Ahold Sets Bar High For Itself And Vendors At Hershey Gathering
It was like the World Cup of all industry meetings with more than 1,500 suppliers, associates and other interested parties in attendance at the Giant Center in Hershey, PA to hear details about the large Ahold USA corporate reorganization directly from the retailer’s senior company management.
And in four fact-filled hours of presentations there was certainly a lot to absorb. Many of the speeches centered on improving the retailer’s connection with its consumers. Vendors have been concerned and curious for more than six months, since the international retailer first announced plans to centralize many of its corporate functions from Quincy, MA to Carlisle, PA, most notably one of its largest departments – merchandising.
At the end of the day, there were still some questions remaining, but the nine executives who addressed the crowd provided plenty of detail and analysis for all in attendance to chew on.
Jeff Martin, who will head all merchandising and marketing under the new structure, served as emcee of the big show, and as he has done in the past when Ahold held its vendor meetings on a divisional basis, kept the action moving and fluid.
First up with a financial overview was COO Larry “Lord” Benjamin, Ahold’s top U.S. executive who also is a member of Royal Ahold’s corporate board. Benjamin pointed to the fine 2009 ID sales performances of its three U.S. banners (all with better than two percent increases), especially when considering the challenges of a poor economy and fiercely competitive marketplaces (Ahold’s U.S. divisions beat Safeway, Harris Teeter, Whole Foods, Delhaize, Supervalu and Wal-Mart in ID sales results). Parallel to its strong sales performance, Ahold’s four year operating income has risen from 992,000 euros to 1.3 billion euros while net debt has dipped from 5.5 billion euros to 700 million euros during the same four year period. Other financial highlights include a 28 percent dividend increase, an ongoing 500 million euro share buyback, 3 billion euros in available cash a positive debt rate and a bullish outlook about the company from financial analyst community.
Providing an update of the “new” Ahold USA retail was Carl Schlicker, who will oversee the day-to-day functions at all three banners in the new organizational structure. Schlicker, the retail executive formerly known as “Mr. Simple Country Grocer,” told the large gathering that the motivation behind the massive reorganization was to provide a simpler, more cost effective organization while creating better opportunities to leverage volume and invest in its consumers. He noted that vital to the ultimate success of the new model will be maximizing the power of the divisions by taking advantage of local flexibility and focus.
He concluded his speech by outlining seven key elements of Ahold’s future growth:1) further reinforce and enhance its consumer brand; 2) continue to increase customer intimacy and trust; 3) broaden and execute multi-format portfolio; 4) efficiently execute supply chain operating model; 4) maximize cost and capital efficiency; 5) strengthen the foundation of the organization – its people; 5) continue to pursue an overall effective labor strategy; and 7) take advantage of accretive acquisition opportunities.
Jeff Martin, arguably the central figure in the vendors’ world, highlighted Ahold’s U.S. performance by banner when measured against several criteria, including dollar and unit growth against competitors from all channels as well as market share changes over the past three years. Gains were made by all four divisions (including the newly formed Metro NY unit) despite significant overall economic challenges during the past 18 months.
Martin then explored the realm of customer loyalty. The retailer has recently engaged a new analytics firm, EYC (Engage Your Customers), to measure and enhance customer loyalty. Martin said that Ahold believes its partnership with EYC provides them with an edge over the competition. EYC will work with Ahold in the areas of primary and secondary research, market and competitive intelligence, vendor interaction, testing and learning, and card data analysis and application.
After lunch for 1,500 was served (no small feat given the tight schedule), Martin returned to the stage to detail the keys to success for the merchandising and marketing team. A prime objective of the now Carlisle headquartered team will be to create economies of scale, make the lines of responsibilities clearer, operate with speed, simplicity and efficiency and leverage best practices. Martin noted that sharpening the focus on “local” will also be vital to the success of the organization, reminding the crowd that all four divisions enjoy strong heritages and will be able to adapt to market-to-market, and even store-by-store competitive situations.
“The first two questions I now ask my team on Monday morning is ‘what happened to ID sales’ and ‘which categories over/under performed?’ In the near future, my first question will remain the same, but what I really want to know is ‘which customers over/under performed?’ The game is changing from category management to customer management.”
In closing, the well-liked and respected Ahold veteran cited four reasons why he believes the new model will continue to succeed and enhance Ahold’s strong recent track record: organization design and leadership; customer driven focus and alignment; localization and personalization tools; and vendor collaboration.
As Ahold continues to refine its data and insights about the consumer, Erik Keptner, senior VP-marketing will pay a key role in shaping that process. Already one of the youngest and brightest marketing executives in the industry, Keptner’s detailed presentation focused on three groups of Ahold shoppers (primary, secondary and tertiary) and strategies to attract them to increase their spending at the company’s supermarkets.
Keptner’s team utilizes a variety of tools to define customers views on price, shop styles (fresh and organics, convenience driven, kids focused, etc.) to develop and implement plans to increase and enhance their particular shopping experience. While trying to more sharply focus on attracting new customers or grow opportunities with existing ones, Ahold will continue to reinforce its core image of driving value, support its “offer” ( private brands, local products and double money back guarantees) while maintain a strong presence in the community with charitable efforts. Other continuity drivers include its healthy ideas program and gas rewards.
While his presentation may have been the most difficult to conceptualize in a 30 minute speech, Erik Keptner’s role is extremely vital in the new lineup.
Andrew Parkinson, president of Peapod, made his vendor meeting debut at last month’s confab and perhaps more than any other speaker provided a perspective that was largely new to many vendors.
Parkinson encouraged suppliers to get more involved with Peapod, pointing to its online leadership position with $400 million in annual sales, its large average ‘ring’ ($155+ average basket size and its 10 percent + annual growth rate.)
Nobody provided a more entertaining presentation than Jeff “Mr. Deadpan” Dichele, who is moving from Quincy to Carlisle and will serve as senior VP- non-perishables merchandising. Dichele attempted to answer many of the vendors’ concerns (How are we going to make this work? How will we execute this plan? How will we remain locally relevant? What is the vendor’s role in all of this?) Using a bit of sarcasm, Dichele urged vendors with two different cost structures (Quincy and Carlisle) to better coordinate their efforts (sharpen their pencils) as they ready to enter a common merchandising platform in Carlisle.
The Stop & Shop veteran told the audience that his team will be utilizing pieces of both former merchandising models (VIP and EDLP) and plans to begin coordinated merchandising programs on October 1. Beginning next year, Carlisle will oversee all aspects of negotiations, including: new items and reset schedules; ads; temporary price reductions (Real Deals, Bonus Buys); market programs and fuel overlays; bargain aisles/wall of values; and spot buys and in/out items.
Since Dichele’s arena handles the most items and deals with the largest number of vendors, he and his team will be very busy in the coming months.
Relatively new to the Ahold management team is Steve Mayer, who will serve as senior VP- fresh merchandising, and also be based in Carlisle. Under Mayer’s umbrella fall key departments such as meat and seafood; produce and floral; bakery deli and new portal, convenience foods.
I was impressed by Mayer’s enthusiasm. Hs presentation, supplemented by videos delivered by his senior team members, was high energy and reinforced an age-old Ahold theme – sell more stuff – and outlined four major priorities to the large group of suppliers in the audience: 1) a commitment to sell only the freshest product; 2) never forget the importance of local relevance; 3) Ahold’s identity remains focused on being a customer driven demand organization; and 4) vendor support is critical.
Addressing the sales reps and brokers next was a true old pro – Don Sussman, somebody I always admired even during the dysfunctional days of Stop & Shop management. Unlike many of his former peers, there’s no arrogance or haughtiness in Sussman’s demeanor – he’s just a straight ahead “git er done” kind of guy.
Now as executive VP-supply chain, he’s got the daunting task of keeping vendor production, warehouse order and store orders in balance with consumer demand. He outlined his priorities in typical direct fashion: improve in-stock position; offer fresher products; reduce landed costs and support each division right down to the individual store. And with 744 stores in 11 states and Washington, DC that interface with 20 distribution centers, Sussman and his team are much like offensive linemen – they seldom get credit for their talents, but no team can succeed without a high level of execution and chemistry.
In his final comments, Sussman made his request for six “asks”: 1) joint business planning; 2) faster speed to shelf; 3) improve quality, freshness and shelf life; 4) improve vendor managed inventory (VMI) for warehouse and shelf; 5) standardize and synchronize data; and 6) utilize better benchmarking and best practices sharing.
The day’s final speaker was Jodie Daubert, who has served in many different capacities over the years at Giant/Carlisle. As Ahold USA’s new senior VP of sales development, she will be working closely to align and improve vendor partnerships. She acknowledged her excitement about the new centralized merchandising strategy, noting that in the past efficiencies were either diminished or non-existent because of several factors – too many layers for approval, not enough shared information, too many layers needed for approvals and not far out enough in planning. In the new structure, Daubert noted that roles and responsibilities are much clearer, decisions are made faster with fewer layers to gain approvals, better overall coordination is already noticeable and that vendors ultimately will gain a better return on their investment.
She implored the vendors to: “Know us, plan with us, bring us, be flexible with us, educate us, be patient with us and tell us.”
The patience factor should not be underestimated. Clearly this reorganization process is a mammoth one and there will be missteps along the way. Larry Benjamin and Carl Schlicker have said from the outset that they are approaching this with a slow and steady hand.
Vendors certainly would have liked to have seen the category manager teams revealed at the meeting, but the truth is that Ahold is still waiting for associates based in Quincy to tell the company if they will be relocating to Carlisle. These are huge decisions that affect the lives of many associates and their families. Most of the heavy lifting has been done, but Ahold also must still integrate its new IT platform (later this month) and give the whole new structure a road test before going live.
Benjamin, Schlicker and Martin want to get it right the first time. And realistically that time looks like quarter four of this year, nearly a year since the plan was first announced.
I give Ahold a lot of credit for holding a unified vendor meeting this year even though all the pieces of the puzzle were not yet in place. The goal, as it’s always been in these unique industry gatherings, is to embrace the partnerships that Ahold holds dearly with its suppliers.
As a reporter and industry analyst who over the past 10 years has seen too many food and drug retailers become overly influenced by the machinations of Wall Street and whose own companies are often driven by financial and HR decisions, it’s refreshing to see Ahold USA to reach out to the vendor community in a mutual effort to “sell more stuff.”
‘Round The Trade
Huge opening day (July 18) for Wegmans’ newest unit in Malvern, PA. The 130,000 square foot mega-store is the Rochester, NY retailer’s 14th store in Pennsylvania and 76th overall, and second with a brew pub following Collegeville, PA which opened last October. The new unit, which is about 10 miles from its first DelVal store in Downingtown, PA, will employ about 650 associates and feature 22 year company veteran Kevin Lang as manager. Lang was recently manager of Wegmans’ Mechanicsburg, PA store…another high-volume retailer is also growing. Wakefern Food Corp. recently added its 47th member, Ken Thompson, who will reopen a former ShopRite in Uniondale, NY. Thompson, a 45 year veteran of the biz, was most recently senior VP-store ops for the now defunct Penn Traffic, has roots with Wakefern, having previously served as VP-operations for Wakefern’s largest member, Saker/Foodarama. It was only a few months ago that the large Keasbey, NJ co-op reached into its extended family to reopen another former ShopRite, when former Kenny Family executive Joe Cowhey acquired the Warminster, PA ShopRite from Jeff Brown…Wal-Mart, which has never been afraid to shake thing up, has announced two key personnel moves affecting its U.S. stores. Late last month, the Behemoth said that Bill Simon will become CEO of Wal-Mart’s U.S. business, replacing Eduardo Castro-Wright, who will now become chief executive of the company’s online and global sourcing unit. The move will allow Castro-Wright, who remains vice chairman of the firm, to be closer to his family while his wife recovers from a recent heart transplant. Simon joined Wal-Mart in 2006 and most recently served as COO of the retailer’s U.S. business. Moreover, John Fleming, Wal-Mart’s chief merchandising officer, has left the company. Fleming, who served as the key vendor liaison for the planet’s largest retailer, will be temporarily replaced by two executives – John Westling, executive VP-planning, pricing and replenishment, who will supervise the GM and replenishment teams, and Jack Sinclair, general manager for grocery, who will now oversee Wal-Mart’s food and health and wellness teams. Both report to Simon. The Bentonville, AR retailer’s club store unit Sam’s is testing a program with Superior Financial Corp. to offer small businesses loans ranging between $5,000 and $25,000 to members who qualify. In other club store stuff, speculation is increasing that BJ’s Wholesale Club may go private after Los Angles investment firm Leonard Green acquired a 9.5 percent equity stake in the Natick, MA club merchant which operates approximately 180 stores in 15 eastern states…and Wal-Mart’s main competitor in the mass merchant arena, Target, will open its first Manhattan store on July 25 in East Harlem. And yes, the new 116th Street store will operate as a P-Fresh…more New York news: Pathmark (A&P), Stop & Shop and King Kullen reached an agreement with UFCW Local 1500 on a new labor contract, shortly after the union took a strike vote against the three retailers. About 16,000 clerks covering approximately 150 stores are part of the new deal…two thumbs up to the folks at Weis Markets for once again hosting a first-class golf outing and charity event. Much like the retailer’s recent progress (earnings were up 34.9 percent in its recently completed second quarter), Weis’ annual outing is growing, now utilizing four golf courses and attracting many new vendors. Since 2003, the Sunbury, PA chain has raised more than $3 million for more than 50 local health care organizations and food banks. More than 450 suppliers attended this year’s two-day event.
Local Notes
Bob Gleeson will be joining Acme Markets as its new senior VP-merchandising, essentially replacing Bart Bohlen, who transferred to corporate headquarters in Eden Prairie, MN in April to accept an executive post in store operations, an area which Bart is better suited for. Gleeson is making the lateral shift to Malvern, PA from sister SVU firm Shoppers Food & Pharmacy where he also headed merchandising. Gleeson is very bright and, despite his youthful appearance, has been in the business for more than 25 years. However, while his role may be similar to the one he is leaving in Lanham, MD, there is one key difference – Acme is fully SuperFused and Shoppers is not. Between corporate SKU rationalization and the local limitations of SuperFusion, Gleeson’s role may be turn out to be one in which his skills as a liaison may be better tested than as a creative merchandiser. Meanwhile on a broader basis, the head count reduction continues at Supervalu. Tim Lowe and Scott Bayne, who headed store ops for Shoppers and Farm Fresh respectively, have both departed Supervalu, leaving division presidents Dick Bergman (Shoppers) and Gaelo de la Fuente (Farm Fresh) to oversee the stores on a day-today basis (apparently they weren’t busy enough). More Supervalu stuff: the beleaguered retailer/wholesaler held its annual shareholder meeting on June 24 in Minneapolis, and after listening to the webcast of the session, to say I was underwhelmed would be an understatement. While CEO Craig Herkert, who’s been on the job now for 14 months, expressed disappointment in the company’s results, he once again provided little in the way of tangible solutions to the shareholders. At some point, there’s got be a clearer pathway to improvement than pumping up the new management team or unveiling new slogans and acronyms (“Win With Produce,” “SHE – Simplify Her Experience”). What about lowering prices at your corporately-owned banners? Reducing head counts and cutting huge swaths of SKUs won’t increase sales, either. While Herkert told shareholders that “our business is in transition,” I view Supervalu as an enterprise in a state of disarray, especially at the corporate conventional supermarket banners, with associate morale tumbling and every key metric (ID sales, customer counts, transaction size) significantly diminishing. Craig, come on, take off the gloves and make some critical decisions, before more wheels come off the cart. By the way, SVU’s first quarter earnings will be released on July 27 (why so long to post the numbers – the operating period ended on June 19). As we went to press on July 15, Supervalu’s shares were trading at $11.43. Exactly two years ago, the company’s stock price was $31.84…another corporate retailer that is struggling in Philly is Genuardi’s. This is not a new story since many of Genuardi’s problems go back nearly a decade when Pleasanton, CA based Safeway acquired the family-owned regional chain and immediately “vanilla-ized” much of the sizzle and spark the Genuardi family brought to its stores. Now comes word that, over the next month, Genuardi’s will be closing three units in Pennsylvania – Newtown Square, Wayne and Glen Mills. One could make the argument that another four to six units could also be closed, based on volume declines over the past 18 months. The weaknesses displayed by Acme, Genuardi’s and the grand-daddy of all dysfunctional retailers, A&P/Pathmark (which recently saw Standard & Poor’s downgrade its credit retailer to CCC+, seven levels below investment grade, citing the Montvale, NJ retailer’s highly leveraged debt – $3.5 billion – and its poor recent operating performance) seem even more glaring in a market like the Delaware Valley where powerhouse supermarkets such as ShopRite, Giant/Carlisle and Wegmans (in addition to strong alternate channel retailers like Wal-Mart, Target, Costco and Wawa) have made it a priority to simply “sell more stuff.” Incidentally, in addition to the aforementioned Supervalu earnings call on July 27, Safeway (July 22 – second quarter) and A&P (July 23 – first quarter) also will release their financials….a tip of the tam o’ shanter to Mike Coyle, White Rose’s advertising and marketing guru, who retired last month after 42 years of service to this great industry. Coyle began his career with ye olde Penn Fruit in 1968, moved on to wholesale with ye olde Frankford-Quaker before joining White Rose in 1989. There are few in this industry who can make me laugh like Mike, nor are there many with the street smarts and instincts of the Philadelphia native. Coyle, I’ll miss ya…on the obituary front, Don Coryell, 85, one of the most talented football coaches over the last half century, died last month in San Diego, the place where he coached the San Diego Chargers for nine years from 1978-1986. Prior to that, he was the head coach at San Diego State from 1961-1972 and developed one of the most potent passing offenses – “Air Coryell” led by Dan Fouts – in NFL history. Much like another great NFL coach, Bill Walsh who died in 2007, Coryell helped develop some of the most successful coaches in the league who employed many of his teachings. Among his disciples are Joe Gibbs and John Madden. Another sports legend of sorts has also passed. George Steinbrenner, the blustery, passionate, “win at all costs” owner of the New York Yankees, died on July 14 at the age of 80. While Steinbrenner was never one of my favorite sports personalities, one had to respect his devotion and pride in the team he bought from CBS in 1973 for $10 million (the Yankees are now estimated to be worth about $1.6 billion). And he did coin a phrase that I often use – “Lead, follow or get the hell out of the way,” so I guess there were a few redeeming characteristics for a man who was suspended from baseball twice in his 37 year reign as owner…I was also deeply saddened by the recent death of Elliott Friedman, former president of Burris who for many years helped pioneer Giant/Landover’s frozen food business. Elliott died suddenly on June 25 and he will be missed. A special person who was nice and helpful to everyone with a great sense of humor – that was Elliott Friedman When Dick Bestany and I acquired Food Trade News in 1978, one of the first people we met was Elliott and he treated both of us as though we were part of his family. And he was part of ours – his step-daughter Shari Simmons served as editor of this paper for several years in the 1990s and she was like a chip off the old block. Perhaps Mark Tarzwell, who succeeded Elliot as president of Burris Logistics in 2006, said it best: “As for one whom he mentored, he was always thoughtful, caring and genuine with everyone he dealt with. No matter what the issue, he was a calming influence. He was insightful into the business but even more so into people. He was a very good friend and I will miss speaking with him greatly.”…and finally, I want to thank a host of people including Terri Maloney from our staff, Matt Danielson, who runs e-ink, our graphics and production partner, and my son, Andy Metzger, for helping develop and relaunch our website – www.best-met.com. Check it out and tell us what you think. We blew up the old, tired model and our goal is to offer the trade something user friendly, interactive and full of industry data. We welcome any feedback.