It was a year ago that Ahold USA announced a major corporate restructuring, consolidating many duties that were split between Stop & Shop/Giant-Landover and Giant/Carlisle. One major function that was shifted primarily to Carlisle was the company’s merchandising and procurement. Additionally, a new division was created – Stop & Shop/Metro New York. More recently, Ahold announced some key senior management changes that include Dick Boer, who will become chief executive in March 2011, replacing John Rishton, who will become CEO of Rolls Royce. Moreover, Sander van der Laan will become COO of Ahold’s European business and Carl Schlicker will add U.S. chief operating officer duties to his current role as CEO-USA Retail, when current COO Larry Benjamin retires from the company in January 2011. We recently sat down with Schlicker and Jeff Martin, Ahold USA Retail’s EVP-sales and merchandising, to discuss a wide array of subjects, including the transition into a new corporate structure, as well as both executives’ views on how their roles have changed and how that will affect Ahold going forward.
Food World: What has been the biggest surprise (both pleasant and unpleasant) during this reorganization process?
Carl Schlicker: As I have said internally, on November 9th of last year when this was announced, if I could have signed up to be where we are now organizationally, from a people perspective, I would have signed up in a heart beat. You always worry about how the organization is pulling together. My concern was how we were going to make this reorganization transparent to the stores and how we were going to continue our high level of performance. As I reflect back on it a year later, I am most proud about how our folks have delivered on this. If you look at our financial performance over the last year, it has been very solid and very good in comparison to our peers. That is not necessarily true of others who have gone through this process in the past. The litmus test for me is: has this been transparent to the customers and has this been transparent to the stores? I think in both cases this has been true. As much as I hoped that would be the answer, quite candidly, it has probably been the biggest surprise.
What hasn’t been pleasant is the fact that people are impacted by an organization undergoing change. For all of the good and all of the people who have benefited from the fact that we are laying the foundation for the future of the company, the reality is that there are people who have been negatively impacted. You feel it all of the time and can see the effect that it has on the organization. On the business side, candidly, in a very competitive environment and during a competitive period of time, there have been things that we would have liked to do. But for a variety of different reasons, including the fact that our IT structure and systems were not quite where we would like them to be, we weren’t able to do that. We are looking to get back on course as we go into 2011.
Jeff Martin: Reorganizing two companies into four divisions with a common support organization was an incredibly complicated process. While we knew we would get there, it was handled – and is still being handled – in an extremely professional way. By combining the experience of two groups, we are laying the foundation for an even better end result. If you look at the reorganization of other large enterprises, most take a very long time. We have done what we said we would do a year ago and feel like we are largely completed with the process.
On the downside, the systems integration was not accomplished at the speed we would have liked. This is not due to lack of effort or attention but to the sheer complexity of IT platforms and integration. All along we said that some areas of the business were poised to move faster than other areas. Our IT teams have been great and working as hard as anyone behind-the-scenes to migrate complex systems to a single, standard IT platform by early next year.
Food World: With the transition almost complete and other major Ahold news recently announced, how have your day-to-day roles changed to this point? How has the job been different for you, if at all?
Carl Schlicker: My job has evolved throughout the year. In the beginning I was very much – and rightfully so – involved in the planning of the structure, the process of how this was going to work and what our vision was going to be. As you bring others into the process, my role starts to lessen and the role of others intensifies. As the year has gone on, my role has evolved from being more involved in the process to one that oversees the results and hard work of others. I would describe my role as going from being strategic to tactical and back to strategic again.
Jeff Martin: My job is less tactical on a day-to-day basis. I am not as involved in the decision-making process. That’s what the divisions do. My job is more to oversee the process. I am spending more time making sure we can serve our divisions effectively and at a high level. The battle is won or lost everyday at the store. We need to support them better than we ever have.
Food World: With you to become COO of the entire Ahold USA platform early next year after the departure of Larry Benjamin, what new or expanded duties will grab more of your time and attention?
Carl Schlicker: In all honesty, I don’t know. I think we have to place ourselves where we are at right now. John Rishton is here until March. Larry is here until January and we are at a point in time in the year when everybody needs to be focused on how we deliver the year, how we take care of the holidays, how we take care of our customers and how we take care of our associates.
I also believe that Sander, Dick and I all know each other very well and view the business in the same way, which is: if you do the right thing for your people, if you always keep the customer in mind, and if you believe that the end result always happens at the store, you are going to be successful. Being able to report directly to Dick will be an advantage in terms of time and also influence. As we go forward, we will be leaner, quicker and share a common vision as we look into the future.
Food World: How would you assess the emotional temperature of Ahold USA as you view it today?
Carl Schlicker: I think the emotional temperature manifests itself in many ways. One year later, we are past the tipping point. As I look at how the organization is coming together and, most specifically, at how the divisions are operating, they have clearly made the transition. As we look at the merchandising organization, for the first time ever, we have negotiated deals for the fourth quarter 2010 and first quarter 2011 working together to leverage the influence and volume of Ahold USA. In all of the years – going back to the Chantilly years – this is the first time we have been able to do this as we interact with our supplier partners.
I also see that people have gone from holding on to where they were to looking at where are we going, how are we getting there and how their roles differ in comparison to the past. Once again, the single biggest indicator of that is in the divisions. The divisions and division presidents are doing a great job. Their teams are coming together and they are making the day-to-day decisions. As I have said before, success or failure rests on how well the divisions run their businesses and become more local. I am personally energized because I think that process is well on its way.
Food World: Explain how the individual banners have benefited and will continue to benefit from the new Ahold USA structure.
Carl Schlicker: I learned when I got to Stop & Shop and Giant/Landover as CEO that, no matter how hard I might try, I could never touch as many things personally as I could at Giant/Carlisle. The problem with that from my perspective is that you need to have a local face and interaction with the communities that we do business in. What started to press on my mind was how could we do that, how could we become much more local? The divisions are the drivers of this whole process. They need to be the ones that make the everyday decisions, quickly react to the competitive environment and be the owners of their future. Their voice needs to be much louder than it could have ever been in the environment that existed before. All of us are here to support the divisions and the divisions are here to support the stores. I passionately believe that the two customers we have are our stores and our shoppers. The divisions, as they have put their teams together, have become the decision-makers and influencers. It is indicative of why our performance has been good in a very tumultuous time. That shift occurred early and is giving us a competitive advantage in comparison to the environment that we dealt with in the past.
Food World: Is it a concern of yours that Ahold USA is going to override some of the good intentions of what you have planned for the divisions?
Carl Schlicker: I don’t believe that is going to happen. From day one the mindset within the organization was that the Ahold USA support functions are here in a supporting role. You can have the best folks in the world involved in plan-o-gramming in one location and then provide options for plan-o-gramming to the divisions. The divisions have their folks decide which plan-o-gram works best in their stores and that, to me, is how a support organization is supposed to work. If day-to-day decisions are made closest to the customer, I believe we will differentiate ourselves from other models that exist. With that said, it is what I watch for the most. There is a lot of diligence around ensuring divisional independence because I do believe that is the secret to the success of Ahold USA going forward.
Food World: As one of the key architects in this, when do you think the real “go” date will be. And overall, it is not just merchandising, but that is the biggest changeable piece. I know that the IT piece has been pushed back again. So when do you think, objectively, you can tell the vendors and the associates that you will be ready to go?
Carl Schlicker: I personally believe that we are 80 percent there. If I were to talk about the divisions, I would make that 90 or 95 percent. My belief – and the belief of the rest of the organization – is that we will be fully implemented and transparent by the end of the first quarter 2011. There is going to be additional progress along the way and that progress will be beneficial to the supplier community and to the folks within the organization. We are headed towards a course that, by the end of the first quarter, will be simpler. We will be an easier company to do business with from the vendor perspective. I am very thankful for the support that the supplier community has shown. We are going to get to where they would like us to be and appreciate that they have been patient with us along the way. We have earned that patience as we have also delivered pretty solid numbers during a very difficult time. By the end of the first quarter we will be rockin’ and rollin’. We are going to be able to do some things in 2011 that we haven’t been able to do in 2010. All of us in the organization look forward to being able to do that.
Food World: At what point will category managers be able to tell suppliers and brokers if an item is going to appear in the ad?
Jeff Martin: Here in the fourth quarter, we have already begun to run similar item ad formats as far as cover items go. For the first quarter of 2011, we’ve managed to build a coordinated promotional schedule. Most if not all of our major suppliers are signed up for Real Deals or Bonus Buys, along with our fuel marketing overlay programs. We continue to iron the wrinkles out but that’s what we consider them – wrinkles as opposed to fundamental problems. As Carl said, we haven’t had all of the tools available to us during 2010 due to the reorganization, but that is about to change. In fact, it is changing. We will need our vendors to be active partners in changing along with us, developing new opportunities and bringing solutions to us.
The great part is that our vendors continue to grow with us. What I have been most impressed by is that some of our key partners have reacted with us, both organizationally and operationally. These partners have really helped our new team members get up to speed in the markets that some of our folks are learning to serve. I think both have benefited from these interactions.
Even during our transition to a new structure, we have continued to grow market share and sales. Now that we are largely completed with the process, we are excited about firing on all cylinders and being better, stronger and faster than ever in 2011.
Food World: Some vendors are concerned about the new merchandising function process as they have seen it evolve to its current point. Can you address that?
Jeff Martin: Some suppliers have asked if we are working off of a Stop & Shop or Giant/Carlisle model. There is now a new Ahold USA model that takes the best of all the prior programs of Stop & Shop, Giant/Landover and Giant/Carlisle. While we still have programs that we need to bring together, the internal planning process is working. For example, there will continue to be duplicative processing until our IT systems are aligned early next year. But we have conducted our fourth quarter planning together and, in some cases, we have been able to negotiate the first quarter as one Ahold USA merchandising team.
Our buyers and suppliers are on a new learning curve from a planning perspective, which means that we are all navigating a new way of doing business. Until we get the IT systems migrated to a single platform, there may be additional processing work that needs to be done, but every supplier I talk to tells me how much they know we will get this right.
Food World: Now wear your CEO Retail hat and your future hat in terms of strategy. Ahold has openly stated that it is ready to seek more acquisitions in the U.S. How do you view the climate for deals in this economic environment?
Carl Schlicker: As you know from what has already been reported in the media, there are a lot of potential opportunities out there. We are continually evaluating our business strategy including potential acquisitions. It is important that we make deals that make sense for us in light of that strategy. One of the key reasons behind reorganizing, if you recall, was to prepare ourselves to grow in the future and you know that our strong financial position enables us to do so.
Food World: Again, I think the fact that you have stood up and said that we are in an enviable cash position has spotlighted you a little bit more. Private equity, honestly, has been a little bit out of the loop in recent times, not that they aren’t financially equipped, but the number of players overall has been reduced. And, here’s Ahold saying “We’re players. We can’t tell you when, but we’re players.”
Carl Schlicker: We would hope that companies looking to do transactions would seek us out. We want to entertain potential offers because we want to grow. Fortunately we are in a position to grow not only monetarily but also organizationally. We have very strong teams. While there have been many distractions as part of the Transition, these folks are now ready to go. When the right opportunity comes along, we will take advantage of it and do it in a very successful way.
Food World: With the business as challenging as it’s ever been, how do you see the Northeast retail landscape shaking out in the next 18 months?
Carl Schlicker: I see it being much different than it is today. I think that all channels will grow. I wouldn’t necessarily subscribe to the theory that there will be fewer players, even within the supermarket channel because there may be opportunities for several new players to enter the market.
Food World: Thank You.