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GROCERY RETAIL LEADERS

Albert Heijn
Although the largest grocer for years, Albert Heijn is now reporting some of the best sales growth results in Europe. This trend is expected to continue on the back of assortment expansion and the development of new retail concepts combined with its brand marketing focus.

Ahold is the clear market leader in the Netherlands, with sales in 2007 more than 5 times that the number 2 on the grocery market, Aldi. The company operates several formats: supermarkets (Albert Heijn and C1000), convenience stores (Ah to go), drugstores (Etos) and an internet delivery service (Albert.nl). Although it is important to note that Dutch antitrust regulations prohibit Ahold from a coordinated management of C-1000 with its other businesses.

As a result, Ahold divested part of its operations in every continent where it was present. In the Netherlands, the group sold Jamin (confectionery shops), De Tuinen (health and beauty stores) and De Walvis (restaurant) in 2003 and started work on the repositioning of the Albert Heijn chain.

In 2004, the chain adopted a business model based on lowering its costs to invest in pricing and market chare gains through volume growth. Throughout 2004, 2005, and 2006, Albert Heijn launched large-scale price cutting campaigns on its entire assortment. The chain has restored its value message, it is not the cheapest in the market but it is much closer to the competition than in the past decade. To compensate for the price cuts, Albert Heijn is building on a premium image and aims to generate higher shopper expenditure with innovations and high quality private labels.

Albert Heijn’s strategy over the past years has been a success. The banner generates among the highest like-for-like sales growth in Europe. The chain has also benefited from Laurus’ difficulties: the acquisition of 27 Konmar stores from Laurus has enabled them to grow their network of large supermarkets (AH XL-4000M2)

Latest developments:
• Albert Heijn is testing a new concept with a bigger assortment, emphasizing fresh food and ready meals. Depending on the result, the new concept could be rolled out to other stores.
• Ahold is moving ahead with a focus on smaller concepts under the AH to go convenience banner.
• In 2003, hit by a financial scandal, Ahold launched the “Road to Recovery” program, which was focused on restoring the financial strength of the company, including reducing its net debt, and rethinking its food retail operations.

Challenges:
• In the long term, gaining further market share will be a challenge, given the size of the Albert Heijn chain.
• Ahold will have to fight the progression of retailers such as Jumbo, Sligro or Sperwer, which continue to outperform the market

SuperUnie
Some of the members of this purchasing and marketing coorperative are poised to become strong businesses in their own right. They key chains of the future are emerging from this collection of independents to challenge Albert Heijn.Buying Group SuperUnie has a strong position in the Netherlands. The organization contains 15 independent retailers, which represent a total of over 1,600 stores and generated a sales turnover of EUR 7.7 billion in 2007. Most members are family-owned businesses and leaders in their local market.

SuperUnie itself joined the European Buying group EMD in 2006, which enables a knowledge exchange with the other 18 members and provide backing in the competition on price.

The SuperUnie structure has been a success for most of its members. Despite a lack of individual size, the group structure has allowed the chains involved to get access to favourable trading conditions from suppliers and implement numerous merchandising bet practices. At the same time, the chain have retained final control over smaller and more flexible operations than there competitors.

Latest developments:
• Several SuperUnie members have benefited from Laurus’s difficulties. Spewer, Jumbo, Sligro and Coop Codis have all qcquired former Laurus stores and frown their presence in the market. The group’s biggest members reported strong growth for the year 2007. Jumbo’s sales increased by 30% year on year in 2007, thanks to the acquisitions and strong like-for-like sales. Sperwer grew its sales by 29% year on year and by 5.4% excluding the impact of the acquisition.
• In 2007, Sligro & Sperwer entered into a partnership to jointly operate the Spar chain. Under the new structure Sperwer, Sligro Food and Spar Participaties own stakes of 45%, 45% and 10% respectively in Spar Holding BV. The Spar, MeerMarkt and Attent formats will gradually be brought into line with the store concept and logistics platforms. However, this is not technically a merger because all of the parties are expected to retain the current shareholding structure.
• SuperUnie has just taken on long-serving Ahold executive Dick Roozen as its CEO. He will replace Frans Fredrix has been at the head of SuperUnie since 1992.

Challenges:
The success of some of the SuperUnie members now puts them amongst the largest and fastest growing chains in the Netherlands. As a result, the value provided by SuperUnie to its members will need to evolve in order to justify continued cooperation.

C1000
C1000, the supermarket chain of the Schuitema division within Ahold, seems to be suffering as Albert Heijn recovers. Ahold’s has recently announced talked with CVC about a potential divestment of C1000.

Albert Heijn price cuts impacted C1000 lacks the range breadth to absorb the price cuts on KVIs. As a limited range soft of dry grocery categories where deflation has been concentrated. C-1000s newest prototype stores emphasize fresh foods as a means to broaden its range and reduce its exposure to price wars.
At the same time that its margins are under pressure, C1000 has to incest in better quality assortments and stores to compete with Albert Heijn. Without C1000 Ahold would still be the market leader in the Netherlands with retail sales of €7.8 billion.

As a standalone retailers, C1000 would be the second biggest supermarket chain in the Netherlands. Should this chain be acquired from CVC by another retailer it could mean the re-emergence of a strong number is balancing the short-term lucrative gain from selling C-1000 with the longer-term potential of creating a new competitor.

Super de Boer/Laurus
Laurus has been unable to sustain the pressure on its margins by the supermarket price war. The company divested its Edah and Konmar chains in 2006-a total of over 300 outlets-to focus rank in terms of turnover behind Aldi and Sligro.

The divestitures were part of reorganization program, which also invoved strengthening the positioning of SDB, cutting costs through changes to the logistical network and a reorganization of the head office. The company announced that the reorganization plan was complete at the end of 2007 and changed its corporate name to Super de Boer at the beginning of 2008.

Going forward, the group wants to keep strengthening the position of Super de Boer. During 2007, some 47 stores that were either underperforming or not in line with the new strategy were divested. The chain will continue to focus on 4 pillars: quality, fresh produce, sustainability, service and price.
The future looks brighter for Super de Boer as the chain reported like for the sales up 3.7% in 2007 compared to 2006 and is expected to have reached break even at EBIT level in 2007.

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