Following a successful year, Ahold Delhaize is adapting to the times, developing concepts that resonate with the post-pandemic shopper. Stephen Wynne-Jones spoke to Wouter Kolk, CEO, Ahold Delhaize Europe and Indonesia. This article previously appeared in ESM July/August 2021.
It’s been just over a year and a half since ESM last had the chance to catch up with Wouter Kolk, chief executive of Ahold Delhaize’s European and Indonesian operations, and while the setting may have changed – Microsoft Teams replacing an in-person engagement at the group’s impressive Zaandam headquarters – the company’s dedication certainly hasn’t.
Now, as then, digital integration, empowering the workforce and improving the customer proposition remain the core fundamentals that Kolk and his team are seeking to instil at Ahold Delhaize – even more so, perhaps, following the onslaught of a year-long pandemic.
“If you look at how things evolved, I’m actually very proud of the way we dealt with the pandemic,” says Kolk. I think we were all a bit shocked in the beginning, and then it started to develop like a real crisis – how do we get the supply chains back up and running? How can we make sure we are meeting shifting demands? How can we make sure that our employees and customers are safe? Also, taking care of the local communities; via special shopping hours for the elderly, for instance.
“Then, of course, it moved to a different phase, where we started to see rapid growth, also in online. Our strategy in omnichannel, digital and e-commerce, was accelerated. We were investing and moving faster in certain areas.”
Strong Start
Ahold Delhaize has made a strong start to the year – sales in its Europe division were up 9.4%, with underlying operating profit up by 22.3%, boosted by a COVID-related bounce in sales. This growth was largely led by its brands in the Benelux and Czech Republic, while online has had a bumper period, with net consumer e-commerce sales up by 78.6%.
According to Kolk, Ahold Delhaize has been dealing with the pandemic to some degree for “about six quarters now”, and while there are signs that things are returning to normal, the jury is still out as to what form that ‘normal’ will take once the crisis subsides.
“We have adopted a really open minded approach,” he says, “because, of course, nobody has done this before. There are no brands who can say that they have traded though a global pandemic, and can tell you what exactly is going to happen. So everybody had to have an open mind and a learning mindset, and be curious.”
Essential Business
At the same time, while Ahold Delhaize has seen a surge in sales, Kolk is cognisant of the fact that, as an ‘essential business’, it enjoyed benefits denied to countless other operators.
“If you look at our numbers, of course, they were really good,” he says. “But we also need to be humble about that fact. It’s not just the case that we did a good job, but we also had a tailwind. So there’s a new balance, which we have seen since the start of this year, in terms of how we also manage public opinion.”
That public opinion has manifested itself in the form of calls for the ‘winners’ of the pandemic, including grocery firms like Ahold Delhaize, to contribute to some sort of recovery tax, to help firms that were less fortunate. Kolk believes it’s not as simple as that.
“We had elections in the Netherlands earlier this year, and you had politicians looking at the profits of companies that did very well, in the food retail sector as well as other sectors,” he says. “There was some discussion of a ‘corona tax’, or some sort of recovery tax. But it’s also the case that if a company does well, they automatically pay more tax on their income.
“In our opinion, if people are thinking about this, it’s important to have a discussion, because we are one of the big employers here in the Benelux, and also in the US, and we would rather be part of that recovery dialogue.”
Short-Term Strategy
According to Kolk, it’s too early to gauge how consumer behaviours will shift as the pandemic starts to melt away, adding that if the business can “get back to where we were in 2019” by the last quarter of this year, that would be a significant achievement.
“But at the same time, it’s difficult to judge, because we don’t know how exactly consumers are going to respond,” he says. “For example, I think people will be travelling for business less, and working from home will become part of daily life. I do think that online ordering will be here to stay, perhaps not the same growth rates as last year, but it should be higher than 2019.
“One of the things we saw before COVID-19 was that people spent less and less time in the kitchen, then, once the virus came, this reversed completely. Recipes were downloaded, and people went from spending nine minutes in the kitchen to 90 minutes. They rediscovered the fun of cooking. The question is, are we going to go back to spending just nine minutes in the kitchen again?”
“We will become more conscious about things that we do, and the decisions that we make, and the type of food that we purchase, either offline or online. After the summer, the dust will settle, and then we will know.”
Could this lead to a change in dynamic when it comes to format growth? Prior to the pandemic, Ahold Delhaize had invested quite heavily in ramping up its convenience offering – for example, it holds a high-profile agreement with NS, the Dutch railway operator, to operate ‘AH to go’ outlets in train stations. Post-pandemic, with fewer people likely to be on the move or travelling into city centres, what might this mean for a future strategy?
“Basically, everywhere in Europe, we are pretty well distributed in city centres,” says Kolk. “These locations have high rents, and high turnovers – there’s more pressure per square metre.
“If I talk to the CEOs of the airlines or of the public transport groups, they don’t think the traffic will come back 100%, but maybe 80%. That will impact our business. But the good news is that we are well positioned to compensate for that. I wouldn’t say that we’re gonna drastically stop developing convenience stores, because that’s also not the right thing to do. But we might want to talk to some landlords about rent costs.”
Earlier this year, Ahold Delhaize announced plans for unmanned ‘AH to go’ outlets in offices across the Netherlands, in partnership with managed services provider Selecta. The group clearly sees this as a scalable option, with at least 100 such outlets set to open by the end of the year. In a post-pandemic world, it is also a more cost-effective option than a traditional convenience store.
“It’s a concept that we can apply quickly and easily,” Kolk says of the new initiative. “We expect that the density of people going to the office is going to be less, which makes this a very good alternative to a full-scale store, with high quality and a good offering. It’s easy to build, easy to maintain and is low cost. Even before the pandemic, this was always in mind for us as a growth engine, as people were looking for more convenience than traditional concepts.”
Business Opportunities
Ahold Delhaize recently announced the acquisition of 39 former Deen stores, as part of a larger deal that will see the family-owned group wound up (competitor Vomar Voordeelmarkt is to buy and convert 22 outlets, while DekaMarkt will buy and convert 19). That deal has just gained competition authority approval, with Kolk noting that it gives the retailer more visibility in “one of the very few white spots” in its home market.
“It’s an area in which Albert Heijn doesn’t have that much of a presence,” he says. “The most important thing for the Deen family was to ensure that their staff got a good home. Also, from a historical point of view, Albert Heijn also came from the northwest part of the Netherlands. That was, I think, one of the main reasons that the owner wanted to talk to us and two other retailers.”
As to whether Ahold Delhaize has a war chest for future acquisitions, on the back of a successful year of trading, Kolk is non-committal.
“Yes and no,” he says. “All the targets have also become more expensive. It’s all relative.
“I think what is going to happen, though, is that retail is going to become more and more complex. More investments are needed, for instance in online. You also have newcomers – as well as the likes of Amazon, you have pure players, ‘instant delivery’ companies, and new e-commerce solutions. Over the next five years, you’re going to see that not every retailer is going to be up for this challenge.”
Online Growth
With online sales up by more than three quarters since last year in Ahold Delhaize’s European operation, it’s unsurprising that Kolk also sees e-commerce as a growth opportunity – again, bolstered by the pandemic.
“Initially, people were a bit hesitant about online, but as a result of the pandemic, they now see how easy it is, and they realise that the service is pretty good,” says Kolk. “People used to go to the store three times a week, for example, but COVID has created all sorts of new routines. It’s here to stay – maybe not at the intensity that it was at over the past year, but it’s here to stay, absolutely.”
One of Ahold Delhaize’s recent e-commerce success stories has been AH Compact, a delivery service based around a limited-assortment model, which offers free delivery on all baskets over €35. The service recently expanded to Velsen, Hoorn, Deventer, Purmerend, Edam-Volendam, Alphen aan den Rijn, and Zoetermeer, in what amounted to a tripling of the service in a month.
“With AH Compact, we make online grocery shopping accessible to more customers, aiming for smaller households,” says Kolk, who adds that in terms of profitability, he wouldn’t say the business is “making serious money out of it, but it enables us to be much more efficient than we used to be. It’s almost like a discounter model, or an EDLP model. In addition to our full-service grocery delivery with 21,000 SKUs, we offer 5,000 SKUs, also you can benefit from Home Shop Centres being located in areas that don’t have the highest rent.
“We are coming at it much more from an algorithmic point of view. Once AH Compact comes to a particular region, we can pick out ideal routing pretty quickly, and optimise our load, our staffing and things like that. And then, suddenly, our e-commerce model becomes much more predictable.”
Inspired, in part, by the rise of apps like Picnic – “They have set the bar high for us,” Kolk says – AH Compact has been developed as a scalable solution that can be rolled out into other markets, and potentially to other retailers, in a similar manner to what Ocado has done with its Ocado Solutions arm.
“Everybody sees the growth of online, but they also see the profitability challenges that it presents,” he adds. “It’s much more labour intensive – you handle the product too many times – and the margins are the same as putting it on the shelf in the store. So you need to optimise it.”
bol.com Bonanza
Kolk is equally confident about the future for bol.com, the group’s core e-commerce platform, which reported sales of €5.5 billion in the first quarter and a 101% increase in sales from third-party sellers, but is this sustainable? After all, last March – just days before the first pandemic lockdown was introduced – Amazon announced the rollout of a new Netherlands-based website (Amazon.nl), pledging to ‘offer an ever-improving customer experience’ for shoppers.
“When it comes to Amazon, the good news is that we have had a head start on them, with bol.com,” he explains. “We have a good base of partners – we’ve ramped it up from around 27,000 at the end of 2019 to 46,000 now, so the breadth of assortment, and relevance of assortment, has grown exponentially, which is one of the advantages we have.
“We are also looking about how we can collaborate as well, we have pickup points for bol.com at Albert Heijn and Delhaize. The Etos assortment is sold at bol.com. There are a lot of opportunities in working together with our brands.
“If you look at the customers that bol.com has, and you add the customers that Albert Heijn has, we can cover almost 95% of the Netherlands, and it’s the same in Belgium. That’s a huge asset to have.”
© 2021 European Supermarket Magazine. Article by Stephen Wynne-Jones. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.
