Delhaize’s new CEO on Thursday detailed decisive new priorities for the international retailer, shifting resources toward building back market share and profitability at its Food Lion and Hannaford brands, and — for now — stepping away from a previous strategy to grow a new discount banner.
Frans Muller, who took over as CEO in November, said his plan would emphasize consumer-centric positioning and market share gains, delivered with efficiency and speed. He said investment in 2014 would be allocated to core properties, while operations with less share and/or profit potential — including the fledgling Bottom Dollar discount banner — will face review.
In the U.S., the plan will result in assortment changes and store format evolution at Food Lion, where price and service investments over the past three years have delivered new sales momentum but “the overall improvement in customer perception has not been enough,” Muller said.
At Hannaford, price investments will continue and the Hannaford To Go Internet shopping option will be accelerated with 10 new click-and-collect points to be added this year. Both chains will see revamped private label programs. Muller said the changes are part of an effort to stabilize profitability following years of investments designed to spark sales momentum and stem market share declines at its core U.S. banners.
“It’s obvious that Delhaize Group has to address a couple of real issues,” Muller said. “Our profitability at Delhaize America and Delhaize Belgium has eroded in recent years. It’s to a high degree self-inflicted as we had to step up our price investment and promotional activities in order to maintain our market share and improve our revenue performance.”
Muller’s remarks came as the retailer reviewed financial results for the fourth quarter and fiscal year.
Muller detailed how the recently completed brand repositioning at Food Lion has stemmed market share and volume losses, but noted the Southeast chain still lags competitors in terms of sales per square foot and share of its shoppers’ overall food spend. To address this the chain is implementing a switch from what Muller described as vendor-driven to customer-driven assortments in center store that will result in a 50% turnover in assortments at stores.
Of 19,000 SKUs reviewed in center store departments, 6,700 items will be discontinued and 3,330 new items added, for an 18% reduction overall, Muller said. These changes are rolling out gradually at Food Lion, with around half of the project to be completed by year-end, Muller said.
Muller said the assortment changes would not harm margins, as the loss of manufacturer rebates would be made up for with a more relevant consumer selection and by an expansion of higher-margin private brands.