For the past month, we’ve been hearing about impending major changes at Ahold Delhaize USA. Most of the speculation centered around company-wide job separations (including several senior level leaders) and the prospect of returning to a centralized merchandising model which Ahold USA had deployed prior to its 2016 merger with Delhaize.
The truth is, there will be changes, but not any that could be considered major. On the issue of job separations, those will occur in the next few weeks. The retailer would not disclose how many jobs will be lost, but a source pegged the number at several hundred. And yes, there will some riffing of senior level executives, but on a relative basis, the number is only about 10 associates. The changes will occur mainly on an administrative levels across all of ADUSA operating platforms – but primarily at its Peapod Digital Labs and Retail Business Services (RBS) units. There will be no impact to stores or distribution centers. Those changes should be implemented by mid-April when JJ Fleeman replaces the retiring Kevin Holt as ADUSA CEO.
Like other large companies that have announced corporate layoffs such as Amazon, Microsoft, Google and most recently Lidl, there is deep concern about the state of the economy going forward. Grocery merchants, which are still generally posting strong comp store revenue, have seen unit sales fall and profits impacted, are looking to become as lean as possible in anticipation of even more severe economic challenges 9-12 months down the road.
As for the rumored return to centralized merchandising, I’m told that’s not going to happen. The decentralized model that was created in 2018 in which Giant Food, Food Lion, The Giant Company, Hannaford and Stop & Shop operate their own individualized merchandising departments will remain in place. However, our source told us that some nuance on how ADUSA’s merchandising leaders go to market will be occurring. As part of both its “Connected Customer” and “Accelerate” initiatives released over the past 18 months, ADUSA wants its merchandisers/category managers to focus on its strengths and diversity with its suppliers and brokers. That means aggressively seeking to assert more leverage (and potential trade funding) by highlighting ADUSA’s heightened clout as a true omnichannel merchant – growth of its brick and mortar stores, increased digital-driven sales and the potential of its newly formed retail media initiative.
There may have also been some confusion or fear that the company’s new consolidated pilot plan (begun in January) involving the high volume laundry/detergent and paper categories would be a precursor to an overall centralized merchandising shift. The new program, a collaborative effort among all of ADUSA’s platforms, incorporates common tools and systems to maximize the chain’s efficiencies and buying power. The pilot plan is not connected to a move to a broad central merchandising effort.
At Ahold Delhaize’s Q4 earnings call last month, CEO Frans Muller outlined a key part of the company’s “Accelerate” plan: “…With inflation remaining high, we will also continue to lean in and explore new opportunities to lower our costs. To that end, we are introducing a new group-wide initiative called ‘Accelerate.’ This initiative builds on our existing ‘Leading Together’ efforts to create more agile organizations, to capture more scale and empower our people to take action to drive efficiency. In particular, we will continue to evaluate additional savings and efficiency levers to streamline organizational structures and processes, optimize go-to-market propositions, increase joint sourcing and consolidate IT – with a clear priority to unlock resources to accelerate our ‘Save for Our Customers’ program and focus investments on high return projects. I am confident this proactive approach will make our organization stronger and ensure we can continue to deliver on our track record of driving consistent long-term value creation for all stakeholders.”
ADUSA’s “Connected Customer” strategy was first revealed by Holt at Ahold Delhaize’s Investor Day in November 2021.
“Let me describe to you what we mean by a connected customer. Our customers’ lives are constantly in motion. They’re looking for convenient and personalized solutions to save time in their day so that they can enjoy the moments that matter. Our strategy is built on providing relevant omnichannel solutions so our customers can enjoy the moments that matter in their lives. Our strategy is resonating. Over the last two years, we’ve seen significant digital growth across all segments of our customer base. In fact, we’ve seen our digitally engaged customers grow by 56 percent in the last two years.”
Beyond personalization, core components of the “Connected Customer” include a fully integrated omnichannel experience, local and trust, health and wellness, and private brands.
Our source emphasized that the upcoming changes at ADUSA were designed to maximize the results of both initiatives.
‘Round The Trade
Walmart continued to post strong sales and earnings in its fourth quarter (ended January 31) but was unfairly flagged by Wall Street for expressing a cautious outlook going forward. Every metric at the “Behemoth” was excellent – U.S. comp store sales increased 8.3 percent (excluding fuel) and December 2022 was the biggest sales month in its history. On the earnings side, operating income grew to $6.4 billion, a gain of 6.9 percent, and the Bentonville, AR retailer saw its e-commerce business grow by 17 percent. “We’re gaining share across income cohorts, including at the higher end which made up nearly half of the gains we saw in the U.S. this quarter,” said CEO Doug McMillon. The chief executive said that food was driving most of those gains at the expense of other categories, most notably home and apparel. That category shift adversely affected Walmart’s profit. He then predicted that that full-year comp store growth would slow to a range of 2-2.5 percent due to uncertainty about the economy. “The consumer is still pressured. And if you look at economic indicators, balance sheets are running thinner and saving rates are declining relative to previous periods. And so that’s why we take a pretty cautious outlook on the rest of the year,” said CFO John David Rainey. That level of caution negatively impacted Walmart’s stock, which was trading at $146 per share prior to the February 21 release and sits at about $139 share on March 2. BTW, Walmart’s total annual revenue now stands at a whopping $611.3 billion, a 6.7 percent gain from fiscal 2021!…in its latest report, which was released in mid-February, the Bureau of Labor Statistics’ Consumer Price Index (CPI) continued to provide the best inflation news in more than a year. However, food price inflation once again remained a concern when compared against all other economic indicators. The overall inflation rate declined 0.1 percent to 6.4 percent year-over-year in January. Food prices, while decreasing to 10.1 percent growth last month (down from 10.4 percent in December) still remain too high. Four of the six major food measuring groups showed modest declines when compared to a year ago. Those declining categories included: cereal/bakery products (+15.6 percent); fruits and vegetables (+7.2 percent); dairy (+14.0 percent); and other food at home (+13.2 percent). Two other categories experienced continuing price increases – meat/poultry/seafood/eggs (+8.1 percent) and non-alcoholic beverages (+13.1 percent)…as far as monthly online grocery revenue goes, according to research firm Brick Meets Click/Mercatus, total U.S. online grocery sales decreased slightly in January 2023 from a year ago. However, that decline – 1.2 percent – came from the “ship-to-home” segment which declined 15 percent. Overall, digitally sourced grocery purchases now comprise about 12 percent of the total grocery pie. Moreover, the survey noted that, for January, the likelihood that a customer will use the same service within the next 30 days decreased two percentage points versus 60 percent last year. “The large gap in repeat intent is concerning and should raise a red flag for conventional grocers. While our monthly research didn’t examine the causes for the variations between grocery and mass, it could be associated with a number of variables, including product pricing, service-related costs, or differences in customer experience, so grocers may want to analyze what are the main culprits driving their respective rates lower,” said David Bishop, a Brick Meets Click partner and co-founder…oh yes, we do have some Amazon news to report. It was another loss for “Godzilla” with the National Labor Relations Board (NLRB) over its attempt to challenge the unionization of one its fulfillment centers in Staten Island last April. After several appeals by Amazon, the national labor board said the company illegally used subpoenas to coerce associates and tried to interfere with the organizational effort of Amazon Labor Union. As it has done since Amazon first appealed the legitimacy of the election last spring, “Godzilla” has denied any wrongdoing. And while we still don’t know how many Amazon Fresh units will be shuttered in the near future, several retailers have told us that the company’s failing brick and mortar small-store entity is looking to peddle equipment reportedly on the cheap. And despite a lot of “rah-rah” rhetoric from Amazon CEO Andy Jassy that his company will revive and improve its Amazon Fresh (AF) format, I’m highly skeptical. In the two years that AF stores have been open (not counting the pre-planning that took place prior to 2021), Mother Amazon has shown ineptitude in almost every aspect of grocery retailing at its newest retail format. In other Amazon stuff, the merchant reportedly will be expanding its small warehouse network to accommodate ultrafast delivery of products. According to The Wall Street Journal, as many as 150 small fulfillment centers could be open in the next few years (Amazon currently operates 45 of these depots) and would be capable of delivering the most popular items in “Godzilla’s” 100,000 item catalogue. This seems to be a direct response to Walmart, which has effectively utilized its broad brick and mortar store network to execute speedier deliveries. There was some good news for Amazon, though – after the FTC last month said it would not block the Seattle-based company from acquiring large healthcare organization 1LifeHealthcare, a $3.49 billion deal the two companies first announced last July, Amazon completed the deal several days later. However, the large federal agency also issued a warning that it will continue to scrutinize the deal even after the statutory deadline for antitrust review had expired. “The FTC’s investigation of Amazon’s acquisition of One Medical continues. The commission will continue to look at possible harms to competition created by this merger as well as possible harms to consumers that may result from Amazon’s control and use of sensitive consumer health information held by One Medical,” said FTC spokesman Douglas Farrar…Howard (“Humble Howie”) Schultz, the interim CEO of Starbucks, is the gift that keeps on giving. Just before presstime, we learned that NLRB administrative judge Michael Rosas has ordered Starbucks to reinstate seven associates who were fired after they attempted to unionize 21 stores in the Buffalo, NY area in late 2021. Untypically, this was not a boiler plate press release that gets buried among a pile of other administrative announcements. Judge Rosas went full scorched earth on the tactics of “his humbleness,” issuing a 200-page report on the ways Starbucks tried prevent organization efforts. Here are a few highlights: in addition to reinstating those terminated employees, Starbucks must provide financial restitution to 27 other associates who were harmed by some of the coffee roaster’s actions; it must also reopen a store in Cheektowaga, NY that it deliberately closed as a result of the union initiative; the company must post a 13-page notice listing its labor violations and workers’ right at all its nearly 16,000 U.S. stores; Schultz is required to read or be present at a reading of employees’ rights and distribute a recording of the reading to all of the company’s employees. Judge Rosas’ ruling, which consolidated 35 unfair labor practice complaints, also noted that Starbucks had spied on associates and in some cases threatened them. The Seattle-based java juggernaut has until March 28 to appeal the ruling, which it likely will. Earlier in February, “Humble Howie” almost couldn’t contain himself when announcing Starbucks’ newest brand rollout – Oleato – an olive oil-infused line of products that debuted at the company’s 25 locations in Italy late last month and will be available in the U.S. in a few months. “This is a transformational moment in the history of our company creating a new category, a new platform.” (I’m trying not to laugh.) Schultz will be stepping down from his third tour of duty as chief executive later this month. He will be replaced by former Reckitt Benckiser CEO Laxman Narasimhan. “I’ll carry the Starbucks flag and the American flag all over the world for Oleato,” said Schultz, “But make no mistake, Laxman is the CEO and at the annual meeting on March 23, there’s only one leader at Starbucks. It’s going to be him.” Wanna bet?
Local Notes
The good news for Lidl: it will be building a new distribution center to accommodate the needs for its growing business in Pennsylvania, New Jersey and New York. The bad news: about 200 associates will be laid off at its corporate headquarters in Arlington, VA. As for the good news, the German discount retailer confirmed that it acquired a 69-acre parcel of land for $144.6 million in the massive NorthPoint Development industrial real estate complex in Falls Township, PA in Bucks County. No specifics or timeline on when the future DC might open were provided but, based on Lidl’s rapid expansion in the Mid-Atlantic (particularly on Long Island), trade analysts expect the German-owned discount grocer, which opened its first U.S. store in June 2017, to continue to aggressively add more stores in the next three years. Lidl U.S. currently operates four distribution centers – Covington, GA; Perryville, MD; Graham, NC; and Fredericksburg, VA – to supply approximately 180 stores of which more than 100 are in the Mid-Atlantic region. It also has about 20 more stores in its real estate pipeline, many of which are scheduled to open in Pennsylvania, New Jersey and New York. The new Falls Township depot will be part of NorthPoint’s Keystone Trade Center which originally called for a 1 million square foot warehouse to be built on the site that Lidl acquired. Overall, when completed, the NorthPoint development will feature an 1,800-acre campus encompassing 15 million square feet of distribution and warehouse space at a cost of $1.5 billion. As for the job layoffs, expect more of these announcements from retailers in all segments as concerns about the economy continue to linger. More Lidl news: the limited assortment grocer will open its 21st Maryland store later this year in Bethesda at the site of the old 41,000 square foot Safeway location on Old Georgetown Road. And rival Aldi opened two Mid-Atlantic stores in the past month – one in La Plata, MD, the other in Millsboro, DE…from the Taking Stock obituary desk: Huey Smith is dead. Some might ask – who is this dude? Well, Huey “Piano” Smith, 89, was one of the finest keyboard players in the history of New Orleans who wrote such well known 50s songs as “Sea Cruise” (made famous by Frankie Ford) and “Rocking Pneumonia and the Boogie Woogie Flu” (popularized by Johnny Rivers). Smith had only one hit song that he recorded – “Don’t You Just Know It” (1958) – but his gifted piano playing, which featured a strong backbeat and an ingenious right hand, influenced many musicians who hailed from Louisiana including Mac Rebennack (Dr. John) …Richard Belzer is no longer with us, either. “The Belz,” who is best known for playing Detective John Munch in the iconic “Law & Order SVU” series (a character that he originated in “Homicide: Life on the Street” in 1992), was a far better comedian than an actor. Starting in 1971, Belzer, 78, performed “stand-up” for nearly 30 years, perfecting his style of sardonic, semi-insult humor at hundreds of comedy clubs around the country. And while Belzer never attained the level of fame as a comic that he did as Det. Munch, his comic genius was appreciated by his comedy peers who often would rank him as one their favorite comedians. The reason was simple: he was drop-dead funny, especially when he was in “attack” mode (think of a more profane Don Rickles). My “Belzer moment” came in 2008 at a Friars Club roast of Matt Lauer at the New York Hilton. In front of a packed house of about 2,000 people, Belzer followed comedienne Lisa Lampanelli at the podium. Lampanelli’s routine primarily consisted of hailing the virtues of some her well-endowed companions. Belzer, already irritated about Lampenelli’s choice of topics, lit her up like a Roman Candle in a manner that I’d have to explain to you in person (don’t get too upset – it was a roast). If you’ve ever heard 2,000 people fall-down laughing in person, it’s an experience you’ll never forget.
