Ahold launches three-year recovery programme
Troubled retailer seeks to draw line under financial crisis
November 7 2003
Netherlands retail giant Ahold has launched a three year plan to add value to its supermarket operations and restore faith in the company.
Ahold, which found itself under investigation by the Dutch and US authorities earlier this year after reporting a financial black hole in its US Foodservice business, set has set out strategic objectives for its food retail operation, as well as US Foodservice, through to 2006.
The company operates the Albert Heijn supermarket chain in the Netherlands, the Giant, Tops, Bruno’s and Bi-Lo chains n the United States, as well as other store chains round in other countries.
With its South American operarations already on the market, Ahold said it now plans to sell it Spanish supermarket operations as part of a plan to raise at least €2.5bn from disposals by 2005. In addition, it plans a €2.5bn rights and has also negotiated new credit facilities.
At the heart of the strategy is a plan to ‘re-engineer’ Ahold’s food retail operations. Businesses will have a minimum growth target of 5 per cent a year and Ahold will only invest in companies that can achieve a sustainable number one or two position in their markets within three to five years.
Companies not capable of meeting these objectives will be sold, with the Spanish operations the first casualty. Ahold operates more than 600 supermarkets, hypermarkets, convenience and neighborhood stores across Spain, having acquired more than ten regional chains since 1999.
These include Kampio, a regional supermarket chain in Catalonia, and Supersol, which operates in southern Spain, Andalucia, the Madrid region and on the Canary Islands.
Chief executive Anders Moberg said: “Ahold is built on strong underlying businesses, but there is considerable value to be realised. Over 90 per cent of our net sales come from companies that hold the number one or number two position in their markets.
“We are turning what has historically been a loose federation of businesses into a single company with a single focus on generating value, based on a superior customer offer. This is a major cultural and organiaational shift in how the company is managed.”
In the US Foodservice business, Ahold said the first step, already underway, is to put in place a rigorous control environment and a strong financial organisation. The company is number two in the $180bn US wholesale foodservice market, and the strategy calls for “regaining its leverage” with suppliers to reduce costs, followed by changes in the customer, product and brand mix to support sustainable profitable growth.
Moberg said: “U.S. Foodservice is an under-managed business, but it has a great market position and great potential to improve its financial performance.”
The company also said today that net sales for the first half of this year were €30.3 bn, down 11.8 per cent compared to the same period last year, with net profits €60m
Moberg said: “Ahold has been through the most challenging nine months in its history. In spite of this, our core operating companies have shown resilience and have retained their leading market positions. I have been extremely encouraged by how our employees have responded to the situation.
“With the financing plan that we are proposing, I am pleased to say that we finally draw a line under this difficult year. We can now focus wholeheartedly on strengthening the competitiveness of our business.”
