Building brands for profitable growth
Ahold will be a company of innovative and powerfully branded stores on two continents, rather than a portfolio of stores that distribute supplier brands. As part of its new strategy the Company intends to gain the loyalty of its customers by understanding them better than its competitors. Ahold operating companies will provide the products and services that customers want at prices that are competitive with all food channels.
To achieve Ahold's growth objectives, the Company will transform its individual retail banners into powerful local consumer brands. The three critical elements of this transformation are: creating an improved product and service offering, delivering an improved price position and lowering operating costs. The key enabler for building these consumer brands is the application of deep consumer insight.
Ahold has elements of successful consumer branding in all of its banners. Albert Heijn in the Netherlands and ICA in Sweden have been particularly successful in bringing together all of these elements to create true consumer brands. The transformation at these banners has been achieved through the highly successful implementation of repositioning programs.
Ahold's ability to access and transfer the successful elements of its European branding programs across all of the Company's retail banners gives it significant competitive advantage compared with many of its U.S.- based competitors. All banners will focus on: providing the best choice, making shopping easy for the customer and offering everyday competitive prices. The transformation plans to drive and fund future growth are based on the proven success of each of these elements.
1. Improving product and service offering
The creation of an improved product and service offering, based on the application of deep consumer insight, is a critical element of transforming stores into powerful consumer brands. Ahold will replicate key components to improve its offering in each banner by:
- Providing the best choice. Ahold operating companies will excel in fresh foods by improving quality, selection and presentation. They will significantly increase their selection of innovative private label products at a variety of price and quality levels. They will improve and expand their General Merchandise assortment.
- Making shopping easy. The operating companies are simplifying their overall assortment with the goal of making shopping easier. They will also provide more convenience-focused products and services and are enhancing the overall customer experience to make shopping more convenient. Format development will be an important tool in achieving this. The operating companies are improving existing formats and developing new concepts for store formats using different layouts, assortments, sizes and service models.
To clearly convey powerful brand positionings, Ahold is strengthening the quality, quantity, variety and form of consumer communications, both inside and outside its stores.
2. Improving price positioning
Ahold's operating companies will strengthen customer trust and loyalty of customers to their brands by continuing to build their value offering across all banners. At Albert Heijn and ICA, Ahold has demonstrated the power of a well-executed value repositioning in a highly competitive supermarket environment.
At all of its banners, Ahold is lowering prices across a wide range of products and, at the same time, reducing the emphasis on promotions. Ahold is improving everyday value to customers and continues to offer attractive promotional prices on selected ranges. Ahold's increased focus on private label is a key component of its strategy to provide a wider selection of price points.
3. Strengthening consumer insight capability
Ahold's core assets are its customer base and its knowledge of customer shopping behavior. Ahold is gathering detailed customer data across all of its banners. The Company is improving the way it translates this data into insight and shares it among the Ahold operating companies to deepen its understanding of customer behavior. Effective application of customer insight and a clear understanding of broader consumer trends are key elements of Ahold's plans to enhance its value proposition in each market.
4. Building on successful continental sourcing strategy
Ahold is continuing to build upon a successful continental sourcing strategy. In Europe, the Company is consolidating purchases through its combined European sourcing organizations based in Zaandam and Stockholm. In the United States, Ahold is consolidating purchases through organizations such as Ahold's Perishables Procurement Organization, based in Massachusetts, and the American Sales Company, based in New York.
5. Implementing company-wide EUR 500 million cost reduction program
To support its value repositioning programs, Ahold is reducing operating costs by EUR 500 million by the end of 2009. It is achieving these cost reductions by focusing on simplification and efficiency across all of the retail businesses, including store operations, shrink, logistics, energy usage and local overhead. Ahold is also taking a more disciplined and rigorous approach to dealing with underperforming stores. Due to the nature of these plans, the savings will accelerate over time.
6. Supplementing growth with additional store openings and targeted fill-in expansions
Ahold will continue to reach new customers in areas where the Company can achieve an attractive return. It will open stores with new format concepts and upgrade existing stores.
Ahold will also continue to look at targeted fill-in acquisitions to provide the Company with opportunities to reach new customers.