Article

Ahold Delhaize Strides Toward Digital Profitability in 2025

By
Tim Denman
February 24, 2023

At A Glance

  • The grocery industry lost nearly $300 million on digital last year alone.
  • The biggest players in the industry still struggle to profitably provide customers with convenient omnichannel shopping.
  • Ahold provides updates on its omnichannel strategies at Stop & Shop, Food Lion, and Albert Heijn.
  • Discover the key omnichannel initiatives helping Ahold climb the slippery slope toward digital profitability.

There are two undeniable truths in digital grocery. First, digital grocery is a business imperative. And second, digital grocery is tough.

The challenges are plentiful, including technology, inventory, labor, and fulfillment, just to name a few. Because of these numerous challenges, most grocers have yet to crack the profitability code. In fact, according to Grocery Doppio’s annual “State of Digital Grocery Performance Scorecard,” the grocery industry lost nearly $300 million on digital last year alone.

Even the biggest players in the industry struggle to balance providing customers with the convenience of omnichannel shopping and operational profitability. International powerhouse Ahold Delhaize, with its 21 local brands in 11 countries, for example, is still operating its digital platforms at a loss. The grocery giant has made it an enterprise-wide goal to reach digital profitability by 2025 and continues progressing toward digital prosperity.

“Our e-com profitability is definitely improving,” CFO Natalie Knight said on a recent earnings call with analysts when asked about the company’s digital business. “That is one of our goals in 2025 to have a profitable e-com business. That is something that's stepping very nicely in the right direction in 2023.”

During the quarterly company update, Ahold leadership highlighted key omnichannel advancements at a handful of its banners that are driving the company’s long-term omnichannel profitability. Below is a quick look at some of the grocer’s key omnichannel initiatives helping Ahold climb the slippery slope toward digital profitability.

Food Lion. Ahold’s biggest brand in the United States, Food Lion, announced its 41st consecutive quarter of comparable store sales growth. To complement its impressive store comps, the banner looks to grow its omnichannel capabilities in lockstep. The brand’s click-and-collect offering, Food Lion to Go, is currently available in 655 stores, with an additional 50 stores planned for this calendar year.

To help facilitate this successful flexible fulfillment option, Food Lion leans heavily on its in-store associates. “Food Lion has been recognized by Newsweek as one of America's Greatest Workplaces for Diversity,” said CEO Frans Muller. “And with this easy, fresh and affordable positioning over the past 10 years, Food Lion's success really epitomizes the potential for growth and market share with the relentless focus on the customer experience, keeping stores vibrant and modern, adding new digital features and functions and investing in our associates and culture. And in that period, the brand has increased sales per square foot by over 80 percent!”

Stop & Shop. The banner’s digital business is soaring, with penetration rates increasing to 8.4%. “This growth is partially driven by the expansion of same-day delivery and the introduction of two-hour click-and-collect across all stores during the year,” said Muller. “Stop & Shop is also piloting additional pickup options, providing customers the ability to shop in a manner that is convenient for them.”

While click-and-collect continues to power the brand’s digital business forward, store remodels are helping to drive physical growth. Stop & Shop’s newly redesigned New York City stores are experiencing double-digit sales increases. Eight additional NYC remodels are planned for 2023, and the banner is leveraging insight from these redesigned stores to inform operational enhancements at 40 other urban locations throughout the chain.

Albert Heijn. The largest supermarket chain in the Netherlands continues to grow market share year-over-year, ending 2022 with 37% of the Dutch market. The brand recently introduced dynamic discounting in its stores. The new feature allows shoppers to purchase products nearing their expiration date at extreme discounts, up to 70% in some cases.

An advanced algorithm determines the ideal discount for aging products, and the discounts are presented to shoppers via digital shelf labels. “Unsalable products can be reduced dramatically,” said  Muller. “Which leads to lower waste and great deals for price-conscious customers."

The initiatives at Food Lion, Stop & Shop, and Albert Heijn are just a small example of the work being done at Ahold as it powers toward its stated goal of digital profitability within the next two years.