As so much talk within the grocery industry is centered around Amazon, Walmart, and a certain pending mega-merger aiming to compete with them, one grocery giant—Ahold Delhaize—is finding value in smaller, regional chains.
“We think retail is local,” Ahold Delhaize CEO Frans Muller told Retail Brew. “We think it gives a lot of ownership and accountability and engagement to local management to run the brand, be responsible, breathe the brand.”
In the US, the company owns Mid-Atlantic and Southeast chain Food Lion; Mid-Atlantic grocers Giant Food and The GIANT Company; and Northeast banners Hannaford and Stop & Shop. Some of these chains are solid, as Food Lion and Hannaford recently notched 47 and 12 quarters of positive sales growth, respectively, while Stop & Shop is shuttering 32 underperforming locations.
Ahold Delhaize is working to restore growth across all of its banners, in May unveiling its “Growing Together” strategy outlining goals it aims to achieve by 2028. These include growing its Own Brand to become 45% of total store sales, pushing for “more pronounced” organic store growth for its banners, and steadying its struggling Stop & Shop.
Speaking with Retail Brew at Groceryshop, Muller shared details on these efforts and the challenges they entail.
Stop at nothing: Ahold Delhaize is happy with 4 out of 5 of its banners, Muller said, but has some work to do on Stop & Shop, which remains profitable but has lost market share in recent years.
During Covid, Ahold Delhaize was in the midst of a shift in the distribution strategy for its US brands, moving from partnering with third-party provider C&S Wholesale Grocers to self-distributing, which essentially turned their supply chains “upside down,” Muller said. Stop & Shop had the biggest share of the supply chain managed by C&S, he said, meaning it was hit the hardest. Those 32 underperforming stores “distracted” management, and the closings will free up ability to invest in other areas for Stop & Shop, Muller said.
“What we learned with Stop & Shop is that if you have not paid enough attention in the past on the core attributes of retail brands, then that will be a painful journey to correct it, and that’s what we’re doing now,” heMuller said.
Those core attributes include location, width of assortment (including fresh offerings, a key in its store remodeling efforts, he said.) and private label, and the company is investing in those areas, as well as pricing and other in-store execution.
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Value add: Ahold Delhaize can’t copy and paste from grocer to grocer, as each regional chain features different brands, customers, and competition from region to region, Muller said.
Food Lion’s success comes from being “super community connected” with 1,100+ locations, as well as being “strict in their positioning” with a focus on value, he said. Its top competitor is Walmart, and it has 3,000 known value items (KVIs)—the products like eggs whose prices consumers are most often comparing—that it weights against the retailer, as well as local chains Harris Teeter and Publix.
Doubling down in its private brand presence will help Ahold Delhaize’s grocers “differentiate” themselves, Muller said—in terms of price, of course, but also formulation, sustainability, packaging, and speed to market, ensuring consumers across varying budgets “can make a right choice in our stores.”
Still, accounting for 70% of its assortment, national brands are essential to the company, though they are in a bit of healthy competition with its private labels.
“Let’s see who delivers the best ketchup,” Muller said. “It’s good to keep everybody sharp, all in the interest of servicing the customer.”
Alert the media: The company also aims to grow complementary income streams to around 3 billion euros (~$3.25 billion) by 2028, one of those being retail media, through AD Retail Media, the retail media arm it transitioned in-house in 2022. Operating local brands is a benefit within retail media, Muller said, as establishing a closer link to its community encourages higher trust for consumers and supports better conversion.
One of those major national brands on its banners’ shelves is PepsiCo, and Ram Krishnan, CEO of PepsiCo Beverages North America, noted at Groceryshop that “not all retailers should be media networks” and that they should “meet all the same criteria as far as how we would evaluate a media investment,” as measurement remains a top issue for many CPG brands.
Muller said AD Retail Media not only offers tools for brand partners to measure impact but also offers ideas to fine-tune their strategies for better conversion both online and in stores: “If you can say to PepsiCo as an example, these kinds of combinations with this kind of customer group are very helpful, and they see higher conversion, better data, better investment and better return, then I think we are also helping the category to grow.”