For Ahold, a New Look Signals a Fresh Start

MARK HAMSTRA

AMSTERDAM — The new logos at Stop & Shop and Giant of Landover, Md., represent the beginning of a rebirth for the two banners, marketing executives at the chains said last week.

“We feel like we've done enough to begin to make the change, but had this been all there was to it, it wouldn't be at all sufficient,” said Stephen Vowles, senior vice president of marketing, in an interview with SN last week. “It is the beginning of a constant process of change.”

As reported in the Aug. 25 issue of SN, Stop & Shop and Giant late last month introduced the new logos, along with a series of changes inside the stores that include technology, expanded private-label offerings, meal solutions and new employee discounts. The changes follow a strenuous effort to reduce prices and streamline selection throughout the store.

Cutting prices marked a 180-degree shift for the chains, which had long been known for their innovation and in-store execution but also bore the reputation of being somewhat expensive. The effort to improve the chains' price perception in an inflationary environment has been a challenge for the company, as reflected in the margin pressures it disclosed in a second-quarter earnings report last week.

The new price image will be an ongoing aspect of the company's positioning going forward, Vowles said.

“We see price as a key part of the new brand, and we'll carry on talking about that at a very high level for the foreseeable future,” he explained. “For the first couple of weeks, we have this brand launch anthem out there that includes references to low prices. Then, moving forward, we'll continue to advertise low prices and how much we've lowered them very strongly for the next few years.”

The chains have changed their websites to reflect the new image and have begun transforming the store interiors. A transitional ad campaign uses animation built off of the colorful new logos, which incorporate a series of free-floating half-circles of varying sizes.

Carol Austin, vice president of brand and marketing strategy at the two chains, said the process of selecting the new image and logo took about a year. Ahold worked with Interbrand, Cincinnati, on the effort.

The logo that was selected from an initial field of about 20 ideas “seemed to be very compelling to customers and associates,” she said, noting that employee participation in the company's new image upgrade is as important as any other aspect. “People said it looks like a new beginning, or that the company is evolving. They described it with words like ‘warm’ and ‘bold’ and ‘simple’ and ‘engaging.’

“We are really pleased with how compelling it has been so far as we have unveiled it to our customers, and we are pretty optimistic that it is going to be a great representation of our evolving brand over the next horizon for us,” she said.

Ahold also plans to continue the “testimonial” ad campaign it launched last fall using real shoppers talking about their reasons for shopping at the two chains.

In the conference call with analysts discussing the company's second-quarter results, John Rishton, chief executive officer, Ahold, said the company briefly considered unifying the two chains under a single banner, but quickly determined that the value of the names in the marketplace outweighed any cost savings that operating under a single name would confer.

The company said it refrained from passing on some cost inflation during the most recent quarter, which contributed to a decline in profitability.

Net income for the quarter was about $496 million, down about 85% from year-ago results, which included nearly $3 billion in income from discontinued operations. Net income from continuing operations rose about 4% for the period, to about $260 million.

Sales for the quarter slid about 0.8%, to about $8.5 billion, although they were up 7.3% at constant exchange rates, adjusted for the decline in the value of the U.S. dollar.

In the Stop & Shop and Giant-Landover segment, operating income was $125 million, down $36 million from year-ago results, which the company attributed to price investments and some one-time charges of $44 million, partially offset by gains on asset sales of $22 million. For the first half, operating income at the two chains fell $62 million, to $327 million.

At Giant-Carlisle, operating income was down $10 million for the quarter, to $51 million, and was flat for the half-year span at $123 million.