Ahold Delhaize USA plans major supply-chain expansion

To fuel the growth of its supermarket and e-commerce businesses in the United States, global food retailer Ahold Delhaize plans to invest $480 million over the next three years to bolster its U.S. supply chain operations.

Ahold Delhaize USA said late Tuesday that the move signals a shift to transition its supply chain into a fully integrated, self-distribution model. Under the plan, the company will acquire three warehouses from C&S Wholesale Grocers — two in York, Pa., and one in Chester, N.Y. — and partner with various firms to build two fully automated frozen facilities in the Northeast and Mid-Atlantic.

In addition, Quincy, Mass.-based Ahold Delhaize USA said it will pursue two new leases: one for a newly renovated warehouse in Manchester, Conn., and another for a C&S facility in Bethlehem, Pa.  

Ahold Delhaize noted that the investment will bring the infrastructure to support its U.S. omnichannel growth strategy.

“Today’s announcement is another example of how Ahold Delhaize USA is transforming our infrastructure to support the next generation of grocery retail,” Kevin Holt, CEO of Ahold Delhaize USA, said in a statement. “Through this initiative, we will modernize our supply chain distribution, transportation and procurement through a fully integrated, self-distribution model, that will be managed by our companies directly and locally. This will result in efficiencies and most importantly product availability and freshness for customers of our local brands – now and in the future – whenever, wherever however they choose to shop.” 

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Earlier this year, Ahold Delhaize USA's Giant Food Stores opened Giant Direct, an e-commerce fulfillment center in Lancaster, Pa.

Currently, Ahold Delhaize USA’s distribution networks include 15 traditional and e-commerce distribution centers, which serve its Food Lion, Giant Food, Giant/Martin’s, Hannaford and Stop & Shop supermarket chains, as well as online grocery arm Peapod. The company said the network will expand to 22 facilities by 2023.

To date, Keene, N.H.-based C&S has supplied select Ahold Delhaize USA brands. Plans call for the company’s Retail Business Services (RBS) subsidiary to partner with C&S to provide supply chain services during the transition to self-distribution, Ahold Delhaize said.

“Moving to a self-managed supply chain will enable Retail Business Services to reduce costs for the local brands it serves, improve speed to shelf, deepen relationships with vendors and better position our companies’ distribution centers in the communities they serve,” according to Chris Lewis, executive vice president of supply chain for RBS. “These changes will enable us to take advantage of financial and strategic value within procurement, logistics and warehousing to provide the freshest product through the most advanced, efficient delivery network in the grocery industry. We will continue to partner with key providers for distribution center management services, including third-party labor services, such as our longstanding partner C&S.”

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The enhanced distribution network will provide coverage for Ahold Delhaize USA’s local brands from Maine to Georgia, where it operates nearly 2,000 supermarkets and distribution centers across 23 states. The company said that over the three-year investment it will boost its distribution presence with seven new and acquired warehouses, including the two frozen facilities; improve speed of delivery and product assortment and freshness with closer supply-chain facilities; and spur innovation in warehouse design, including more automation, and an integrated transportation management system and end-to-end forecasting and replenishment technology.

Ahold Delhaize USA said its supply chain operations are among the most extensive on the East Coast, encompassing more than 1,000 trucks that travel more than 120 million miles annually and deliver 1.1 billion cases to its store banners. The company also generates over 6 million online grocery orders annually.

“Part of our strategy is leveraging the best of automation and technology,” Lewis added. “Each facility will also maintain a significant workforce. We recognize the future of work is changing, and we’re taking active steps to help our workforce adapt by enabling them to work more efficiently.”