Strategy


In early 2006, Ahold's management commissioned a strategic review of its businesses. The objective of the review was to define how Ahold could accelerate identical sales growth, improve profit returns and strengthen the Company's foundation for future expansion, and in doing so create additional value for shareholders.

Refocusing the Company's portfolio

As a result of the review, the Company announced its strategy for profitable growth in November 2006:

Ahold companies will operate as market leaders in local food retail markets in the United States and Europe where the company can secure a number one or number two position with clear prospects for profitable and sustainable growth.

Ahold's portfolio of retail businesses is fundamentally strong. The Company has a number one or number two position in the Netherlands and the Czech Republic, as well as in the ICA, Giant-Carlisle, Stop & Shop and Giant-Landover market areas. All of these businesses have significant potential for profitable growth.

Ahold has decided to divest retail businesses that would require a significant level of investment and management attention. The Company will now focus on accelerating improvements across its remaining businesses.

1. Divest U.S. Foodservice

Ahold is pleased with the progress made at U.S. Foodservice following its decision to retain this business in 2003. Since that time the company has created significant shareholder value. Ahold has improved the company's financial performance through restructuring and rebuilding the organization and culture and has resolved the outstanding material legal matters with significant financial exposure related to 2003. Ahold's new long-term strategy for U.S. Foodservice launched at the end of 2005 is showing good results.

U.S. Foodservice has the potential to further improve its performance, but Ahold sees limited near-term synergies between U.S. Foodservice and Ahold's retail operations. Therefore, Ahold has decided to focus its resources and expertise wholly on the future growth of its retail businesses. Ahold will complete its exit from the foodservice industry by divesting U.S. Foodservice.

2. Focus on the Czech Republic and divest retail activities in Poland and Slovakia

Ahold will focus its investment in Central Europe on the Company's leadership position in the Czech Republic. Although the Czech Republic is a highly competitive market, Ahold's position and strengthened organization there provide the Company with the basis for successful growth.

Ahold is divesting its retail operations in Poland and Slovakia where the Company is not a number one or number two player. While these two markets are expected to continue to grow, and offer good long-term opportunities, establishing a leading position for Ahold would require a significant level of investment and management attention. The Company has therefore decided to exit these markets.

3. Divest Tops retail banner in the United States

Further to Ahold's announcement to divest Tops stores in Northeast Ohio, the Company has concluded that it should also sell the remaining Tops operation in New York and Pennsylvania. Although Ahold is a market leader in these areas, the divestment will allow the Company to focus resources on its remaining retail growth businesses.

4. Divest minority ownership position in Jerónimo Martins Retail

Ahold has been a 49 percent shareholder in Jerónimo Martins Retail (JMR) since 1992. JMR has developed into a successful player in the Portuguese retail market with good results and strong management. However, as the Company will focus on retail activities in which it owns a majority shareholding or is able to drive considerable synergies, it has entered into negotiations with Jerónimo Martins Holdings, the other shareholder in JMR, to begin the process of divesting Ahold's stake in JMR.

5. Continue to retain majority ownership in ICA

Ahold has a 60 percent majority shareholding in ICA, which has operations in Sweden, Norway and the three Baltic states. The value of the business has improved significantly over the past year. Ahold sees further potential in the close cooperation that exists between ICA and Albert Heijn. The Company has recently established joint European sourcing organizations, and is working closely together on areas including private label development, IT infrastructure and development and supply chain optimization.

6. Continue to retain majority ownership in Schuitema

Ahold has a 73% majority shareholding in Schuitema, a successful player in the Dutch market. Within the jointlyagreed governance structure in place between Ahold and Schuitema, the Company will make continental synergy opportunities available to Schuitema.

7. Return approximately EUR 3 billion to shareholders and reduce debt by approximately EUR 2 billion, following divestments

Approximately EUR 3 billion will be returned to shareholders, through a share buyback program, the details of which will be announced in due course, and EUR 2 billion will be used to reduce debt. The funding for both will come primarily from divestment proceeds (net of restructuring and other costs), as well as from improved cash flow. In addition to driving operating cash flow, Ahold is undertaking a special exercise to improve cash generation from working capital and from more efficient capital expenditure. The Company will also continue to evaluate the potential to generate value from its real estate assets.

8. Future portfolio opportunities

Ahold will look at all opportunities to improve shareholder and stakeholder value, including acquisitions, divestments, and other potential cooperative ventures.