Food service
00 Ahold ANNUAL REPORT 2002 63
BOARD GOVERNANCE HIGHLIGHTS OPERATING REVIEW FINANCIAL INVESTOR REL AT IONS
net sales in Malaysia decreased. Results in Malaysia were affected by the closure of unprofitable stores. Our Indonesian
operations experienced strong net sales growth due to new store openings and net sales growth at identical stores, but due
to the relatively small size of these operations, they only had a limited impact on our results.
Operating loss in the Asia Pacific retail trade segment increased by EUR 11 million, or 37%, to EUR 31 million in fiscal
2002 compared to fiscal 2001. Gross profit, as a percentage of net sales, decreased in fiscal 2002 compared to fiscal
2001, primarily due to the launch of wholesale activities in Thailand. In addition, gross profit was negatively affected by
lowered prices in response to competitive pressures in the region. Operating expenses increased due to impairment
charges with respect to other long-lived assets in Thailand, Malaysia and Indonesia in the aggregate amount of EUR 6
million. In Malaysia, we experienced operating losses as a result of high operating expenses, largely due to high labor costs
and high real estate costs. Additionally, we incurred costs in Malaysia relating to the closure of unprofitable stores and the
cost of integrating acquisitions completed in prior years. In Thailand, operating expenses were affected by start-up costs
relating to the opening of wholesale activities. Indonesian operating expenses were affected by miscellaneous losses on
USD-denominated loans and by a provision for retirement benefits.
- Fiscal 2001
Net sales in the Asia Pacific retail trade segment declined by EUR 2 million, or 0.5%, to EUR 400 million in fiscal 2001
compared to fiscal 2000. Net sales were negatively affected by stronger competition in Malaysia and by currency exchange
rates in Thailand. Net sales in Indonesia increased from both identical stores and new store openings.
Operating loss in the Asia Pacific retail trade segment decreased by EUR 10 million, or 33.4%, in fiscal 2001 compared
to fiscal 2000. Operating loss from the Thai operations was lower in fiscal 2001 due to a write-off in fiscal 2000 relating
to the distribution center in Thailand. Malaysia and Indonesia continued to sustain operating losses, although we
experienced significant improvements in Malaysia as a result of lower store closure costs in fiscal 2001 compared to fiscal
2000. Operating expenses decreased in fiscal 2001 compared to fiscal 2000.
Our food service operations provide us with another channel to serve consumers. Food service operators supply food and
related products to restaurants, food service establishments, hospitals, universities and other institutional food providers.
Our primary food service operations in the United States and two European countries - The Netherlands and Belgium -
serve the needs of thousands of accounts. Through them, we reach consumers who eat meals prepared away from home.
We distribute food and offer services and expertise to restaurants and hotels, health care institutions, government facilities,
universities, sports stadiums and caterers. Compared to the food retail market, which has a number of large operators, the
USD 160 billion food service market in the United States is large, widespread and fragmented with over 3,000 full-service
distributors and over 10,000 specialty distributors operating nationwide.
The following table sets out, for the periods indicated,
net sales for our food service operations (excluding intersegment
sales):
Fiscal 2002
Fiscal 2001
Fiscal 2000
(in EUR millions)
(restated)
(restated)
United States
18,508
13,556
6,649
Europe
872
882
761
Total Food Service
19,380
14,438
7,410
Food service: United States
Through a series of acquisitions that began in April 2000 in the United States, we have established ourselves as the second
largest food service distributor in that country based on net sales in fiscal 2002. Our food service business in the United
States, which is comprised of the operations of USF and its subsidiaries, supplies food and related products to restaurants
and other institutional and food service establishments, including hotels, health care institutions, government facilities,
universities, sports stadiums and caterers. USF currently has a customer base of over 300,000 independent and chain
businesses throughout the United States. It also provides marketing expertise and business support to its clients. USF's
operations cover a geographic area in which 95% of the U.S. population resides. Its customers include independent "street"
and multi-unit "chain" businesses. "Street" businesses include small, independent, operator-owned restaurants. "Chain"
businesses include multi-unit restaurant, healthcare and catering companies. No single customer accounts for more than
