Weak Economy Complicates Transition: Delhaize CEO

BRUSSELS — Executing its “New Game Plan” initiative in a time of economic uncertainly has put Delhaize Group in an “uncomfortable” position for the short term, but the turmoil is making the case for the changes.

“We have started to cross the river and we know we will be stronger, for the long term, on the other side,” Pierre-Oliver Beckers, Delhaize’s chief executive officer, told shareholders at the retailer’s annual meeting here. “But right now we are in the midst of the river, and our position is uncomfortable.”

Delhaize’s New Game Plan, introduced in 2009, is a comprehensive strategy designed to improve profitable sales growth behind an effort on best-in-class execution, expense reductions and value leadership throughout its banners. The effort includes a new branding initiative at its U.S.-based Food Lion division, its largest banner, and the expansion of its discount Bottom Dollar stores in the U.S. Beckers said he was confident those initiatives were working while acknowledging the economic and competitive environment “has made things more complicated in the near term.”

Specifically, the expectation of decreased profits while the initiatives take hold has been poorly received by financial markets, Beckers said. But he maintained the company would meet its goal of growing revenues by 5% to 7% beginning in 2014, and that it would exceed its cost-cutting goals this year.

Executive Bonuses Reflect Performance in 2011

In an interview published as part of Delhaize’s annual report, Beckers said the economy has forced consumers to develop what he called “and-and” behavior, reflecting the need to improve Food Lion’s pricing at the same time it improves presentation and cleanliness.

“They want price and quality,” he said. “To meet those demands and improve our perception with consumers we undertook the brand repositioning work at Food Lion. We focused on price but also improved the shopping experience and emphasized produce, which is often seen as the barometer for the quality of a store.”

He reiterated plans to roll out the new strategy to more than 600 stores this year, and complete the Food Lion transformation by early 2013. The company said stores that received the new branding initiatives are seeing increases in customer visits and items sold.

Delhaize America, the U.S. division of Delhaize Group, also operates the Hannaford Bros. banner in New England and the Sweetbay chain in Florida in addition to Food Lion and Bottom Dollar,

The annual meeting was the last for retiring board Chairman George Jacobs, who officially stepped aside following the meeting for Mats Jansson. Jansson is a veteran executive of Swedish retailers ICA and Axefood, and also had been chief executive officer of Scandinavian airline SAS. Shareholders at the meeting approved the appointment of Shari Ballard, an executive vice president of Best Buy, as an independent director; and approved the renewal of board terms for Beckers, Didier Smits and Claire Babrowski.

Jacobs in his remarks at the meeting said that the board had accepted a proposal from management that no increase will be applied to their 2012 salaries. Managers also said they would reduce their bonuses to 50% of what they would be entitled to achieve given the 2011 performance.