WASHINGTON — Nearly two years of price investments through the Value Improvement Program has provided a foundation upon which Ahold is building “powerful consumer brands” for its Giant-Landover and Stop & Shop divisions.
In presentations attended by SN here last week, Ahold officials provided a glimpse into the effort, promising “great food” and “engaging shopping experiences” along with low prices and reliability at its largest U.S. banners. The presentation came on the heels of quarterly sales results showing Stop & Shop's largest identical-store sales gain in five years and the first quarterly positive identical-store sales at Giant in more than six years.
“This was a threshold quarter for Giant, a real rallying point,” said Larry Benjamin, chief operating officer of Ahold USA, whose parent company is based in Amsterdam. “The third quarter provides evidence that what we are doing is working.”
Officials cautioned that the brand-building effort is only now getting under way, and noted that volatile consumer sentiment, competition and the economy should continue to provide a challenging environment. But the mood among its executives last week — like the yellow and purple that are taking over signs, uniforms and marketing materials at Giant and Stop & Shop stores — was bright.
“Our whole view of our business in the U.S. is that we're not in the business of selling stuff. We're in the business of building brands,” said Benjamin. “What we're trying to do is create a proposition that offers our consumers a very attractive value and a very high-quality offering at the same time.”
Carl Schlicker, president of Stop & Shop/Giant, called the branding effort a “journey” that began when Ahold began making rounds of everyday price reductions under the Value Improvement Plan two years ago. As that program progressed, about 10,000 SKUs were culled as part of supplier renegotiations, officials said. Everyday shelf prices on remaining items were cut by between 10% and 15%, according to some estimates.
“As that process went along, a kind of critical mass was gained,” Schlicker explained. “Before that, to try and say we'd be something different than what we'd been in the past would have been difficult.”
Ahold envisions four “pillars” to support its brand: great food, low prices, an engaging shopper experience and reliability, said Jim Dwyer, chief business development officer and architect of the branding effort. Dwyer said a focus on low pricing, in concert with improved food offerings, will defend against competitors who position their stores at the high and low extremes of the market — while distinguishing itself from others operating in the “middle.”
Efforts to build “great food” credibility include new lines of prepared foods at stores under the Nature's Promise private label, revamped service meat cases and a new icon — Healthy Ideas — that will accompany products that would meet or exceed the criteria for healthy eating guidelines currently under discussion by the U.S. Food and Drug Administration, said Dwyer. The Healthy Ideas symbol, which will accompany around 10% of all products at Giant and Stop & Shop stores, will begin rolling out this month, Dwyer said.
A new store logo, introduced in August, has begun going up as part of renovations at stores throughout the chains. Employees have been dressed in a variety of new logo wear, which Dwyer noted comes in more cuts and styles than had previously been available.
“What it did was really help our associates stand out to shoppers,” Dwyer told SN. “Clothes that are tailored and fit well made a big difference to the workers, especially to the women, who previously had to fit into clothes in men's sizes. They love it.”
Officials noted that Stop & Shop and Giant had suffered in recent years as Ahold's financial problems, which erupted in early 2003, drained financial resources from the chains and emboldened new competitors. In the Washington metro area, this hurt Giant particularly as non-union operators, including Wegmans and Harris Teeter, arrived aiming directly for its best customers.
“I think among the two companies with the greatest market share over the last period of time — Giant and Safeway — there wasn't significant investment in the capital program. And in the case of Giant-Landover particularly, the pricing got out of sync,” Schlicker told SN. “And I think that opened up the opportunity for other retailers to look at this market and the great demographics it had, and come in with a new offering.”
An aggressive overall price message — a specialty borrowed from Ahold's successful Giant-Carlisle division — is now on prominent display at Giant-Landover and Stop & Shop stores. At a local Giant store, shelf tags call out the difference between prices at Giant and the same items at local competitors. Most recently, the chains introduced the “Real Deal” campaign, which uses television ads to tell the story of lower pricing on essential items and makes them easy to find in the store.
Ahold's U.S. banners posted a combined 6.4% sales gain in the third quarter, with comparable-store and identical-store sales gains at all U.S. divisions. Stop & Shop posted identical-store sales increases of 4.6% (3.8% excluding gasoline), while Giant-Landover's ID sales improved by 0.7% (0.6% excluding fuel) — its first positive sales performance in 25 quarters. Giant-Carlisle posted 8% ID sales gains (5.4% excluding gasoline).
Overall, Stop & Shop/Giant-Landover posted $3.9 billion in sales for the quarter, an increase of 4.4%, while Giant-Carlisle sales increased 11.8% to $1.1 billion. Analysts had anticipated weaker sales growth at Stop & Shop and a comparable-store sales decrease at Giant-Landover, according to reports.