Delhaize Ramps Up Growth Initiatives

Delhaize Group here would consider a major acquisition if the right opportunity arose, but it is placing a priority on opportunities within its existing footprint, the company said at a meeting for analysts here. We look at strategic acquisitions of size, but right now we don't think it's the best way to build value, said Craig Owens, executive vice president and chief financial officer,

BRUSSELS — Delhaize Group here would consider a major acquisition if the right opportunity arose, but it is placing a priority on opportunities within its existing footprint, the company said at a meeting for analysts here.

“We look at strategic acquisitions of size, but right now we don't think it's the best way to build value,” said Craig Owens, executive vice president and chief financial officer, Delhaize.

The company can better use its capital “within its four walls,” he said, and will also be “more aggressive about organic growth,” leveraging recent acquisitions like Victory Markets in New England to expand in currently occupied regions.

The company also unveiled a plan to license its Guiding Stars nutritional evaluation system at the meeting. Guiding Stars, developed last year by Delhaize's Hannaford Bros. chain, assigns “good, better, best” ratings to products throughout the store based on an algorithm developed by dietitians. The program could be offered to other retailers and to manufacturers, according to Ron Hodge, chief executive officer, Hannaford Bros.

Hodge also provided some information about an experimental store the chain recently opened in Dover, N.H. The 35,000-square-foot store carries the same amount of merchandise as a traditional 55,000-square-foot location, he said. To make room for the relatively large number of stockkeeping units in relation to the space, Hannaford shrank the back-room areas, added more product per square foot and used higher shelving.

The store is also experimenting with an initiative that seeks to speed up the checkout process for customers who have a large number of items in their cart.

“For years, the industry has figured out how to provide better service to people with small orders; we're figuring out how to give better service to people with large orders,” Hodge said, although he did not provide details about the test.

He said customer reaction to both the level of service the store provides and the variety of product “has been strong” in the first few weeks of the store's operation.

“We see this store as very experimental, but we do have high hopes,” Hodge said. “It's very revolutionary. We think it will be a while before we understand all the ramifications, but it may have some long-term profit possibilities for us.”

Hannaford, along with sister chains Food Lion and Sweetbay, are rolling out Delhaize's new three-tiered private-label program, which includes the Smart Options brand at the low end, the store brand in the middle tier and the Taste of Inspirations line at the high end. In addition, the chains have developed three specialty private labels: Nature's Place for organic and natural products, Healthy Accents for health-related products and Home 360 for general merchandise.

Hannaford is launching the rollout of about 65 Smart Options offerings this month, and it has about 80 items in the Home 360 line ready to begin rolling out in the first quarter of 2008. In 2007, Hannaford added about 100 items in the Nature's Place line, Hodge said, noting that natural and organic was the fastest-growing product segment in the store.

Rick Anicetti, chief executive officer, Food Lion, said the chain expects to ramp up new store openings by 10-15 stores per year, from a base of about 35 this year. By 2010, the chain will add 60-80 new locations, he projected. In addition, Food Lion will remodel 95-110 stores per year, plus 35-40 stores that are part of “market renewals,” in which the chain makes improvements to every store in a market at once.

The chain will continue to open its more upscale Bloom stores in various markets, he said.

“If we are going into a market where we think we will eventually want to build a Bloom, we want to go ahead and do that now,” he said.