Ahold Delhaize Moving To More Decentralized U.S. Merch Model

Ahold USA and Delhaize America, the U.S. units of recently merged retailer Ahold Delhaize, announced on February 6 another major step in the integration of efficiencies for the two companies. Last month, the large global merchant began operating its newly created Retail Business Services (RBS) unit led by Roger Wheeler.

RBS was designed to drivAe synergies and best practices as well as provide expertise, insights and analytics to the Ahold USA and Delhaize America brands to support their respective strategies. In addition to commercial support, the responsibilities supervised by RBS include financial services, not-for-resale procurement, legal services, information technology, and people systems and services.

That would leave the merchandising, marketing and store operations of the Stop & Shop, Giant/Landover, Giant/Martin’s, Peapod, Food Lion and Hannaford banners/brands to fully focus on building their positions in their respective markets and potentially delivering more for their customers.

With its announcement earlier this month, the retailer shed more light on what improving its individual banners/brands really means.

Each of the “brands” will have distinctive commercial strategies that are tailored to local markets with dedicated resources, including category merchandising, assortment, pricing, promotions, marketing and format teams. This brand-centric structure, which is expected to be completed by early 2018, will better position the Ahold USA and Delhaize America brands to be even more closely connected to their customers and communities, the retailer stated.

“Positioning the Ahold USA brands to be even closer to their customers will not only help them deepen their connection in their local communities and win in their markets, it will ensure that associates have exciting and rewarding opportunities to make meaningful contributions to each brand’s success,” said Kevin Holt, chief operating officer of Ahold USA.

“Today’s announcements will further strengthen Food Lion and Hannaford’s strong brands,” said Frans Muller, acting chief operating officer of Delhaize America and deputy CEO of parent Royal Ahold Delhaize. “The brand-centric structure will enable our Food Lion and Hannaford associates to build even stronger relationships with existing customers and communities in the markets they serve, and win new customers to grow their businesses.”

Ahold USA also announced that its Stop & Shop New York Metro and Stop & Shop New England divisions will be consolidated into one brand organization (last month former Stop & Shop-New York Metro president Don Sussman was moved to the EVP-merchandising post at Ahold USA in Carlisle following the resignation of former AUSA chief merchant Andrew Iacobucci). The company noted that having a single-banner organizational structure dedicated to Stop & Shop will strengthen the division and will ensure it can better leverage its brand to serve the unique needs of customers in the different markets that Stop & Shop serves. The company’s Fresh Formats LLC unit, which currently includes three 10,000 square foot bfresh specialty stores, will now become part of Stop & Shop’s management structure, too.

Delhaize America and Ahold USA brands will maintain their current respective office locations in: Quincy, MA (Stop & Shop); Salisbury, NC (Food Lion); Carlisle, PA (Giant/Martin’s); Scarborough, ME (Hannaford); Landover, MD (Giant/Landover); and Skokie, IL (Peapod). Ahold USA brands and Delhaize America brands that have regional support offices now will continue to have brand support offices throughout their market areas.

In addition, the supermarket chain announced that the banner/brand leadership team will remain in place including: Mark McGowan, president, Stop & Shop; Tom Lenkevich, president, Giant/Martin’s; Gordon Reid, president, Giant/Landover; Jennifer Carr-Smith, president, Peapod; Meg Ham, president, Food Lion and Mike Vail, president, Hannaford.

“I’m very excited about the brand-centric model at Ahold USA and its brands, which puts the customer at the center of all we do,” said Holt of his Ahold USA team. “Mark, Tom, Gordon and

Jennifer all have proven track records and they are the right leaders for our great local brands.”

Muller also expressed support for the leaders at Food Lion and Hannaford: “I am extremely pleased that Meg and Mike will continue to lead and drive the successful strategies of Food Lion and Hannaford. We have every confidence in the continued success of Food Lion and Hannaford under their leadership.”

In addition, the following executive appointments in the U.S. will become effective when the brand-centric organization is complete, which is expected by early 2018, and will report to Royal Ahold Delhaize in Amsterdam: Greg Amoroso, executive VP, U.S. CFO; and Linn Evans, executive VP, U.S. chief legal officer.

The following executives will report to Retail Business Service when the brand-centric organization is complete: Kathy Russell, executive VP – people systems and services; JJ Fleeman, executive VP-commercial services and strategy; Chris Lewis, executive VP-supply chain; and Paul Scorza, executive VP-CIO.

The Ahold USA and Delhaize America brands will continue to operate as independent companies in the U.S. and will continue to serve their local customers’ needs and be strong community partners in their respective markets. While this is the second key announcement to be made in the last eight weeks, expect several more waves of details in the new few months. Some related topics of interest to the more decentralized “brands” focus includes the deployment of individual merchandiser/category managers at each AUSA banner and what will be the new protocol between the banners/brands and the current centralized merchandising platform that has existed in Carlisle since 2009.

Other potential synergy/integration initiatives are explored in this month’s “Taking Stock” column on page 6.

As the Vendors Heard It From Kevin Holt and Frans Muller

Dear Vendor Partner:

As part of our continued partnership with you, Ahold USA and Delhaize America remain committed to keeping you informed of changes and transition plans for our brands.

At the time of closing, we talked about the unique opportunity to work with you to aggressively grow sales and market share in the geographies in which each of our brands operate. A tremendous opportunity exists for suppliers to take advantage of each of our brands’ initiatives to drive savings and growth, fund innovation and, ultimately, achieve a better return on your investment. We are so pleased that our partners see the promise of the Ahold USA brands and Delhaize America brands in the U.S. We’re very proud of the teams at each of the companies working to create strong partnerships with each of you, and collaborating and sharing ideas as these teams work to enhance our respective businesses for future growth. 

A hallmark of the success of the Ahold USA brands and Delhaize America brands is their ability to adapt to market demands and customer preferences. Even before the merger, our brands reorganized to implement more customer connected strategies and operations. Food Lion and Hannaford shifted their focus to be closer to their customers and communities, and Ahold USA and its brands reorganized to provide more locally relevant support to stores, including the implementation of a “district centric” team structure.

You can read more about the changes that we shared with associates today in the attached press release, but key highlights for the vendor community include:

The brands will have the resources necessary to develop and execute their respective strategies, including category merchandising, assortment, pricing, promotions, marketing and format teams.

Retail Business Services LLC, which Ahold USA and Delhaize America created in December 2016, will offer world-class services to all of Ahold Delhaize’s U.S. brands and leverage its scale to drive synergies and best practices. A new function in Retail Business Services will be Commercial Services & Strategy, which will offer expertise, insights and analytics in merchandising services, digital and sourcing, as well as sustainable retailing, private brands and Pharmacy support.

Thank you for your ongoing collaboration, support and partnership and we are very excited to grow our businesses with you. 

Kevin Holt                               Frans Muller

Chief Operating Officer         Acting Chief Operating Office (ad interim)

Ahold USA                             Ahold USA

As The Associates Heard It From Kevin Holt:

As you know, we’ve been working hard on the integration of Ahold Delhaize’s U.S. companies, and I’m very proud of our efforts so far. We’re building teams that are creating strong partnerships and collaborating, sharing and learning from one another.  We’ve made excellent progress in working to achieve synergies to fuel future growth. And, we’ve established Retail Business Services LLC, an independent services entity that will leverage scale and identify best practices in order to offer services, as requested by the brands, more efficiently and effectively.

Today we are giving you updates on a number of topics, including: the Brand-Centric Operating Model, U.S. leadership appointments, selection information, location decisions and timing.

Our Story So Far

A little more than six months ago, the merger of Ahold and Delhaize created a family of great local brands around the world, including U.S. brands that together comprise the largest grocery retailer group on the East Coast.  All of the brands are part of the fabric of the communities they serve, with deeply loyal customers who trust them to feed their families every day with fresh, healthy food while also knowing they will be there in times of need.

Part of the brands’ continued success has been based on their ability to adapt over the years. Even before the merger, Ahold USA and Delhaize America and their brands recently reorganized to implement more customer connected strategies and operations. Food Lion and Hannaford shifted their focus to be even closer to their customers and communities.

But, we need to do more. The merger is a unique opportunity to make the changes we need to continue to grow the businesses. As we move into 2017, it’s time to take the next step to build on the strong foundation of great local brands – work that will take place over the course of 2017 and into early 2018.

The Brand-Centric Operating Model

The U.S. brands and RBS will have a brand-centric focus and be relentlessly focused on growing sales and putting customers at the center of everything we do. Organizational charts about the top levels of each RBS function and of the U.S. brand support offices will be shared to give more clarity, but here are some of the highlights.

The brands

The U.S. brands will remain:

• Food Lion
• Stop & Shop, including bfresh
• Giant Carlisle, including the GIANT and MARTIN’S brands
• Hannaford
• Giant Landover
• Peapod

The former Stop & Shop New York Metro and Stop & Shop New England Divisions will be consolidated into one brand with a single Stop & Shop support organization. Stop & Shop will be headquartered in Quincy, MA, with other Stop & Shop brand support offices located throughout the Stop & Shop market area. bfresh will now also report into the Stop & Shop President as part of a team focused on developing a winning small store format. In the coming months, we will evaluate how the new operating model and Retail Business Services can best support Peapod.

Each brand will operate independently in its own local market, developing its unique strategy and defining its relationship with its customers and communities. Each brand will also have the authority, tools and resources to execute its commercial strategies and to facilitate effective and quick local decision making, which includes building its own category merchandising, assortment, pricing, promotions, marketing and format teams.

Retail Business Services LLC

RBS will serve the brands as a key partner to fuel the brands’ growth and help bring the strategies they develop to life. RBS will be organized to:

• Help the brands, as requested by them, operate smarter, waste less and purchase goods and services better;
• Leverage scale and identify best practices to offer services, as requested by the brands, more efficiently and effectively; and
• Provide tools and data that the brands need.

RBS will include:

• Commercial Services & Strategy (CSS) – a new function called that will deliver core commercial capabilities, expertise, insights and analytics and manage platform tools and data sources as requested by the brands
• IT Services
• People Systems and Services
• Supply Chain Services
• Legal Services
• Accounting Business Services and Controls
• Corporate Business Support
• Real Estate/Construction
• NFR
• Operations Support
• Communications

Certain roles within the current Ahold USA and Delhaize America support structures will shift to the brands.

U.S. Leadership Appointments

We are excited to announce the following executive leadership appointments to support the main functional areas and our U.S. brands.

The U.S. brand leadership appointments include:

• Meg Ham, President, Food Lion
• Mark McGowan, President, Stop & Shop
• Tom Lenkevich, President, Giant Carlisle
• Mike Vail, President, Hannaford
• Gordon Reid, President, Giant Landover
• Jennifer Carr-Smith, President, Peapod

These brand leadership appointments are effective immediately. The brands of Ahold USA will continue to report to me, and the brands of Delhaize America to Frans Muller.

As you all know, Roger Wheeler has been named President of RBS and is already in that role. Roger will have a team of leaders working with him, and they will become effective as the functions are set up through the transition in 2017/2018:

• JJ Fleeman, EVP Commercial Services & Strategy
• Chris Lewis, EVP Supply Chain
• Paul Scorza, EVP and Chief Information Officer
• Kathy Russello, EVP People Systems and Services

Linn Evans has been appointed EVP and Chief Legal Officer. Greg Amoroso has been appointed EVP and Chief Financial Officer. The CLO and CFO roles are, in part, focused on compliance and general oversight and, therefore, will be independent of the RBS organization for regulatory reasons. The CFO will have functional oversight for the NFR and Real Estate & Construction functions.

We also want to recognize the contribution of our other leaders at this time:

• Fran Weissman will remain in the interim AUSA CFO role through the transition.
• Tom Hippler, the current EVP and Chief Legal Officer for Ahold USA, will remain in position through the transition and may continue in a consulting role thereafter.
• Dave Pylipow, the current Chief People Officer for DA, will remain CPO and, as recently announced, will lead the U.S. IMO throughout the transition. He will retire at the end of his IMO assignment.
• Mike Laurenti, the current SVP & Chief Information Officer for DA, will be moving into the global role he was previously appointed into, SVP of Global Delivery, Portfolio and Project Management.  In this role, he will lead the Global IT Integration program reporting to Ben Wishart, Global CIO.
• Don Sussman will continue in the AUSA EVP Merchandising role through the transition, and then will retire.
• Jan van Dam, currently the AUSA EVP Supply Chain, Peapod and Marketing, will be completing his U.S. expat assignment, and he will be returning to Europe to take on a role there.

There are no changes to reporting relationships at this time, and every associate will continue to report to his or her existing manager until the organizational design and appointments are complete and a transition date is established.

Location Decisions

We will maintain brand headquarters offices at the following locations:

• Food Lion in Salisbury, NC
• Stop & Shop in Quincy, MA
• GIANT/MARTIN’S in Carlisle, PA
• Hannaford in Scarborough, ME
• Giant Landover in Landover, MD
• Peapod in Skokie, IL

As we continue to define the RBS and brand organizations, we will maintain some RBS functions in each of the current five key office areas (Quincy, Salisbury, Carlisle, Scarborough and Greenville). RBS associates will also be located at other locations. In addition to the brand headquarters, brands that currently have them still will have additional regional offices located throughout their market areas.

The long-term goal is for associates who are supporting specific brands, including those transitioning from roles currently in a support office, to be located at brand headquarters or regional offices close to their stores.  And, as we finalize our organization design in the coming months, we will evaluate resources at each of our support offices, and some roles may potentially move.

Any location decisions that may involve relocation of roles will be done in a thoughtful way to minimize the associate impact while meeting the needs of the business. When we communicate to each person about his or her role in the new organization, we will be clear if there are any geographic changes. If relocation is required, our goal is to transition people over time to their new locations.

Selection Information

Our next step is to begin a staffing and selection process. As we move through this process, our commitment is that decisions will be made thoughtfully, and this process will be conducted fairly and transparently.

The general timeline for the staffing and selection process is as follows:

• The first phase will include leaders reporting to the executive leaders announced today and will begin soon, and we anticipate this phase will be completed by the end of Q2.
• The next phase will include positions in the brands: the Stop & Shop, Giant Carlisle and Giant Landover support organizations, as well as some functions that may change in Food Lion and Hannaford. This phase will also include Operations Support and CSS in RBS. We anticipate this taking place in Q2 and Q3.
• The last phase will include all remaining RBS functions, along with any functions that reside in the brands. We anticipate this will start in Q3 and last through the end of the year.
• For functions in which roles reside both in the brands and in RBS, selection for those roles will follow the functional selection timeline.

The details of the process will vary by phase, and associates will be communicated to in advance so they may prepare for the process. Overall, however, associates in transitioning functions will be identified as candidates within pools for roles, will be able to express their career and mobility interests and will be evaluated on both role-specific and functional area competencies.

It is important during the transition period to get the organizational structures right for RBS and each brand. In the coming weeks, the leaders placed into roles after this next phase of the staffing and selection will play an important part in designing the right structure for their teams.

As we shift and change functions, this will result in additional opportunities within the brands, as many functions will move into these organizations. We will see some job reductions, however these will constitute a relatively small percentage of the overall associate base. Overall, associates should anticipate that functions and departments will experience differing levels of change.

Conclusion

As we have said, that is certainly a lot to digest, but these changes are not immediate and will happen over time – through 2018. We are going to have more communication opportunities in the next few days to offer further clarity, and we will keep you updated as we work together through this process.

As we look ahead to the future, we believe that the U.S. brands and RBS will be exciting and dynamic brand-centric organizations that will be poised to win in their local markets. While there will be much work ahead to transition to this brand-centric model, the opportunity to be part of new, winning organizations will provide exciting and rewarding professional opportunities throughout all of our organizations. Some change will be necessary, but we will support you through the process. To ensure this, our guiding principles will continue to be:

• Working better together
• Staying connected to the brands
• Building customer-focused selling organizations
• Having simplicityas a mindset
• Enabling a purpose-driven culture with fundamental values

You should be very proud of the work done so far and how focus has continued to remain on delivering our business as usual. We thank you for your hard work and dedication. We appreciate your ongoing focus and commitment to serving our customers during this time of transition and will continue to provide regular updates as our journey continues.

Kevin Holt

CEO Ahold USA