Global grocery giant Ahold Delhaize, owner of Stop & Shop, Food Lion and others, had a strong final quarter of 2020. Net sales were up 18 percent year-over-year for the quarter and 14 percent for the year, the company announced Wednesday (Feb. 17). A huge portion of this success comes from the grocery company’s continued strong online performance: net consumer online sales grew 84 percent during the quarter, 67 percent for the year.
Early in the quarter, the company’s Chief Information Officer Ben Wishart told PYMNTS CEO Karen Webster in an interview, “We don’t know where [online grocery sales are] going to normalize to.” Now, however, the company is making major investments in the chain’s post-COVID eCommerce future, predicting strong online sales even after the vaccine rollout.
“Even as COVID-19 subsides, we think customers will work more from home than they did before COVID-19, and therefore, eat more at home than before,” CEO Frans Muller said Wednesday on a call with analysts. “And we think online demand will continue to grow strongly.”
Putting its money where its mouth is, Ahold Delhaize acquired FreshDirect in November, and it has been building out its fulfillment capabilities in the United States. In Europe, the company is building automated capacity at bol.com, its online general merchandise retailer in the Netherlands and Belgium, after the site saw net consumer online sales of 4.3 billion euros ($5.2 billion) for the year. The grocery group is planning additional increases to its online capacity in the coming year. This includes doubling online capacity in the U.S. and building up to 1,400 click-and-collect centers by the end of the year, up from 1,116 locations at the end of 2020.
“With our investments in increased capacity, and continuous innovations,” Muller predicts, “We expect over 30% growth in net consumer online sales for the group in 2021. We expect the US to outperform that rate, with over 60% growth.”
With its grocery stores’ quick pivots to meet consumers’ changing needs, Ahold Delhaize believes that much of the strong performance it saw in 2020 will carry into the future. As Muller put it, “While no doubt COVID-19 creates challenging sales comparisons in 2021, we are confident that our two years stacked comp sales growth rates will be better than they were pre COVID-19.”
Building A Network Of MFCs
Micro-fulfillment centers (MFCs), mini warehouses that fulfill several thousand orders per week, are an efficient way for many retailers to build up their delivery networks without the time and cost typically associated with establishing new warehouses. Ahold Delhaize will be opening an MFC in the final quarter of 2021 in Philadelphia, with plans to open additional locations throughout the area in the future.
“A multiple-MFC network along the East Coast is for us the best solution,” said Muller. “We can react very fast with those MFCs because you can build them very fast — the buildings are already there. So you can very fast operate and roll out when you make your final decisions with whom to work. And that also the costs are much lower.”
Why the East Coast? The area is much less populated than the locations the grocery group serves in Europe. “The density in those markets, we think, is much more fit for an MFC solution.”
Modernizing Inventory
With the past year’s growth, Ahold Delhaize is investing in changes to its inventory that will help maintain customer loyalty for years to come. It will be expanding both its overall selection and its in-store brands. As Chief Financial Officer Natalie Knight explained, “This year, we’ve actually planned to bring an extra about 2000 SKUs into our private label collection.”
The grocery group will also be adding an “‘endless aisle’ with 80,000-100,000 general merchandise and food items,” per a company presentation shared with analysts. The expansion will be made possible by Mirakl, an eCommerce platform that provides online marketplace software to manufacturers, wholesalers and retailers that expands the network of sellers that the company can work with.
In combination with this expanded inventory, Ahold Delhaize also will have more brick-and-mortar locations to reach more consumers. In the last year, it acquired over a hundred stores in the U.S. and the Netherlands. The group ended 2020 with 170 more stores than the previous year. The company is using new in-store technologies such as electronic shelf labeling, which allows for real-time responsive pricing, and looking into cashier-less checkout options to maximize store efficiency.
Looking ahead, Ahold Delhaize is optimistic about its ability to leverage the COVID-19 bump into long-term growth. “As we look at 2021 … there are a lot of unknowns,” Knight reflected. “But what we do know is how we can control our costs. So that as we have benefits that come through, because of COVID stickiness or other opportunities, we’re able to capture them.”
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