Ahold's Private Label and Price Focus Continue to Boost Performance

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August 31, 2010

Dutch retailer Ahold NV is performing admirably in Europe and in the United States, beating out most U.S. rivals who have been struggling through the recession.

Despite soft market conditions, the Amsterdam-based company posted a 3.1 percent increase in net profit in the second quarter. In the U.S. alone, same-store sales increased 1.4 percent (excluding retail gasoline sales) and overall sales jumped 5.5 percent to $5.5. billion, which represents more than half of the company’s overall revenue.

Ahold is outperforming rivals such as Walmart, Delhaize and Supervalu because it cut prices before the recession and has been squarely focused on its private label offerings.

Ahold's private label share is approximately 15 to 16 percent of total U.S. sales, which Ahold's Chief Executive John Rishton said the company plans to increase by as much as 2 percent a year over the next few years.

"In the U.S. we can learn a lot from our Dutch private label activities," which account for around 50 percent of sales, Rishton told the Wall Street Journal.

Ahold's U.S. operating margin is 4.8 percent, the same as last year, and its U.S. market share has improved in all states where it operates, Rishton said. During the same operating period, same-store sales at Walmart dropped 1.4 percent, while Delhaize Group’s declined 3.6 percent and Supervalu tumbled by 7.2 percent, according to the report.

In addition to having the advantage of a strong northeast presence where Walmart has less stores, Ahold began lowering prices in 2006, well ahead of the recession, which better positioned it against slower-to-respond competitors and to anticipate the needs of frugal consumers.

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