Dive Brief:
- As it reported strong third-quarter results, with comparable store sales up 12.4%, Ahold Delhaize announced new digital services and updates on its omnichannel expansion plan. This includes a 100% increase in e-commerce capacity by 2021, new online subscription and digital marketplace offerings, an increase in its private label portfolio by upwards of 10% and an acceleration of its Stop & Shop store remodels.
- Along with its comps increase, Ahold Delhaize reported U.S. online sales growth of 115% and overall net sales growth of 6.8%, to $20.8 billion, during the third quarter. It once again raised its target for earnings per share for fiscal 2020, anticipating high-20% growth versus a previously noted low-20% rate.
- Ahold Delhaize aims to capitalize on the growing wallet share and new customers it netted in 2020, particularly in digital. “While 2020 will be a record year by nearly any financial measure, we know it’s also a time we have to lean into our strength to continue driving our business forward in the future,” said Frans Muller, president and CEO of Ahold Delhaize, during the company’s earnings call Wednesday morning.
Dive Insight:
Ahold Delhaize’s omnichannel update Wednesday included a mixture of new initiatives and updates on existing ones as the company seeks to retain its No. 1 and 2 market share across the majority of its East Coast markets.
One of the company’s newly announced services is a digital marketplace that will launch at the beginning of next year with software platform Mirakl. The marketplace will source between 80,000 and 100,000 general merchandise and food items that can help shoppers round out their baskets, Muller said, including kitchen items for many at-home cooks. The initiative will launch with a yet-to-be-announced Ahold Delhaize banner.
In August, Kroger announced the launch of a digital marketplace that includes 50,000 new products from third-party sellers.
“It’s not our stock. It’s not our working capital, but it’s extending the offer in total with general merchandise,” Muller said during Wednesday’s earnings call.
As competitors like Walmart and Kroger launch new membership models, Ahold Delhaize is also testing an online subscription model with The Giant Company that will cost shoppers less than $100 annually and offer an “improved value proposition and preferential delivery time slots,” according to the company’s Wednesday announcement. Details of the program weren’t discussed, including whether the program would apply to delivery and pickup, or just one channel, but the subscription program would presumably offer unlimited no-fee fulfillment for shoppers.
Peapod, Ahold Delhaize’s e-commerce division, has offered numerous subscription models in the past, including a PodPass for $119. The new subscription model being offered through The Giant Company, said Muller, is more price-competitive and aimed at boosting loyalty and digital engagement.
Ahold Delhaize’s 100% capacity build-out will include expansion of home delivery, which is now being branded under individual banners, as well as running 1,400 pickup locations by the end of next year, a nearly 60% increase from its current count of 883. The company currently offers e-commerce solutions to 90% of customers, with 70% able to access same-day service.
Muller said digital services like contactless checkout and click-and-collect have helped draw new customers to stores, and said the company believes these will continue to prove “sticky” into the future.
“Online in grocery has accelerated, but will be sticky after the COVID-19 surge,” he said. “What do we see? We see that the type of fulfillment models will be varying, and we have to offer all of them, whether that’s same-day or next-day [delivery] or pick-from-store options. Customers are very indifferent to the requirements and demand. They want to pick and choose, and we let them do so.”
On the stores side of the business, Muller said Stop & Shop has seen improving results from remodeled locations that offer fresher assortment and enhanced layouts. Next year it will resume a more rapid remodeling clip after the pandemic slowed down the process, with 60 store updates planned compared to 31 this year.
Ahold Delhaize will also increase its private label assortment by between 1,500 and 2,000 products in 2021, adding to its assortment of 15,000 items currently. As part of its previously outlined health and environmental goals, the grocer aims to have 51% of its store brand items qualify as "healthy" products by 2022. It will also offer discounts and rewards for better-for-you product purchases, with implementation of nutrition labeling on all store brand products by the end of 2025
Ahold Delhaize also reiterated previously announced initiatives, including its plan to transition to self-distribution model by 2023 that it says is running ahead of schedule. Its first six facilities will transition next year to this model, representing nearly two-thirds of distribution footprint. Ahold Delhaize also reiterated its plan to halve food waste and its carbon footprint in the coming years.
In stepping up its digital offerings and capacity, accelerating store remodels and building out private label and self-distribution, Ahold Delhaize is following many of its competitors. But it does have some built-in advantages, including popular legacy brands, including an expanding Food Lion banner, and a Peapod online operation that leverages proprietary fulfillment and technology at a time when many grocers are relying solely on third-party companies.
