A leaner Ahold expands nutrition, wellness efforts

Drug Store News, April 21, 2008 by Jim Frederick

Having shed its Tops supermarket division through its sale in December to Morgan Stanley Private Equity for $310 million, Ahold USA has condensed its supermarket and pharmacy operations to a smaller, but stronger and perhaps more focused, retail enterprise. The U.S. subsidiary of Dutch-based Royal Ahold, Ahold USA now consists of the three crown jewels of the company's former list of holdings: Braintree, Mass.-based Stop & Shop; Landover, Md.-based Giant and Giant of Carlisle, Pa.

What remains are 709 supermarkets in the Northeast and mid-Atlantic region under the Stop & Shop and Giant banners, some 560 of which contain pharmacies. That total includes roughly 450 instore pharmacies within the Stop & Shop and Giant of Landover division, which Ahold groups as a single operating entity, and 112 pharmacies within the Giant-Carlisle sphere.

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Efforts to reinvigorate all three chains have sharpened. Among the recent highlights: the rollout of the "Value Improvement Program," or VIP, at Stop & Shop and Giant Landover, a shakeup in management to streamline decision-making and focus on local market opportunities and the opening of the company's largest food/drug combo store last month under the Giant-Carlisle banner, outside Philadelphia.

Last October, Ahold also revealed plans to renovate 100 Giant Food stores in Delaware, Maryland, Virginia and Washington, D.C., marking what Stop & Shop/Giant-Landover president and chief executive officer Jose Alvarez said was "Ahold's largest investment in the Giant Food stores since acquiring the chain in 1998."

For 2008, said Royal Ahold chief executive John Rishton, "our focus will be on the completion of the VIP program at Stop & Shop and Giant-Landover" and "the start of the remodeling of our Giant-Landover stores."

Early results of that refocus could be seen in the fourth quarter. Excluding gasoline sales at both chains, same-store sales were up 1.2 percent at Stop & Shop and 3.8 percent at Giant-Carlisle. Although margins were dented by the value pricing program--and same-store sales actually slipped half a percentage point at Giant-Landover--the company appears to have regained its footing and its local-market customer focus.

"I think we've come a million miles," declared John Fegan, senior vice president of pharmacy for Ahold USA. "Armed with new CEOs and a new executive team in both organizations ... Ahold USA has put a team in place that will continue to focus on the individual markets, but also has a broader team that overlooks the whole operation to see where there are local opportunities."

Such executives as Ahold USA chief operating officer Larry Benjamin and recently installed executive vice president of strategy Jim Dwyer are "bridging the cultures" among the three operating entities, he added.

That leaves the pharmacy management team free to concentrate on emerging trends in health and wellness. "

As we move forward, you're going to see a very strong tie-in with food and pharmacy and HBC," Fagen told Drug Store News.

What will set Ahold's three supermarket divisions apart, he added, will be the company's day-to-day determination "to provide the best service and the best nutritional information that's available in the marketplace."

"We have nutritionists in the office ... who work directly with our consumer affairs group, with the pharmacy and HBC sides, and with various associations ... to help stimulate the thought process of how these groups can interact with us at retail," Fagen said.

Ahold also is expanding its patient care outreach efforts, including vaccination and disease management programs, and has brought in a part-time clinical coordinator to develop protocols for medication therapy management.

Ahold

Headquarters: Braintree, Mass.

2007 sales: $21 billion *

% change vs. 2006: -6.2% *

No. of stores: 709 *

No. of stores with Rx: 560 **

Avg. store size: 55.000 square feet

Rx sales: $2.0 billion est.

% of sales from Rx: 9.4% est.

Sales per store: S29.6 million

* Following divestment of Tops Markets and U.S. Foodservice.

and acquisition of Clements Market by Giant of Carlisle.

** Including 282 Stop & Shop pharmacies, 166 Giant-Landover pharmacies

and 112 Giant-Carlisle pharmacies.

Source: Company reports