To achieve its growth objectives, Ahold is in the process of transforming its individual retail banners into powerful local consumer brands. The critical elements of this transformation include: creating an improved product and service offering, delivering an improved price position and lowering operating costs. The key enabler for repositioning each of its consumer brands is the application of deep consumer insight. By understanding consumers better than its competitors, Ahold is committed to providing products and services that customers want at prices that are competitive with all food channels.
- 1. Improving our product and service offering
- 2. Improving our price positioning
- 3. Strengthening our consumer insight capability
- 4. Building on our successful continental sourcing strategy
- 5. Implementing company-wide EUR 500 million cost reduction program
- 6. Supplementing our growth with additional store openings and targeted fill-in expansions
Ahold already has elements of successful consumer branding at each of its banners. Albert Heijn in the Netherlands and ICA in Sweden have been particularly successful in bringing together all of the elements required to create and maintain true consumer brands. The transformation at these banners has been achieved through the highly successful implementation of value repositioning programs.
Ahold's ability to transfer and apply 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 are focusing on providing the best choice, making shopping easy for the customer, and offering everyday competitive prices. The transformation plans, which will drive and fund future growth are based on the proven success of each of these elements.
1. Improving our 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 is replicating key components to improve its offering in each banner by
- Providing the best choice. Ahold operating companies plan to excel in fresh foods by improving quality, selection and presentation. They are significantly increasing their selection of innovative private label products at a variety of price and quality levels. We will also improve and expand the existing general merchandise assortment.
- Making shopping easy. Each operating company is simplifying their overall assortment with the goal of making shopping easier. They are also providing more convenience-focused products and services and enhancing the overall customer experience to make shopping more convenient. Format development is an important tool in achieving this. The operating companies are improving existing store formats and developing new format concepts 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 our price positioning
Ahold's operating companies are strengthening customer trust and loyalty by continuing to build their value offerings. 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. The goal is to improve everyday value to customers while continuing 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 our consumer insight capability
Ahold's core assets are its customer base and knowledge of customer shopping behavior. The Company gathers detailed customer data across all of its banners and continues to improve the way it translates this data into insight. The insight is being shared among each operating company to deepen understanding of customer behavior and consumer trends to enable Ahold to enhance its value proposition in each market.
4. Building on our 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 will reduce operating costs by €500 million by the end of 2009. It is achieving these cost reductions by focusing on simplification and efficiency measures across all of its retail businesses, including store operations, inventory 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. Savings achieved by the end of 2007 were in line with the plan.
6. Supplementing our growth with additional store openings and targeted fill-in expansions
Ahold will continue to reach new customers in areas where it can achieve an attractive return. It will open stores with new format concepts and upgrade existing stores. The Company will also continue to look at targeted fill-in acquisitions to provide opportunities to reach new customers.