THE DAY AHOLD'S CHIEF EXECUTIVE DISCUSSED HIS LEGACY

David Orgel

It was undoubtedly one of the last interviews granted by Ahold's President and Chief Executive Officer Cees van der Hoeven. He sat down with two SN colleagues and me in mid-January to discuss the Netherlands-based company's outlook after 25 years of operating in the United States. At the time, he was close to celebrating 10 years at the helm. It was still a month before revelations of accounting improprieties would prompt his sudden exit from the company.

During our January interview, Cees was already concerned about his legacy at the $70 billion-plus firm he built into a global food retailing powerhouse. He had just come through a year in which the company's strong earnings growth outlook faltered; its accounting was called into question (not for the last time, it turns out); a foreign partner fell into bankruptcy; and Ahold's stock plunged. Cees offered his resignation in 2002 but the board declined to take it.

He had clearly stared into the abyss and was ready to return to business. But after years of praise from the financial community, Cees was still adjusting to the more tempered view of himself and the company.

"The sensitivity of the markets is huge," he mused. "In retrospect, I've joked that I had too much praise in the last 10 years but too much criticism at the present time."

Cees expressed confidence that growth would resume following a period of focus on internal issues, including reducing debt. And indeed he had some reason to be optimistic. Some investors believed Ahold was among the better-positioned chains to ride out tough times in the industry.

After spending $19 billion to amass businesses around the world, including the widely praised move to enter the U.S. food-service segment, Cees said performance problems were limited to a small portion of the company. Specifically, he cited the Latin American operations, particularly Argentina, as the main drag on results.

In contrast, "The U.S. has delivered according to expectations, or even better, in retail and food service," he said. "The Netherlands had a very good year. Scandinavia has had a phenomenal year. So that's 85% of our total business, if not more."

In the face of that positive performance Cees observed, "It's a little sad to see there's been such a huge impact with the write-down of assets and goodwill that this relatively small part of our business has had.

"I take full responsibility for what has happened," he added. "I was responsible when we acquired the Argentina business. But I also take full responsibility for the acquisition of U.S. Foodservice as well as Stop & Shop, etc. If you put that on a scale, it goes one way." It's up to others to decide how the scales will tip regarding Cees' legacy. For now, there are more pressing issues. Ahold's future is at stake, in particular its string of U.S. Eastern supermarket chains built over a quarter century with a vision of melding best practices of thoroughbred companies.

The problems of Cees and Ahold remind us how quickly and irrevocably the U.S. supermarket industry has changed. It seemed to move almost overnight from a period of rapid earnings advancement and acquisition frenzy to an era of reduced financial expectations, accounting scrutiny and reliance on organic growth. That translates into a challenging operating environment in Dutch, English or any other language.