Delhaize Rolls Out Three-Tier Private-Label Program

JON SPRINGER

BRUSSELS — Delhaize Group is close to launching a three-tier private-label offering across all its U.S. banners, Pierre-Olivier Beckers, president and chief executive officer, said last week.

The line would include value-priced offerings under the Smart Option brand and premium items under the Taste of Inspirations name. Mid-tier house brands will retain their names but will share unified design and procurement throughout U.S. operations, Beckers said. Delhaize recently rolled out a private-label natural and organics line, Nature's Place, in a similar manner and is preparing the launch of a health and beauty care brand called Healthy Accents at Food Lion, Beckers said. (See Page 57 for more on multi-tier private label.)

Unifying private-label operations in the U.S. and in Europe creates significant savings in procurement and packaging and is a major strategic focus at Delhaize, said Beckers during a conference call reviewing results for the fiscal first quarter ended March 31.

U.S. sales of $4.4 billion increased by 5.6% vs. the same period a year ago, with same-store sales improving by 4.1% and operating profits increasing 7.7% to $240.6 million. Including operations in Europe, Delhaize reported $6.4 billion in sales — a decrease of 0.5% from the same period last year — and $150.9 million in net profits, a 19.9% increase. At identical currency exchange rates, Delhaize said overall sales improved by 5.9%, while profits were up by 12.6%.

Delhaize officials used the question-and-answer period to clarify some earlier statements that may have fueled speculation that the company was seeking a merger with Ahold. Specifically, Craig Owens, chief financial officer, said his comments in March regarding similarities between Delhaize and Ahold were in response to being asked to compare them. “I really would caution anybody against reading very much into that,” he said.

An analyst in the meantime asked about Delhaize's attitudes toward purchasing a unionized retailer — referring to chains, such as Ahold, in the Northeast U.S.

“We have shown in the past that we are not completely opposed to potential acquisitions of unionized companies, as some time ago we had shown some interest for Pathmark,” Beckers said. “We will take opportunities as they come, and we will look at the fundamentals of companies and how they can complement and fit our overall growth strategy, whether they are union or non-union.”

Meanwhile, Delhaize chains are responding to consumers' growing interest in healthy lifestyles. The Guiding Stars program that rates product health and wellness attributes on shelf tags at Hannaford will be rolled out to Sweetbay Stores in Florida later this year. Ron Hodge, CEO of Hannaford, said Guiding Stars was “gaining traction,” at Hannaford, where sales of items marked with Guiding Stars have increased.

Health and wellness is an overarching theme driving conceptual changes at Delhaize, Beckers said.

“We believe customers are really changing their behavior, and we think we can create leadership in the marketplace,” he said.

Hannaford is experiencing its greatest growth in Massachusetts, as a result of a price investment program begun late last year, said Hodge. He added there has been “very, very little impact,” to sales or profit margins as a result of competitor Stop & Shop's implementation of an everyday-low-price strategy in certain categories.

The transformation of Kash n' Karry stores to the Sweetbay banner in Florida is nearly complete, officials said. Delhaize converted 10 former Kash n' Karry sites to Sweetbay during the first quarter, ending up with 79 Sweetbay locations. Officials said they expect to complete the final 20 conversions by the end of the summer.

While trends at Sweetbay were boosted in the quarter by aggressive price promotions, overall sales “are not where we want them to be or need them to be,” said Hodge. “But we're headed in the right direction.”

Albertsons stores in Florida, which were sold to the private equity-backed Albertsons LLC group last year, have not become more significant players in the marketplace, Hodge said. “They have a management team on-site that seems very capable,” he said. “The stores have improved in their appearance, but there has been very little cap-ex on those stores. I think we have seen improved operations, but not a significant change in relation to the total marketplace.”

Some observers have said they consider Albertsons to be a potential acquisition target for Sweetbay.

Food Lion has begun making adjustments to assortments and sales fliers at more than 200 stores based on its customer segmentation research. In particular, said Beckers, changes are being made in the fresh departments on key value items that address the needs of specific customer clusters.

Also at Food Lion, work will begin later this year on a market renewal strategy in the Norfolk, Va., area, where 80 stores are set to be remodeled based on the Food Lion, Bloom or Bottom Dollar brands.