Delhaize and Ahold, European rivals and longtime owners and operators of East Coast supermarkets, confirmed last month they were in talks about a potential merger.
The combination would create a company with some 2,000 U.S. stores, sales of more than $44 billion, and millions in synergy savings with which the combined companies could presumably plow into ongoing programs to improve price competitiveness and consumer relevance. Analysts in Europe estimate a deal has a better than 70% chance of happening. Beyond those headlines, here are five reasons Ahold and Delhaize need one another.
Delhaize has a modest click-and-collect effort underway at Hannaford, but expansion will take time and money. Food Lion doesn’t sell a thing online. Delhaize America CEO Kevin Holt in a presentation this spring identified e-commerce as a priority for its brands but didn’t elaborate on a solution. Ahold by contrast has a mature and well-developed e-commerce undertaking in the U.S. and Europe, capable of both click-and-collect that Hannaford does currently as well as home deliveries through its Peapod and Bol.com subsidiaries, which would surely welcome the volume and scale Delhaize’s stores could provide.
2. Fresh focus
Delhaize’s Hannaford chain is known for its leadership in fresh foods, and is determined to further exploit that advantage as a means to grow. Its New England neighbor, Ahold’s Stop & Shop, is only now beginning extensive — and expensive — revamps of fresh departments as it seeks out an edge. Combining Stop & Shop’s size, scale and Center Store strength with Hannaford’s merchandising touch could make for a formidable player, particularly in New England.
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3. Distribution solutions
Delhaize self-distributes while Ahold long ago outsourced its distribution to C&S Wholesale Grocers. A combination between them represents the potential to shift Ahold stores back to the better control of self-distribution while simultaneously driving more efficiencies and scale from the existing assets under Delhaize.
4. Private label
Delhaize has been all over the map when it comes to private label, ditching and now re-establishing store brands. Ahold on the other hand has demonstrated industry leadership in private label, with its “wedge” core brand serving as a national brand equivalent at all its banners and the Simply Enjoy and Nature’s Promise lines offering profitable and well-established leads in the specialty and natural/organic fields.
5. Help where it hurts
While Delhaize has shown recent momentum in the U.S., assets in its home country are struggling due in no small measure to Ahold’s invasion of Belgium. Ahold in the meantime remains king in the Netherlands while U.S. sales have been sluggish as its “Reshaping Retail” strategy is only beginning to take root.
Go to the Delhaize/Ahold merger landing page