Stop & Shop and Giant-Landover banners.
One of the architects of that initiative — which has helped Ahold’s U.S. banners thrive during the economic downturn — was John Rishton, currently the chief executive officer of Ahold, which is based in Amsterdam and makes its U.S. headquarters in Quincy, Mass.
“As CEO, he was part of the team that oversaw the Value Improvement Program,” said Charles Allen, a London-based analyst with Consumer Equity Research. “As outsiders, they were not bound by established thinking and clearly saw the need to cut costs, rationalize SKU count, cut prices and improve stock turn. This is an ongoing process, and more work continues.”
More recently, the company has been shifting more support functions from its Stop & Shop offices in Quincy to the Carlisle, Pa., offices of Giant Food, for example.
Late last year the company, which generates most of its revenues in the U.S., realigned its U.S. operations to better position it to respond to local market initiatives and to make acquisitions.
Two such deals were done this year — the purchase of the Ukrop’s Super Markets banner in Richmond, Va., by the Giant-Carlisle division, and the pickup of several Shaw’s stores in Connecticut by Stop & Shop.
The company also was able to grow sales and market share in 2009 in all of its U.S. divisions, despite the difficult economic conditions.
“We did well in a tough year, delivering solid results,” Rishton said during a recent earnings conference call, citing high unemployment, declining consumer confidence, food-price deflation and increased competitive activity. “Against this backdrop, we increased operating income by 7.9%, delivered an underlying retail operating margin of 5.1%, improved cash flow from operations and improved our return on capital.”
As the former chief financial officer of Ahold, Rishton also helped lay the foundation for restructuring the company following its 2003 financial implosion, according to Allen.
He credited Rishton with facilitating the asset sales — notably the sale of the U.S. Foodservice business — “at prices that allowed Ahold to have a stable supermarket portfolio in the U.S.”
He also cited as Rishton’s biggest achievement “restoring the financial health of Ahold” to make it “one of the best capitalized food retailers.”
In a conference call last month, Rishton said he believes Ahold is well-positioned in the near term.
“Irrespective of whether things stay as they are, get worse or get better, we are better placed than most of our competitors,” he said. “I think we have we proven that we can adapt to the changing conditions very effectively. The fact that we repositioned our businesses a long time ago has given us an advantage, and the strength of our balance sheet gives us an advantage over many of our competitors.”