Ahold Delhaize USA (ADUSA) is making changes. On February 1, the large Dutch-owned retailer said that it would be folding two of its largest support services groups – Retail Business Services (RBS) and Peapod Digital Labs (PDL) – into ADUSA by the end of the first operating quarter to create more simplicity and effectiveness throughout the organizations. Then five days later, the East Coast merchant said it would sell its two meat plants – in Camp Hill, PA and North Kingstown, RI – to large meat processor Cargill, Inc. Also on February 7, ADUSA said it has signed a new agreement with ecommerce platform DoorDash to home deliver groceries to customers of all ADUSA brands – The Giant Company, Stop & Shop, Giant Food, Hannaford and Food Lion – by next month.
Moreover, the large Zaandam, Netherlands-based chain announced its Q4 and year-end sales and earnings, which like many other food retailers recently, trended flat to slightly negative.
The biggest long-term news involves the internal restructuring at the large retailer’s U.S. operations. In a memo the retailer’s CEO JJ Fleeman, noted “Following the merger of Ahold and Delhaize Group in 2016, we set up a strong brand-centric operating model for the U.S. brands. This included support brands providing expertise and service to each of our local brands to help them in their markets and drive omnichannel growth. “Our brand-centric approach has been a great success, and today each of our brands holds the leading market share in their geographies. But persistent headwinds continue to challenge our businesses.
“To continue to ensure our brands are durable companies for the future and the leading omnichannel retailers in their respective markets, we are now at an inflection point where we need to simplify our operating model, improve organizational effectiveness, create clarity and focus, ensure strong and clear prioritization of work and initiatives, and reduce costs across all our businesses.
“Consistent with our ongoing discussions about getting back to the basics of our business, which is selling groceries, as well as being clear on our focus and priorities, simplifying ways of working and becoming more effective and efficient, we have taken a number of actions across each of our companies, including selling non-core businesses and stopping work.
“We know that this alone will not be enough. It’s still too hard and too complex to get work done across our U.S. companies.
“As a next step in reducing complexity and simplifying the operating model for our support functions, one of the first decisions we are taking is to move to one support brand – Ahold Delhaize USA. This means we expect to sunset the Retail Business Services and Peapod Digital Labs brands by the end of the first quarter, and we expect to move associates to Ahold Delhaize USA by the end of the first quarter.
“The only exception to the support brand transition is that ADUSA Distribution and ADUSA Transportation will continue to remain separate companies continuing to support the local brands.
“This shift will bring all support functions together to seamlessly partner with the local brands so they can do what they do best – be the trusted local grocer in their markets – and together we will accelerate omnichannel growth.
“As we transition functions to the new Ahold Delhaize USA entity, we will organize the new support organization with the following leadership structure: Roger Wheeler will continue in his role as chief commercial officer. ADUSA Distribution and ADUSA Transportation will continue to operate as separate entities led by Sanja Krajnovic, who will continue to report to Roger.”
Under the new ADUSA structure, Keith Nicks will continue his role as chief digital officer; and Natalie Dupill will continue in her role as head of U.S. strategy and chief of staff, overseeing ADUSA strategy, governance, strategic priorities, and enterprise portfolio management.
Additionally, Tracy Stone has been promoted to chief administrative services officer. In this new role, she will oversee key services provided in the U.S., including organizational effectiveness, led by Glenn Henry, which is a new function that Fleeman said he will we will share more about in the coming months. Also under Stone’s aegis will be business services, led by Jim Saccary, and communications and omnichannel service center, led by Christy Phillips-Brown.
The company is continuing its search for a chief information officer and upon appointment, this position will report to Fleeman, The IT leadership team will continue to report to Wheeler until an IT leader is announced.
Fleeman, who became ADUSA’s chief executive in April 2023 after a 33-year career, primarily with Delhaize America, also said that a new chief sustainability officer will be created for the U.S. “We are in the process of selecting this leader, who will be responsible for advancing the U.S. sustainability efforts and partnering closely with Ahold Delhaize in this work, as its importance is increasing with reporting and sustainability will be an integral part of our strategy going forward. Once named this leader will also join the Ahold Delhaize sustainability leadership team,” he explained.
Other key personnel included under the expanded ADUSA umbrella include: Greg Amoroso, who will continue in his role as chief financial officer; Kim Lyda, who was previously announced as a successor to Linn Evans, will assume the role of chief legal officer in April, when Evans transitions to his new role as chief legal officer for Ahold Delhaize.
In addition, each local brand president will continue in their roles and remain a part of the U.S. leadership team.
“With our industry changing rapidly around us, now is the time to fully leverage capabilities to accelerate omnichannel growth. This new operating model will make it easier to work toward better, together, as a support organization and with each local brand, while still preserving the brand-centric model that has been valuable to the organization.
“I want to recognize and appreciate the great work that has been done to get us where we are today. It’s because of your dedication and commitment to establishing strong capabilities in each of your functions, the great talent we have, along with thriving cultures and strong associate experiences, that we are now positioned to bring together all support brand teams into one Ahold Delhaize USA organization. As we move into the new operating model, we’ll leverage what you have built to streamline services to each of our local brands so they can execute their unique strategies, further differentiate in their marketplaces, and more effectively compete.
“Over the next several weeks, we will have teams working on a seamless transition of support brand associates into ADUSA. We will provide frequent updates on this transition, as well as next steps as we move forward as one support organization, including regular updates on our focus and critical priorities across all U.S. businesses.
“As always, I thank you for all you do to support one another, and the customers and communities we serve. To the Retail Business Services and Peapod Digital Labs teams and associates coming into Ahold Delhaize USA, welcome. I’m eager to work more closely with you, learn from you, and build an amazing Ahold Delhaize USA organization together,” Fleeman stated.
It’s clear that ADUSA is attempting to prioritize its omnichannel retail while revamping or shedding certain assets. At its two case-ready meat plants, Cargill was already part of both facilities in a day-to-day management role.
“As our brands focus on being the leading omnichannel grocery retailers in our markets, we have made the decision to sell these facilities so that we can continue to be intentional about our investments in the U.S. as we drive growth,” said Fleeman. “By aligning these facilities with a company that specializes in meat production, we can continue to provide quality products to our brands’ customers and increase our focus on being leading omnichannel retailers.”
With the acquisition announcement, Cargill will continue to provide packaged meat products to Ahold Delhaize USA brands in the Northeast. The deal was actually made by ADUSA subsidiary Infinity Meat Solutions. When it was still known as Ahold USA in 2013, the retailer opened a 163,650 square foot meat plant in Camp Hill to produce packaged ground beef, pork, muscle cuts and value-added products such as seasoned, marinate and breaded meats initially for The Giant Company and Giant Food. In 2020, ADUSA opened its second such facility near Providence, RI, a 209,000 square foot processing plant to serve Stop & Shop and Hannaford. Originally, the retailer utilized Vantage Foods as its management partner for both processing centers, but in 2020 Cargill acquired Vantage and has been a part of the Camp Hill and North Kingstown facilities since that purchase.
“With this investment, we look forward to our continued partnership with Ahold Delhaize USA companies while bringing additional high-quality, case-ready products to new retail customers. By bringing more of our case-ready and value-added protein products to retailers, their employees can spend less time on backroom prep work and more time helping their customers at the meat counter,” said Hans Kabat, president of Cargill’s North American Protein business.
Cargill said it plans to service other retailers from the Camp Hill and North Kingstown plants.
As for its newly created relationship with DoorDash, the e-commerce platform is already being utilized by The Giant Company, Giant Food, Stop & Shop and Hannaford. A Food Lion pilot project has already begun and will go “live” next month.
“As leading omnichannel grocery retailers in their markets, Ahold Delhaize USA brands are focused on providing fast and convenient grocery delivery for customers. The addition of DoorDash as a marketplace partner for our companies is very exciting,” said Fleeman. “The speed and ease of DoorDash and its strong reputation for providing great customer service aligns with the priorities of each of our local brands. We look forward to delivering this new option for customers of our local brands – as well as new customers through DoorDash – and leveraging this partnership to enable our brands as they continue to drive omnichannel growth.” ADUSA brands are already utilizing the services of Instacart as well.
“From day one, DoorDash has been focused on creating opportunities for our merchant partners to compete, succeed, and flourish in every environment,” said Tony Xu, CEO and co-founder at DoorDash. “We’re excited to partner with Ahold Delhaize USA brands to support the growth of their digital channels and help them engage consumers in new ways. As consumers’ favorite local commerce platform, we look forward to expanding our East Coast selection and giving consumers more access to everything in their neighborhoods, including groceries, retail, flowers, food, and more.”
Revenue and earnings-wise, Ahold Delhaize USA followed the path of many retailers over the past four months – comp stores sales were down and profits were flat to slightly negative when compared to Q4 in 2022. At ADUSA, net sales were down 1.5 percent year-over-year in Q4 at constant exchange rates, while same-store sales excluding gasoline declined 1.9 percent. The company said that diminishing inflation, the reduction of SNAP benefits and its sale of online grocer FreshDirect (to Getir) adversely affected results. Ahold Delhaize said it lost about $268 million on its three-year investment of FreshDirect where it paid approximately $327 million for an 80 percent stake (investment firm Centerbridge Partners owned the remaining 20 percent of Fresh Direct).
However, unlike other traditional supermarkets, ADUSA’s comp store decline has now lasted four consecutive quarters. The bright note was once again Food Lion which has now posted an impressive 45 straight operating quarters of positive comp store revenue. Hannaford, too, continued a more modest sales streak, with 10 consecutive quarters of increased comps. Both those ADUSA brands were originally owned by Delhaize America before the 2016 merger.
Ahold Delhaize also revised its 2024 sales and earnings projections, noting that it expects to achieve an underlying operating margin of more than 4 percent; underlying EPS comparable to 2023 levels; free cash flow of around $2.46 billion; and net capital expenditures of around S2.4 billion.
Even with a less-than-stellar fourth quarter, Ahold Delhaize CEO Frans Muller remained optimistic, telling shareholders: “I am pleased to report a solid end to the year for Ahold Delhaize. The local brands in our strong international portfolio have been steadfast in creating value for customers by enhancing their highly personalized loyalty programs, increasing access to omnichannel offerings, and expanding their innovative own-brand assortments.”
For all of fiscal 2023, ADUSA’s sales were $59 billion, with $4.6 billion of that amount generated from online orders. As of December 30, 2023, ADUSA operated 2,048 supermarkets, three fewer than the year before.