In December 2019, Ahold Delhaize made a historic company announcement when the Dutch retailer said it would transform and expand its U.S. supply chain operations over the next four years by investing $480 million to control its own distribution. For more than 30 years, the original Ahold banners – The Giant Company, Stop & Shop and Giant Food – all relied primarily on an outside distributor, C&S Wholesale Grocers, to supply most of the stores operated by those three regional chains. The former Delhaize America banners – Hannaford and Food Lion – have utilized a self-distribution model for more than 50 years to operate 10 combined depots (Ahold and Delhaize merged their grocery chains in 2016). The entire transformation to self-distribution is under the supervision of Retail Business Services (RBS), Ahold Delhaize USA’s (ADUSA) services company.
At the time, ADUSA CEO Kevin Holt (who will be retiring in April but will remain with the company through year-end said that the move was “another example of how Ahold Delhaize USA is transforming our infrastructure to support the next generation of grocery retail. Through this initiative, we will modernize our supply chain distribution, transportation and procurement through an integrated, self-distribution model, that will be managed by our companies directly and locally. This will result in efficiencies and most importantly product availability and freshness for customers of our local brands – now and in the future – whenever, wherever however they choose to shop.”
As the largest grocery chain in the Mid-Atlantic and Northeast prepares to complete this massive project over the next 12 months, let’s document what specifically has occurred over the past three years. The first distribution center to be converted into the merchant’s new supply structure, which included significant software upgrades, was Stop & Shop’s large complex in Freetown, MA. In February 2021, grocery products became part of the new network followed by perishables three months later.
In August of 2021, Giant Food’s perishables facility in Jessup, MD was also integrated into the ADUSA supply chain network.
Also in July 2021, following the acquisition of nearly 62 Bi-Lo stores in the Carolinas from Southeastern Grocers (SEG), ADUSA Distribution purchased Bi-Lo’s primary distribution center in Mauldin, SC. Ironically, Delhaize used to own the Bi-Lo brand (and the Mauldin facility) before selling it to SEG’s parent firm Lone Star Funds in 2005. Grocery delivery from the Mauldin depot went “live” in July 2021; perishables followed a month later.
In September 2021, ADUSA opened its first new facility, a dry grocery DC in Manchester, CT to serve Stop & Shop stores in New England and Metro New York. Indeed, 2021 was a busy integration year, and ADUSA completed its final conversion with The Giant Company’s (TCG) perishables facility in Carlisle, PA in October.
As this year comes to a close, the big chain will have completed two projects: a large dry grocery distribution center in Bethlehem, PA that now serves TGC and Stop & Shop was added in February 2022, and another large grocery depot in York, PA was added in May. Both those warehouses were gained from C&S. The York warehouse is the largest depot in ADUSA’s fleet and once served as collaborative supply chain facility when the Keene, NH-based wholesaler owned it.
As it prepares for full supply chain self-distribution by the end of next year, the final three distribution centers will be added. In Q2 of 2023, a new automated frozen food warehouse (in partnership with Americold in Mountville, PA) will begin shipping product to TGC and Giant Food stores; in Q3 another automated frozen facility in Plainville, CT (also with industry partner Americold) will start delivering frozen to Stop & Shop stores; and also in the third quarter of 2023, a perishables DC gained from C&S in Chester, NY will begin shipping fresh product to Stop & Shop stores.
In addition to those physical warehouses which will deliver products to ADUSA’s nearly 2,000 stores, the company operates other warehousing properties in Jersey City, NJ; Lancaster, PA: Philadelphia, PA; Hanover, MD; and Manassas, VA (opening next year). Those distribution centers operate as digital facilities that serve ADUSA’s online customers as does the large FreshDirect warehouse complex in the Bronx, NY. Also under ADUSA’s aegis are two meat processing facilities in Camp Hill, PA and North Kingstown, RI and a Central Fresh Kitchen which is also located in North Kingstown, RI.
As for C&S, the large family-owned wholesaler will still play a significant role in working with ADUSA. Going forward, C&S will be involved with helping the big chain with third-party labor needs, IT systems support and overall collaboration.
“Over the last three years, we have been working through the self-distribution project, which will create one of the largest supply chain infrastructures on the East Coast in the grocery industry. This transformation has been incredibly challenging due to the complexity of the project itself, but also during the times in which we needed to execute it, which of course was during COVID,” said Roger Wheeler, president of RBS and chief commercial and supply chain officer. “That put tremendous pressure not only on the workforce, but the stability of the supply chain in total. So, obviously there were additional challenges, complexities. And yet, we have been able to stay on pace for the most part, but also made adjustments along the way. Overall, the learnings have been very significant, and mostly centered around how to mitigate risk in providing continuity of supply for the stores while we were transitioning facilities. Large-scale initiatives like these take a lot of joint planning and preparation from our partnership with C&S, IT and the brands we serve. That’s one of the hardest parts of all because there are complex systems behind driving all of the supply chain systems. It has been a rewarding project and we are very proud to be on pace to finish it in the coming year.”