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Ahold Eyes Growth Initiatives

AMSTERDAM — Ahold's reorganization of its U.S. businesses into four local divisions sharing centralized functions has been a financial and operational success that has positioned the company for further growth, Carl Schlicker, chief operating officer of Ahold USA, said last week.

Speaking at Ahold's annual Capital Markets Day here, Schlicker said the transition resulted in the adoption of best practices between the Stop & Shop, Giant of Carlisle and Giant-Landover divisions, helped the company gain greater leverage on its volume, and generated savings in excess of targeted levels. Its success inspired the company to embark on a new plan to reduce costs companywide by around $471 million over the next three years, with an eye toward investing the savings toward building stronger brands and higher sales.

Growth initiatives discussed at the meeting last week included a plan to generate higher identical-store sales through improvements in loyalty programs and to seek to triple the company's global online sales.

Acknowledging that he was eschewing Ahold's typical strategy to “fly under the radar,” Schlicker in his remarks traced the company's current state of affairs in the U.S. to a retail review in 2006 and the decision to engage in the Value Improvement Program at Stop & Shop and Giant Landover.

“There were clearly things that Giant-Carlisle did that I thought were better than the processes and the programs that we had at Stop & Shop and Landover, and correspondingly, there were things within the Stop & Shop/Landover organization that I thought were better than Carlisle,” Schlicker said.

Giant-Carlisle also influenced the ongoing redesign program at Giant-Landover stores, particularly in Center Store, Schlicker said.

In realigning its U.S. businesses under four local groups (Stop & Shop New England, Stop & Shop-New York Metro, Giant-Carlisle and Giant-Landover), Ahold also moved to a common system for point of sale and purchasing throughout the U.S. and crafted an organizational structure that mirrors that of Ahold's European businesses. Businesses on both continents today use a common alignment, Schlicker said, helping the company to use fewer IT vendors.

The structure also allows for attention to local tastes, Schlicker said, noting that around 20% of the assortment at every store is local.

“The right mozzarella is important in Philadelphia,” he said, “and it's not the same as the one that's sold in New York and it's not the same as one that's sold in Boston.”

Citing explosive growth of mobile devices in recent years — a phenomenon growing eight times faster than web adoption did in the 1990s — Ahold is looking to grow worldwide on-line sales to $2 billion by 2016 from around $609 million today. James McCann, Ahold's chief commercial and development director, said the company would experiment with broadening on-line offering including testing curbside and store pick up options in 2012 to spark a 2013 rollout. Offering a pickup option would allow Ahold to offer online shopping at sharper price points than physical stores, which McCann noted in many cases was a primary motivator for success in other categories of e-commerce.

Another characteristic shared by leading e-commerce retailers is offering the broadest range in their categories, but here too grocery falls short. McCann said.

“If we can manage to get the process right, and expand the offering, the opportunity is enormous,” McCann said.

Jeff Martin, executive vice president of merchandising and marketing, said the company would look to grow identical sales by 1% to 2% through customer loyalty initiatives, saying Ahold has developed programs to target promotions relevant to the frequency of their shoppers as well as to the their preferred style of shopping.

For example, Martin said, analysis of customer data showed six styles of shoppers, including “healthy foodies,” “convenience seekers,” “basic meal planners,” “kitchen enthusiasts,” “dietary monitors” and “dollar stretchers.” Using this information has allowed Ahold to optimize and target its promotions with more precision and improved store layouts, Martin said.

Frequency data is being used with a goal of retaining primary customers and migrating its secondary shoppers to become more loyal.

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