Late last week food retail group Ahold Delhaize, the parent company of US retailers, Food Lion, Hannaford, Stop & Shop and Giant Foods and numerous other banners around the world, reported its Q4 and Full Years 2017 results. The report showed continued strong performance during the fourth quarter of 2017.
Dick Boer, CEO of Ahold Delhaize, said: \”2017 was the first full year as Ahold Delhaize, one in which we substantially completed the integration. We delivered synergies ahead of schedule and continued to show underlying operating margin expansion with stable or increasing market share in our major markets.
\”In a dynamic environment, our great local brands delivered strong results, tapping into changing consumer behavior. We grew our online consumer sales by more than 20%, with already €1.2 billion sales in food online. In 2017 we realized €2.8 billion online consumer sales and are well on track realizing nearly €5 billion by 2020. We are expanding our digital capabilities in all our brands and are rolling out successful customer loyalty programs. In 2017 we sent out close to 2.5 billion personalized offers, which we expect to increase significantly in 2018. It seems clear the ongoing “Better Together” strategy is paying off.
\”We are investing to make shopping more convenient, introducing new technologies to improve the customer experience and further ease the check-out process, as we live up to our promise to be a better place to shop. We also are stepping up our focus on fresh inspiration as customers are increasingly looking for healthier options, organic products, and locally grown produce, which will help us to reach our target of 50% healthy products in own(private) brand sales by 2020.\”
Boer’s presentation highlighted the importance of private brands and the evolution of the organization after the merger. Notably, the now fully operational Retail Business Services (RBS) group in the U.S. providing back-office functions for all U.S. brands and expertise on Own (Private) Brands, Digital and Supply Chain. The move was touted as streamlining the organization in the U.S. to deliver ‘best of both worlds’ and create economies of scale in sourcing.Building great own-brands: Differentiating our businesses for today’s value-focused customers
- Healthy own brand sales increased to 46% in 2017, target 2020 raised to 50%
- Own brands U.S. centralized in RBS for best in class commercial capabilities and leverage of U.S. volumes
- In the U.S., Nature’s Promise and Nature’s Place brands combined passed the $1 billion goal and will be combined into Nature’s Promise
- Ahold USA brands took 1 million pounds of sugar out of the private brands last year
- Best practice sharing: Delhaize and Albert Heijn continue to share knowledge, expertise and introduce same, locally branded products
- Etos products brought to U.S. customers in 2016 and introduced in our stores in Belgium, Romania, Greece, and Czech Republic in 2017
The Ahold Delhaize Annual Report 2017 which was also released continues the emphasis on private brand. In the Market Overview section, the retailer clearly articulates their strategic importance and validates the prevailing wisdom that is guiding evolution at retailers around the world.
Own (Private) brands
The importance of own brands continues to grow, driven by factors that include Millennials’ pursuit of better value for money. While own brands used to be inferior to national brands in quality and packaging design, they are achieving tremendous improvements in these areas, and at a lower price-point compared to equivalent national brands. This is particularly true in the case of product lines focused on organic or health and well-being. Own brands continue to offer retailers an opportunity to distinguish their brands from the competition and to build customer loyalty.
The Annual report goes onto to feature private brands, with a specific call out for a big shift in their portfolio which will consolidate Ahold’s Nature’s Promise brand with Delhaize’s Natures Place brand sales of Nature’s Promise and the Nature’s Place brand at Food Lion and Hannaford reached the billion-dollar goal in 2017. During 2018, the two own-brand lines will be combined into one, Nature’s Promise, and offered Ahold Delhaize U.S. store.
Our promises in action Best own brands
The context Through own brands, retailers are able to develop product lines that fit the needs of customers in their local markets while at the same time providing good value. These product lines continue to grow in popularity as customers seek to get more for their money – whether more, to them, means quality, taste, health, sustainability, or even benefits to society. Retailers who develop distinctive own brands are able to differentiate themselves and build customer loyalty.
Our response Our local businesses have made own brands a critical component of their strategies – some of them even achieve more than half of all sales from their own-brand assortments. These product lines are tailored to local customer preferences, with an increasing focus on being healthier and more sustainable. Now more than ever, we are sharing own brands across our businesses to capitalize on the strength of our brands, and we are using our scale to drive change in the supply chain and provide more sustainable products at lower prices. To help us source smarter and keep improving our own brands, we are partnering with buying alliance AMS in Europe and have created an own-brands center of excellence to serve all our brands in the U.S.
How we are delivering on our strategy Our “free from” and organic own-brand lines are highly differentiating and strategically important for the U.S. brands, so they set a goal to reach $1 billion in sales by the end of 2017. At Stop & Shop, Giant Landover and Giant Carlisle, the own-brand teams accelerated product development and innovation on their Nature’s Promise brand and expanded the range to include baby, health and beauty care, pet and household. At the same time, they improved the safety and sustainability and began rating own-brand products against the Guiding Stars nutritional criteria. By year-end, the range of Nature’s Promise included around 1,450 items and annual sales reached a record high of $727 million. Combined sales of Nature’s Promise and the Nature’s Place brand at Food Lion and Hannaford reached the billion dollar goal in 2017. During 2018, the two own-brand lines will be combined into one, Nature’s Promise, and offered across our U.S. market area.
Our Dutch health and beauty brand Etos has a long history of innovation and helping customers live healthy and happier lives. In recent years, Etos has invested substantially in its own-brand lines. After our U.S. businesses brought Etos products to customers the previous year, they were introduced in our stores in Belgium, Romania, Greece, and Czech Republic in 2017 – a great example of how we’re becoming better together.