Strategy
6. Continue to retain majority ownership in Schuitema
Ahold has a 73 percent majority shareholding in Schuitema,
a successful player in the Dutch market. Within the jointly-
agreed governance structure in place between Ahold and
Schuitema, the Company will make continental synergy
opportunities available to Schuitema.
7. Return approximately EUR 3 billion to shareholders
and reduce debt by approximately EUR 2 billion, following
divestments
Approximately EUR 3 billion will be returned to
shareholders, through a share buyback program, the details
of which will be announced in due course, and EUR 2 billion
will be used to reduce debt. The funding for both will come
primarily from divestment proceeds (net of restructuring and
other costs), as well as from improved cash flow. In addition
to driving operating cash flow, Ahold is undertaking a special
exercise to improve cash generation from working capital
and from more efficient capital expenditure. The Company
will also continue to evaluate the potential to generate value
from its real estate assets.
8. Future portfolio opportunities
Ahold will look at all opportunities to improve shareholder
and stakeholder value, including acquisitions, divestments,
and other potential cooperative ventures.
II. Building brands for profitable growth
Ahold will be a company of innovative and powerfully
branded stores on two continents, rather than a portfolio
of stores that distribute supplier brands. As part of its
new strategy the Company intends to gain the loyalty of
its customers by understanding them better than its
competitors. Ahold operating companies will provide the
products and services that customers want at prices that
are competitive with all food channels.
To achieve Ahold's growth objectives, the Company will
transform its individual retail banners into powerful local
consumer brands. The three critical elements of this
transformation are: creating an improved product and
service offering, delivering an improved price position and
lowering operating costs. The key enabler for building
these consumer brands is the application of deep
consumer insight.
Ahold has elements of successful consumer branding in
all of its banners. Albert Heijn in the Netherlands and ICA
in Sweden have been particularly successful in bringing
together all of these elements to create true consumer
brands. The transformation at these banners has been
achieved through the highly successful implementation of
repositioning programs.
Ahold's ability to access and transfer the successful
elements of its European branding programs across all of
the Company's retail banners gives it significant competitive
advantage compared with many of its U.S.-based
competitors. All banners will focus on: providing the best
choice, making shopping easy for the customer and offering
everyday competitive prices. The transformation plans
to drive and fund future growth are based on the proven
success of each of these elements.
1. Improving product and service offering
The creation of an improved product and service offering,
based on the application of deep consumer insight,
is a critical element of transforming stores into powerful
consumer brands. Ahold will replicate key components
to improve its offering in each banner by:
Providing the best choice. Ahold operating companies
will excel in fresh foods by improving quality, selection and
presentation. They will significantly increase their selection
of innovative private label products at a variety of price and
quality levels. They will improve and expand their General
Merchandise assortment.
Making shopping easy. The operating companies are
simplifying their overall assortment with the goal of making
shopping easier. They will also provide more convenience-
focused products and services and are enhancing the
overall customer experience to make shopping more
convenient. Format development will be an important tool
in achieving this. The operating companies are improving
existing formats and developing new concepts for store
formats using different layouts, assortments, sizes and
service models.
To clearly convey powerful brand positionings, Ahold is
strengthening the quality, quantity, variety and form of
consumer communications, both inside and outside
its stores.
2. Improving price positioning
Ahold's operating companies will strengthen customer trust
and loyalty of customers to their brands by continuing to
build their value offering across all banners. At Albert Heijn
and ICA, Ahold has demonstrated the power of a well-
executed value repositioning in a highly competitive
supermarket environment.
At all of its banners, Ahold is lowering prices across a wide
range of products and, at the same time, reducing the
emphasis on promotions. Ahold is improving everyday value
to customers and continues to offer attractive promotional
prices on selected ranges. Ahold's increased focus on
private label is a key component of its strategy to provide a
wider selection of price points.
3. Strengthening consumer insight capability
Ahold's core assets are its customer base and its knowledge
of customer shopping behavior. Ahold is gathering detailed
customer data across all of its banners. The Company is
improving the way it translates this data into insight and
shares it among the Ahold operating companies to deepen
its understanding of customer behavior. Effective application
of customer insight and a clear understanding of broader
consumer trends are key elements of Ahold's plans to
enhance its value proposition in each market.
4. Building on successful continental sourcing strategy
Ahold is continuing to build upon a successful continental
sourcing strategy. In Europe, the Company is consolidating
purchases through its combined European sourcing
organizations based in Zaandam and Stockholm. In the
United States, Ahold is consolidating purchases through
organizations such as Ahold's Perishables Procurement
Organization, based in Massachusetts, and the American
Sales Company, based in New York.
8 Ahold Annual Report 2006
