Our strategy
OVERVIEW OF OUR U.S. FOODSERVICE STRATEGY
In addition, we are building a standard set of retail systems
to streamline infrastructure and reduce overall IT costs.
We have started by implementing a global IT outsourcing
program and realigning our IT structure internally. These
changes will help integrate the function globally, leverage
our resources and improve support to our operating
companies.
Our retail strategy is supported by our company-wide
ambition to build a learning organization that encourages
knowledge exchange to leverage our expertise wherever
possible.
Initiatives like value repositioning, optimizing the supply
chain, developing new store formats and improving private
label penetration are supporting the execution of our
business model in our retail arenas.
The Multi-Unit company provides food and related products
to large chain restaurants. Its primary focus is on efficient
distribution rather than on value-added services. Creating a
specialized multi-unit company gives us a clear opportunity
to make this part of the business profitable.
We are also taking a close look at sourcing to reduce overall
supply chain costs by optimizing distribution logistics and
reducing working capital requirements. As part of efforts to
improve competitive positioning, U.S. Foodservice has
reduced overhead expenses and launched the 'Quality,
Service, Trust' marketing campaign.
We expect that U.S. Foodservice's operating margin in U.S.
dollars before impairment of goodwill will exceed 1.7% no
later than 2006.
In 2005, competitive and operating cost pressures in
our retail markets were greater than expected and the
turnaround at some of our businesses was slower than
planned. The financial targets we originally set for retail in
2003 have become increasingly challenging. Based on
the retail trends we have seen so far in 2006, we expect
our retail net sales growth this year to be between 2.5%
and 3.0% (at constant exchange rates and excluding
divestments made in 2005). In addition, we expect that our
retail operating margin will be between 4.0% and 4.5% in
2006. Our overall priority remains to drive top line growth
and achieve a 5% retail operating margin.
In November 2005, we announced a new long-term strategy
for U.S. Foodservice. The strategy divides our U.S.
Foodservice business into two customer-focused operating
companies starting in 2006 to meet the needs of different
types of customers.
The Broadline company is the growth engine and generates
the bulk of sales turnover. It provides a wide range of food
and related products and services to customers such as
independent restaurants, healthcare providers, and the
hospitality industry. We are focusing on geographical areas
that offer superior potential for profitable growth and
increasing the penetration of our private brands. We have
set up a 'company within a company,' Monarch Foods, to
consolidate and manage our strongest brands. We also plan
to make acquisitions to build scale in areas where we are
not a leading competitor and to enhance our position in
areas where we are.
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