ZAANDAM, Netherlands -- Ahold here is melding its Edwards Super Food Stores chain into its Stop & Shop and Giant Food Stores subsidiaries and shifting top-level officials to streamline some of its U.S. operations.
The move, announced last week, does not eliminate the Edwards banner in the competitive Northeast market, and Ahold has no plans to phase it out, spokesman Erik Muller said. The changes eliminate costs and create more distinctive trade areas for each chain, the company said.
Ahold's decision to realign the three divisions comes on the heels of its acquisition of Stop & Shop Cos., Quincy, Mass., completed July 22, and a consent agreement to divest 31 New England stores, mostly Edwards units. The consolidation answers some questions observers have had about how Ahold planned to keep different stores in the same regions.
Key changes include the following:
Merging 35 Edwards stores in New England and New York's Westchester County into the Stop & Shop organization. Those stores would become Stop & Shops in the next few months.
Placing 44 Edwards stores in New Jersey, New York City boroughs and New York's Long Island under the organizational umbrella of Giant, Carlisle, Penn., while maintaining the Edwards name on those stores. Edwards is based in Windsor Locks, Conn.
Converting 16 Melmarkets Foodtowns, a Garden City, N.Y.-based chain Stop & Shop bought late last year, into Edwards stores.
Appointing Allan Noddle, president and chief executive officer of Giant Food, president of Ahold USA Support Services, effective Jan. 1. His post will be filled by Tony Schiano, president and CEO of Edwards Robert Tobin remains CEO of Stop & Shop.
Ahold said the consolidation stems from an effort to better serve customers in mid-Atlantic and New England markets and maximize its U.S. efficiencies.
"We want the local consumer to benefit from our large presence in the Northeast in the best way possible. Therefore, we are constantly looking for ways to be cost-effective in our operations," Robert Zwartendijk, Ahold USA president, CEO and a corporate executive board member, said in a statement. "By providing each Ahold chain with its own distinctive trade area, we not only avoid customer confusion, but we also clear the way for optimal distribution networks, marketing programs and customer relations."
The new trade turfs give Stop & Shop control of the New England region, while Giant will be Ahold's key player in many mid-Atlantic states.
"The streamlining we announced today is in the interest of the consumer as well as the Ahold operating companies involved," he said. "Their management will be better positioned to work together and pass on the resulting savings to our customers. It will improve the companies' competitive position even more, benefiting the consumer in all communities."
Under the new arrangement, Giant, which operates 75 stores in Pennsylvania, Maryland, Virginia and West Virginia, will operate 135 supermarkets and have expected annual sales of $3 billion, Ahold reported. The stores will do business under the Giant, Martin's and Edwards banners.
Stop & Shop will run 192 stores in Massachusetts, Rhode Island, Connecticut and New York and generate about $5.3 billion in annual sales, Ahold said.
Ahold, required to divest stores when it announced that it would buy Stop & Shop in March, is waiting for the Federal Trade Commission to give its final OK on the sale of 26 Edwards stores, three Stop & Shops and two planned Edwards sites to competitors. The FTC approved the divestiture proposals on July 15 and is expected to sign off on the transactions after a 60-day public comment period ends.
The merger will not have any affect on its other U.S. chains, namely Tops Markets, Williamsville, N.Y., which adjoins the Stop & Shop and Giant regions, Muller said.
Meanwhile, several securities analysts said they are wondering why Ahold opted to keep the Edwards' everyday-low-price format in the New Jersey and New York markets when Stop & Shop's high-low strategy may be more appealing to customers there. They recently had been trying to gauge how Edwards and Stop & Shop would compete.
"It's hard to believe that Edwards is the right format for New Jersey and Long Island and that the Stop & Shop format won't fit into that strategy," said Ed Comeau, an analyst at Donaldson, Lufkin & Jenrette, New York. "I would indicate that Stop & Shop should be a dominant piece of this Northeast territory and [Ahold] should take responsibility for it to grow rather than limit it to the New England states that it operates in." Gary Giblen, managing director at Smith Barney, New York, said Ahold may have been looking for the quickest, most cost-effective way to combine the stores instead of focusing on what its core customers want in those regions.
"They may be pennywise and pound foolish with this. They may have been driven by cost minimization rather than customer optimization," Giblen told SN. "Ahold is a planful operator and it doesn't make impetuous decisions. It's not apparent to me and others in the financial world why they would take [Melmarkets] and put it under the Edwards name.
"It doesn't seem logical to me," he added. "I respect Ahold and I am sure they will make it work. But they are not infallible."
The realignment is another example of an industrywide trend to scale down and create more efficiencies between existing divisions, said Debra Levin, vice president at Morgan Stanley & Co., New York.
"It just reinforces the pursuit of synergies. They are essentially consolidating and taking out one of the divisional offices. And they are just going to use their advertising revenues, I think, in a very smart fashion," she said. "They will have one trade name per area. What exactly happens to Edwards long-term in terms of a trade name or a franchise could be a bit of a question mark."
Ahold decided to divide the Edwards chain the way it did because Stop & Shop is the stronger chain in New England and Giant operates under the same EDLP format as Edwards, said Muller. On the personnel side, Ahold may be positioning Noddle to supervise all of its U.S. operations, a responsibility currently on Zwartendijk's shoulders, according to Giblen. "I never thought Zwartendijk was Mr. Ahold USA" because of the constant traveling he had to do between Europe and the United States, he said, noting that the changes do not negatively reflect Zwartendijk's role.
Ahold will now be able to use the talents of the newly named executives to take corporate development plans to the next level, Giblen added. "Allan Noddle is an executive of a successful operating division. He's a good thinker," he said. "Tony Schiano is the mastermind behind one of the greatest turnarounds in history: Edwards. He [now] will be able to unlock his talents."
However, Muller said he knew of no plan to have Noddle eventually succeed Zwartendijk, who must shuttle between Ahold USA's Atlanta headquarters and Ahold's Dutch base.