CIES EXECUTIVE CONGRESS 2000-06-05

DAVID ORGEL

DUBLIN -- Global food retailers are overcoming challenges ranging from heightened competition to a shortage of good employees as the race to increase market share intensifies.

Top executives of international retailers Tesco, Ahold and Delhaize detailed how they are surmounting such major obstacles during sessions of the CIES Executive Congress here last week.

U.K.-based retailer Tesco is making solid gains as a relatively new player on the international stage as it battles other global retailers in a consolidating industry, according to David Reid, deputy chairman.

"We're a newcomer to an increasingly global world, so we've had to relaunch ourselves to access further growth," he said.

Reid noted that Tesco has been growing in numerous world markets despite increasing competition from global operators, including Wal-Mart, Carrefour and Costco.

Tesco's vehicle of choice is the hypermarket. The company has become one of the world's largest investors in hypermarkets with initial focus in central Europe and Asia.

Currently, the company operates hypermarkets in nine countries. It operated 38 hypermarkets at the end of 1999 and will have 130 such units by 2002. That compares to almost no units in 1997.

"So we're moving fast and building scale," Reid said.

"International will be our biggest source of investment and growth."

In Central Europe, Tesco leads other global players in hypermarket development, Reid said. In Asia, the initial focus is in Thailand and Korea, with Taiwan to be added in 2001.

"For example, in Bangkok we have a world-class hypermarket format that will take us to 24 units by the end of this year -- a market-leading position."

One of the keys to Tesco's global retailing is the use of local retail managers. "We have executives from the core business in the U.K. doing technical work, but local people run the companies," he said. "We have local store managers because you need support in the countries. For example, only Hungarians know all the nuances behind the local holidays to create opportunities to sell more to consumers."

Global sourcing is also an important goal for the retailer. Tesco has sourcing hubs in India, Thailand and Hong Kong. "We believe you need sufficient scale in each country and region to buy well," Reid said.

Tesco's international push was spurred partly by increasing competition in the 1990s. The company is also working to maintain its core U.K. business, building nonfoods sales and closely following customer trends and purchasing habits, Reid said.

Belgium-based Delhaize, an expanding global retailer, is focusing on increasing employee retention to gain a competitive edge at a time of low unemployment, said Pierre-Olivier Beckers, president and CEO.

Much of that effort involves fostering communication and training, Beckers said. The company has put in place a "global knowledge platform" on the Internet to enable employees to share information and managers to obtain relevant data quickly. Monthly meetings between Beckers and middle managers probe problems and challenges. Future managers visit all departments of the company and get in-store experience.

Beckers pointed to the young employees of Generation X as a group that has forced new types of thinking for the company and the industry. "There's a new generation of executives in the workplace," Beckers said. "They are the post-baby boomers."

Beckers advised companies to tackle the Generation X challenge early and forcefully. He said employees want more "cosmetics" or perks, such as fitness centers or casual dress days; conveniences like flexible work hours or baby-sitting services; training and quick responsibilities that can improve marketability, and rewards like bonuses that can be tied to job performance.

Global retailer Ahold, based in Zaandam, the Netherlands, is relying on the innovation of its employees to foster its rapid expansion pace, said Han Willemse, executive vice president.

"Ahold is an organization that is multiformat and multibrand and international," he said. "We want to use the resources of our people, to have their ideas more available for everyone in the company." Willemse spoke as part of a panel session during the CIES event.

Attracting young, innovative employees is a major challenge for Ahold and other retail companies. "Young people are coming to our company for excitement, adventure and the opportunity to be entrepreneurial," he said. "We have a university program that involves the sharing of ideas."

But Ahold's growth also relies on teaming up with the right global partners and embracing their cultures and know-how, he said. "If you think about us as an organization of winning teams, then you learn from each other and you want to keep the identities of each alive," he said. "People from each country have their own identities, and you want to build on that."