Ahold Delhaize’s CEO on the need for scale and volume improvements

Frans Muller oversees one of the world’s largest and most complex retailing empires. But when the Ahold Delhaize president and CEO reflects on what the company has learned during the past few years, he speaks in strikingly simple terms.

Even as Ahold Delhaize continues to deal with pandemic-induced challenges like rising prices, rampant theft, supply chain disruptions and labor shortages, Muller believes the Netherlands-based supermarket company needs to focus on something much more basic: how people eat.

“A big lesson for us is that we have to do … a better job in informing [and] educating consumers what food is, what healthy food is, what cooking is. And how cool it is to have an at-home, great meal on your table,” Muller said in an interview. “People were forced during COVID to go in this direction, and we found out how many people had no experience or no passion for it.”

Muller added that a top priority for the company lies in reconciling people’s “very new and different eating behaviors” with the business realities that come with running a low-margin business charged with meeting people’s need for essential goods. He pointed out, for example, that the company has not seen the quantity of goods it sells increase even as it has posted strong financial results in recent quarters.

“I’m not happy with the fact that we don’t see volume growth,” said Muller, who took over the top role at Ahold Delhaize in 2018 after holding other positions at the company and earlier serving as an air cargo executive for KLM. “The growth we had seen was mainly inflation-driven. That is nice for a moment, but it is not a sustainable solution.”

As chief executive of Ahold Delhaize, Muller runs a sprawling international company that operates more than 7,600 grocery stores under 19 brands in the United States, Europe and Indonesia. The retailer generated more than 60% of the nearly 22 billion euros ($24 billion) in revenue it posted in its latest quarter from the United States, where Ahold Delhaize runs about 2,045 supermarkets under banners including Food Lion, The Giant Company, Hannaford, Giant Food and Stop & Shop.

Muller spoke with Grocery Dive in late November following a media tour of The Giant Company’s flagship store in Philadelphia.

This interview has been edited for length and clarity.

GROCERY DIVE: What’s your reaction to people who believe grocery stores have thrived because of inflation?

FRANS MULLER: I can tell you that our gross margins did not improve. It’s not that we took more money. We do not have a lot of margin to play with. We’re not a 16, 20 EBIT percentage company like a number of big manufacturers are. We are a 4% company, and compared to some retailers in the U.S. that is relatively good already. So we are proud about that.

How has inflation impacted your costs?

If you see on a three-year stack, on a two-year stack, where prices went, it’s hard. You see, in your total cost development, that two years of hyperinflation has also an effect on your own costs, in materials you use in stores, if it’s plastic, or cardboard, in labor costs, in IT and automation. [For example,] we pay now 20% more to remodel a Food Lion store than we paid before.

What are your thoughts about how the Kroger-Albertsons merger would affect your company if it goes through?

Let’s see where that goes. I don’t want to speculate on that. There’s not a lot of overlap in our stores on the East Coast when you talk about Kroger, Acme, [Harris] Teeter, these kinds of brands. But scale does matter in retail. And both companies have a national footprint.

That’s why growth for us is important. There’s plenty of opportunities on the East Coast, where we are, we think, or some adjacencies when you go more west. And scale does matter, not necessarily only from a procurement perspective, from a sourcing perspective, but also from the perspective of spreading your digital and technology investment dollars over more sales, so that by unit, it gets less expensive.

Ahold Delhaize President and CEO Frans Muller

Courtesy of Ahold Delhaize

 

Do you see opportunities to expand Ahold Delhaize’s footprint in the U.S.?

Yes. We will see that a lot of independents in the market now … don’t want to remodel their stores because [they don’t have] money, or don’t have the money to invest in digital data, technology, e-commerce. So those companies will come to the [acquisition] marketplace.


Source link

About couponing

Check Also

Citi moves deeper into e-commerce through digital couponing

Consumers looking for deals often use coupon finders in their browsers to find promotional offers …

Leave a Reply

Your email address will not be published. Required fields are marked *