NEW YORK -- Top executives at the Belgium-based Delhaize Group told SN last week synergies will be able to flow more freely among the company's worldwide supermarket operations, now that the company has simplified its structure.
"We now have one entity with one global management structure," Pierre Olivier Beckers, Delhaize Group president and chief executive officer, told SN during a wide-ranging interview last week. "We are trying to give Delhaize Group opportunities to spread best practices and take advantage of economies of scale."
Also participating in the interview were Bill McCanless, Delhaize America president and CEO, and Hugh Farrington, Delhaize America vice chairman and CEO of Hannaford Bros., the Scarborough, Maine-based chain Delhaize acquired last year.
Delhaize America operates supermarkets under two other banners: Food Lion, Salisbury, N.C., its largest chain, and Kash n' Karry, Tampa, Fla.
McCanless and Farrington have been nominated by Delhaize Group to join its board as directors, pending a vote by shareholders at the company's May 23 annual meeting.
The interview followed immediately a special meeting here at which shareholders of Delhaize America, Salisbury, N.C., approved a share exchange agreement with Delhaize Group. The agreement calls for Delhaize Group to exchange all outstanding shares of Delhaize America it does not already own for Delhaize Group ordinary shares or Delhaize Group American Depositary Shares.
The company said 95% of Class A shareholders and 93% of Class B shareholders casting ballots approved the agreement.
Delhaize Group ordinary shares trade on the Euronext Brussels, and Delhaize Group ADRs started trading last week on the New York Stock Exchange under the DEG ticker.
Beckers explained that the company's previous structure limited its options. "We had two sets of shareholders, which produced conflicts of interest," he said. "It was difficult to allocate resources, and as a result we missed opportunities in the past."
The previous setup was also not popular with Wall Street, Beckers admitted. "The structure was unattractive to investors," he said. "It was difficult to understand. Our market capitalization was divided. Our visibility was divided.
"Now, we have a simple structure that should give us more visibility and an increased market cap."
What the new structure does not mean, the executives insisted, was that Delhaize was about to adopt a single way of going to market around the world.
"We built Delhaize with a strategy of developing a team of strong local companies," said Beckers. "Delhaize American will stay an extremely American company with American executives.
"The main challenge is to make sure we don't miss an opportunity, and at the same time to make sure we don't force synergies simply to make our life easier.
"We will continue to make sure we are providing our customers with what they want. This reinforces our strategy of going to market locally. We are not in an industry where cutting costs is a primary driver of profits."
Farrington said, "We look for synergies that are transferable across companies -- management practices, human relations."
As an example of what Delhaize expects to be able to do more of with its new structure, he cited the recent transfer of a senior category manager from Hannaford to Delhaize's operations in the Czech Republic.
The executives said the company is currently focused on building profits and organic growth, with no plans for any major acquisitions during the remainder of 2001.
"We are very focused in making our new reality a success," said Beckers. "We will focus on profit in the U.S. and Belgium."
McCanless pointed out that acquisitions are not the only path to growth. "Expansion will come from population growth in existing markets, expanding into areas contiguous to existing markets and fill-ins of existing markets," he said.
Farrington observed, "Recently, Hannaford bought five or six Grand Unions. They were fill-ins, in market acquisitions. That's a normal way of doing business and that will continue."
While the executives maintained they were not currently eyeing any takeover targets, they freely shared what they had learned about the integration process from Delhaize's experience absorbing Hannaford.
"For acquisitions to succeed, it is critical to have a common vision," said McCanless. "We've shown we have a common vision by our success in maintaining the Hannaford management team.
"Success begins with human resources. If you keep that in mind, the rest falls into place."
Commented Beckers, "We didn't take anything for granted. There was good understanding between Delhaize and Hannaford before and after the acquisition.
"When acquisitions fail, it's usually due to a lack of communication. We're past that. We've known each other a very long time."
The executives were also adamant that Delhaize has no plans to enter such supermarket-related ventures as freestanding drug stores, convenience stores or food-service companies.
"In Belgium, we have more of a network of stores in addition to our supermarkets," said Beckers. "We have pet food stores, drug stores, an e-commerce home-delivery service, but we are not looking to repeat that in the U.S."
Nor is the company looking to penetrate the fancier realms of retail food. "Food Lion tested an upscale store in Virginia a while back," recalled McCanless, "and we decided as a result we should stick to what we do best -- an everyday-low-prices format."
McCanless added that Food Lion can succeed in either a boom or bust economy. "Food Lion is perfectly positioned," he said. "We are a low-cost operator with a solid business in good times, and in an economic downturn we stand to pick up customers."