Key developments: Began process of remaking Giant-Landover in the Stop & Shop image and Tops in the Giant-Carlisle image; exiting the Southeast U.S.
What's next: Deciding whether to keep Tops and U.S. Foodservice.
Anders Moberg, president and chief executive officer of Ahold, Zaandam, Netherlands, believes the end of the road is in sight -- the corporate recovery program dubbed the Road to Recovery.
Ahold's journey down that road began in 2002, after a financial meltdown over vendor accounting practices at U.S. Foodservice. What was originally perceived by the company as a three-year journey is now expected to take an extra year to reach its ultimate goals.
The company designated 2003 as a year of crisis management and 2004 as a year of transition, with 2005 expected to be a year of execution and delivery. While Ahold is making progress on several fronts, it has acknowledged it is a year behind on the financial targets it set for this year, including net sales growth of 5%, operating margin of 5% and return on net assets of 14% -- goals Moberg said are achievable in 2006.
"I'm happy where we are at this point in time," he said last month. "Creating a firm foundation for profitable growth has been the primary business objective of our Road to Recovery strategy, and we are once again in a position to invest to meet customer needs and create profitable growth.
"We are focused, ambitious and moving fast as we simplify our business while we strengthen our value proposition to invest in our future and create a firm foundation for profitable growth."
During 2005, Ahold got out of the southeastern U.S. with the sale of Bi-Lo, its original U.S. holding, and Bruno's; it also streamlined its other four U.S. operations into two arenas, integrating Stop & Shop, Quincy, Mass., with Giant Food, Landover, Md.; and combining Tops Friendly Markets, Williamsville, N.Y., with Giant Food, Carlisle, Pa.
Looking ahead, Moberg said Ahold is committed to price investments and store upgrades in the U.S., and he remains confident his strategies will ultimately succeed. "There have been a lot of distractions for our management with all they are going through," he told SN in an interview earlier this year, "and that's some of the reason we have slipped a little here and there in our operations. But you'll see a more aggressive company going forward compared to 2003 and 2004, and a management more focused on what it will do in 2005 and beyond."
A mid-level executive at Stop & Shop was particularly positive about the steps Moberg has put in place to prevent future meltdowns. "The company has established strict rules for corporate governance and a 'tip line' as a whistle-blower for inappropriate company activity," he told SN. "Under the Road to Recovery program, Ahold is repositioning itself to be more competitive throughout the world."
The immediate challenge to make Ahold more competitive in the U.S. is to upgrade Giant-Landover by remodeling its aging store base and improving its perishable offerings in the Stop & Shop image. It also seeks to strengthen Tops by becoming more price competitive, in the Giant-Carlisle image, and by converting some Tops stores to the Martin's Super Food banner -- or possibly selling the chain. Ahold has already closed nearly 10 stores in the Tops division.
As for U.S. Foodservice, Moberg said Ahold has "no current intention" of divesting that operation, although he said the company would not make a final decision on that until probably sometime next year.
Bob Tobin, the former chairman and CEO of Stop & Shop who subsequently oversaw Ahold's U.S. operations before his retirement, told SN that Moberg has proved to be the right man to lead Ahold back from the brink.
"He faced unbelievable pressures on a daily basis when he took the job," Tobin said. "In the U.S., Ahold's problems were a short-term story, but overseas it was considered Holland's Enron at the time, though Ahold was still a going business."
Tobin said he was part of the search team that hired Moberg, and he believes Moberg was clearly a good choice. "He's been under very intense pressure, but he's withstood it. Along the way he was brutalized by shareholders, and he took a voluntary salary cut to show his commitment, but he's done a tremendous job leading the company through the crisis."