AHOLD ASSEMBLES ITS U.S. HOLDINGS

CHANTILLY, Va. -- It all fits so neatly that one thinks it was planned out from the start, just over 25 years ago.Ahold USA's retail business comprises six companies that are key supermarket players heavily concentrated on the East Coast. These chains enjoy the synergies and efficiencies of working as part of a larger network, which also includes Ahold's worldwide operations in 27 countries. The U.S.

CHANTILLY, Va. -- It all fits so neatly that one thinks it was planned out from the start, just over 25 years ago.

Ahold USA's retail business comprises six companies that are key supermarket players heavily concentrated on the East Coast. These chains enjoy the synergies and efficiencies of working as part of a larger network, which also includes Ahold's worldwide operations in 27 countries. The U.S. retailers were added one by one in what appeared to be pieces fitting into a pre-determined puzzle.

But the vision that seems so formidable today was not there all along. When Ahold entered the United States for the first time in 1977 to acquire Bi-Lo in the Carolinas and Georgia, the company could not have anticipated what the future would bring.

"It wasn't until the late 1980s or early 1990s that Ahold developed the whole idea of taking stock of what was acquired and seeing how we could position ourselves as the market leader along the East Coast," said Cees van der Hoeven, Ahold president and chief executive officer.

"In the beginning, our vision was not that great," he continued. "We weren't familiar enough with the marketplace. But later we began to develop our confidence."

Illustrating the changes in Ahold's view of the U.S. market, van der Hoeven noted that the reason for starting with Bi-Lo was the belief that the Southeast, as a growth area, was the most attractive region.

"We found out since then that in the Southeast you can also build stores more easily and that therefore competition is also a little more dispersed," he said.

The initial deals in the United States -- the acquisitions of Bi-Lo and Giant Food Stores of Carlisle, Pa. -- were guided by Hans Van Meer. Later, executives including Pierre Everaert and Robert Zwartendijk played important roles.

In 1988, Ahold added Finast in Ohio, followed by Tops Markets, Williamsville, N.Y., in 1991; Red Food Stoes in Tennessee and Georgia in 1994, and Mayfair in New York in 1995.

What came next would change the way Ahold went about its future business in this country.

"The watershed event was the acquisition of Stop & Shop in 1996," van der Hoeven emphasized. "That's when we really made a very important step forward. From that base, we were much more confident we'd be able to add significant value to the existing chains."

What was it about Stop & Shop that fueled Ahold's U.S. efforts? Bill Grize, a Stop & Shop alumnus who is president and CEO of Ahold U.S. Food Retail, said the chain brought a new level of operating savvy to the parent company.

"I think what Stop & Shop brought to Ahold is a heavy focus on people development, on the customers and an incredibly intense view of doing things better, always raising the bar," he said. "People at Stop & Shop are their own worst critics. They've set a very high performance level."

Robert Tobin, who formerly ran Ahold USA and is now on the company's supervisory board, was the top executive at Stop & Shop at the time of the merger. He said the most important thing about Stop & Shop "is the intellectual approach to everything. The process of approvals is very stringent on new store development. There's lots of research and an understanding of the customer. Their perishables procurement is outstanding. Stop & Shop lets people run things themselves but holds them accountable."

Grize and Tobin point to the efforts of former CEO Lew Schaeneman in helping to create the modern Stop & Shop culture. The roots of that culture can be traced back to the founding Rabb family, especially Sidney Rabb, the company's longtime leader and a legendary supermarket executive. Grize said Rabb stressed the importance of understanding and satisfying customers; treating associates with decency and respect; being ethical in dealings with trading partners; and giving back to communities through philanthropic activities.

Two years after the Stop & Shop acquisition, Ahold tapped Tobin to lead all of Ahold USA. In 1998, Ahold acquired Giant of Landover, another strong chain, as a follow-up to the Stop & Shop deal.

"That turned into a quick and successful transition into Ahold which involved exchanging of best practices and stepping up of knowledge sharing," Tobin recalled.

Ahold was not so lucky with its attempt to acquire Pathmark in 1999, a deal it abandoned in the face of government antitrust concerns.

The year 2000 brought new and different kinds of companies to Ahold. U.S. Foodservice was acquired in a diversification move that quickly made Ahold a major player in an important U.S. food sector. Ahold would later add to its food-service holdings with other deals, including the acquisition of Alliant in 2001.

"Food service was a cataclysmic change for Ahold," van der Hoeven said. "We were very excited about it. After all, it is awesome, isn't it? Within a period of two years, you go from a nobody in the sector to a $17.5 billion food-service operation, No. 2 in the nation with tremendous potential for growth."

In another new direction in 2000, Ahold took a majority stake in the home shopping Internet grocer Peapod. Also that year, Ahold acquired two chains of gas stations and convenience stores.

Ahold added to its retail holdings in 2001 the 56 stores and eight locations from Grand Union. Also that year, Ahold acquired Bruno's Supermarkets.

Looking back on the past 25 years, Ahold executives list a number of reasons why the U.S. operations have grown and improved. One of those is choice of acquisition candidates.

"We found over the years that the most important criteria in choosing companies to acquire is cultural fit," van der Hoeven said. "It is so incredibly important that the vision of the companies is aligned and that your goals, dreams and ideals -- the way you want to go to market -- are very much the same."

Grize said Ahold did a good job of selecting companies that were market leaders. "We also have kept the soul alive at each of the companies," he added. "One of our biggest strengths has been fanatical dedication to everything that's local. The focus on the customer is intact."

That aspect of Ahold is what will help guarantee its resiliency, Tobin concluded.

"From the beginning, I believed in the Ahold system of thinking globally and acting locally," he said. "That concept will stand the test of time. I'm very optimistic about the company's future."

AHOLD USA THROUGH THE YEARS

A lot has happened since Ahold first entered the United States in 1977 with the acquisition of Bi-Lo. Below is a chronology of Ahold's U.S. progression as it built its portfolio with supermarkets, convenience stores, food-service companies and home shopping operations.

1977 Ahold entered the U.S. market for the first time, acquiring the Bi-Lo supermarket chain in the Carolinas and Georgia.

1981 Ahold acquired its second U.S. supermarket company, Carlisle, Pa.-based Giant Food Stores.

1988 Ahold acquired its third U.S. supermarket chain, Finast, in Ohio.

1991 Ahold acquired Tops Markets based in Williamsville, N.Y.

1994 Ahold acquired Red Food Stores supermarkets in Tennessee and Georgia.

1995 Ahold acquired Mayfair in New York's metropolitan area.

1996 Ahold acquired Stop & Shop in New England.

1998 Ahold acquired Giant Food based in Landover, Md.

2000 Ahold acquired U.S. Foodservice.

2000 In June, Ahold acquired a majority stake in the Internet grocer Peapod, based in Chicago. In May, Tops Markets acquired Sugar Creek, a chain of gas stations and convenience stores. Also in May, Bi-Lo acquired the Golden Gallon chain of gas stations and convenience stores.

2001 Acquisition of 56 stores and eight locations from Grand Union was completed in February.

2001 In November, Ahold's acquisition of nationwide food-service operator Alliant was completed.

2001 Ahold acquired Bruno's Supermarkets, with stores in the Southeast.

2001 In August, the shares outstanding in Internet grocer Peapod were acquired.