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It’s better together

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ZAANDAM, Netherlands — Ahold Delhaize has unveiled a strategy for exploiting its international scale, the popularity of its local banners, and its employees’ expertise. Building on solid financial footing and a track record of cost controls, the company will adopt the “Better Together” strategy to drive profitable growth in supermarkets, smaller formats and e-commerce.

The strategy “builds naturally on our combined strong performance as well as the strong foundations of the local brands in our group,” said chief executive officer Dick Boer. “Guided by this common compass, we will continue to improve our family of brands to be a better place to shop, a better place to work and a better neighbor, every day. We are meeting the needs of customers today, and anticipating those of tomorrow, by providing more value, quality and convenience.”

The integration of Ahold and Delhaize, which merged in July, is on track to deliver 500 million euros ($525 million) in net synergies in 2019, Boer said. “We are convinced more than ever that our merger is the right combination at the right time. Driven by our purpose, ‘Together, we build great local brands, bringing fresh inspiration every day,’ we will continue to shape a stronger future for Ahold Delhaize, providing fuel for the brands to grow to the benefit of customers, associates, communities and ­shareholders.”

Better Together encompasses promises to customers, employees and communities, and values that drive the company’s actions. It has three pillars:

• Savings for customers through better buying, smarter operations and less waste.
• Investing for affordability, superior store brands, fresher and healthier food, and personal ­service.
• Funding growth in key ­channels.

Supermarket programs continue to boost sales through improved pricing, assortments and service, the company said. Food Lion is making gains with its “Easy, Fresh and Affordable” initiative, which will be rolled out to 160 more stores in 2017, bringing the total to 540, accounting for 55% of total chain sales.

Ahold USA is building momentum with its “Heading Northeast” strategy, with investments in pricing, service and quality paying off with gains in customer satisfaction and sales increases.
Delhaize Belgium is on track to deliver $84 million in savings in 2018 through a transformation plan. A new store organization — deployed to all 128 company-operated units — aims to drive sales through a clear commercial strategy.

Ahold Delhaize has also reaffirmed its commitment to e-commerce by meeting growing demand for online groceries and building the leading digital platform in the Netherlands and Belgium. The company intends to double online sales by 2020, from around $2.42 billion this year.

Sustainability efforts include promoting healthier eating, reducing food waste, and creating healthy and inclusive workplaces for the supermarketer’s 375,000 employees. All of the company’s chains will set clear targets in the areas of product integrity, sourcing, tackling climate change and taking care of employees.

Continuing to exercise rigorous cost discipline, the company will further improve its cost base to fund growth and invest in price, quality and service. It will also continue to deliver strong cash-flow generation, fueling free cash flow with synergies and working capital improvements. In 2017, free cash flow is expected to be some $1.68 billion, up from around $1.37 billion this year.

The company is committed to a balanced approach between funding growth in key channels, managing debt and returning cash to shareholders. It targets a 40% to 50% dividend payout ratio based on pro forma underlying income from continuing operations. In addition, in 2017 Ahold Delhaize will return $1.05 billion through a share buyback ­program.

The grocer’s profits have been hurt by food deflation in the U.S., but the bottom line should recover ground in the second half of 2017 as prices of milk, eggs and meat rebound, Boer said during a conference call with reporters. Inflation from President-elect Trump’s infrastructure spending could also bolster the business, he said. But he added that a specific forecast would be ­premature.

Ahold Delhaize has more than 6,500 stores globally that in 2015 generated combined sales of $68.02 billion. The two companies’ subsidiaries in the U.S. had combined sales of $44.14 billion and ended the year with 2,079 stores. Store locations range from New England to South Carolina.


ECRM_06-01-22


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