Ahold USA 2014 sales down 0.6%, but grocer hyping value to drive 2015 results

ZAANDADM, the Netherlands — Ahold USA on Thursday reported $22 billion in 2014 sales, representing a slight decline of 0.6%. For the year, comparable sales excluding gasoline was up 0.1%. 

 

Ahold USA is currently deploying a multi-wave strategy to improve customer perceptions of its U.S. operations across quality and service as well as price. "We don't think it's enough to choose between those two things, we believe that we must and that it is possible to differentiate on both," James McCann, Ahold USA COO, told analysts Thursday morning. "We start from a strong place," he said. "We have great store locations and very strong [banners], leading in three of the [U.S.] markets. ... Our teams are aligned and highly energized because we now have a strategy to win in the U.S. market."

 

Wave one involved making signficant progress toward improving price perception across Ahold USA's banners by impelmenting lower prices across more than 1,000 items. The value proposition, which has currently been deployed across 636 locations, will be implemented across all U.S. stores by the second quarter of this year. On average, the new value-driven price position is contribing to a 2% sales increase vs. the baseline, McCAnn said. 

 

The second wave emphasizes key value items across the chain, or those items that have the greatest impact on value propositions. "We're about 20% of the way into this," McCann said. "This is about having great prices on the top 30 items which every customer knows the price of." These items are typically less promotional but will be featured across Ahold USA's flyers and other consumer communications as a long-term price reduction investment.  

 

While the first two waves focused on value, the third wave involves transforming Ahold USA's produce department. "The most important department and the department where we have set out the ambition to be truly famous for in the U.S. market is the produce department," McCann said. Produce department improvements will be featured across 87 stores by the end of April with the plan of recasting the department across more than 700 stores by the end of 2016. 

 

In addition to Ahold USA's brick and mortar locations, the online business Peapod continued to grow its sales, but this quarter growth and operating profit were impacted by Ahold's newest distribution facility not being fully operational yet.

 

And while the Giant Landover and the New England markets remain very competitive, Ahold USA's market share in dollars was down slightly compared to last year, reflecting the price investments made. Volume trends improved in the course of the year and market share in volume in the fourth quarter was slightly higher than last year.

 

For the year the grocer's own-brand assortment penetration increased by 50 basis points to 37.6% on a full-year basis.