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Message from Dick Boer, Ahold CEO (continued)
Our 2014 financial performance
Better stores, better value
Developing our omni-channel offering
Strengthening our own brands
Ahold at a glance
Business review
Governance
Online, convenience, transparency, quality, value,
health: all are trends that are having a major impact
on the food retail sector. Customers have never had
so many ways to shop, and have never known
so much about the products they buy - and their
demands are growing. They want value for their
money, innovative and healthy products, and an
easy shopping experience personalized to their
needs - and they want it today. Retailers who will
be successful in the future will need to provide all this
and more.
After more than 125 years in the business, change
is in our DNA. As food retail continues to evolve,
we see significant growth opportunities in catering
to the rapid shifts in how our customers shop.
Our Reshaping Retail strategy helps us reinvent
the shopping experience for our customers to
maintain our long-term, sustainable profitability while
tackling difficult market circumstances in the short
term. Our promises are helping us to get better
every day for our customers, our associates and
our communities.
We grew sales by 0.8% at constant exchange rates
in 2014, reflecting challenging market conditions
with no volume growth and value-focused customers.
Our successful Simplicity cost savings program
enabled us to invest in our customer proposition
while maintaining our operating income at a level
comparable to 2013. Our net income included the
cost of settling the Waterbury litigation, while in 2013
net income had been boosted by the results from the
sale of our former joint venture ICA. We continued to
generate strong free cash flow, exceeding €1 billion
in 2014.
In 2014, we invested in our value offering and our
in-store experience, to make our stores more attractive
and friendlier places to shop, and provide the right
products at the right prices for our customers.
In the U.S., we launched a program to improve our
customer proposition and rolled it out to around 525
stores during the year. We are investing in our Fresh
offering, enhancing the customer experience through
associate engagement training and making targeted
price reductions across the store. We are seeing
encouraging early results and volumes have started to
pick up in locations where the program has been up
and running for several quarters. We expect to have
it rolled out to all our stores in the first half of 2015.
In the Netherlands, our Albert Heijn business
continued to introduce innovative new products and
make significant improvements to its assortment and
formats. We started to see a positive impact on
sales, especially towards the end of the year, with a
successful holiday season.
Etos also ended the year strong. Our specialty
drugstore business grew in both its health and beauty
care categories in 2014 and managed to attract
more customers and increase sales in a competitive
market. Our liquor store chain, Gall Gall, is putting
a strong focus on service and staff friendliness, which
consumers recognized by voting it Best Retail Chain
in the Netherlands this year in the Food Specialty
Stores category.
Our acquisition of SPAR's business in the Czech
Republic was certainly transformational for our
Czech business. We are pleased with the sales
performance of the stores that were rebranded into
Albert and expect to have all stores rebranded by
Easter 2015.
As a result of the acquisition, our Czech business
made a step increase in market share, while Albert
Heijn improved its market share slightly over the year.
In the U.S., market share was down slightly, mainly
related to Giant Landover,
Although the vast majority of our customers can - and
do - shop in our stores, today they can also order
online for pickup or home delivery. Enabling them to
choose the channel that fits their needs best, online
and off ine, is becoming ever more important to
our business.
Our stores provide a world of inspiration - serving
as the customer interface, to play a role in our local
communities, to enable customers to taste, try and
test instead of "only" shopping for groceries and
to serve as the connector between the online and
offline world.
For the new generation of "digital natives" coming
of age, online is an integral part of everything they
do. They expect a seamlessly integrated shopping
experience that is at least on par with - and
preferably better than - what the best brick-and-
mortar stores can offer. Ahold is well-positioned
to serve these demanding customers through our
leading online businesses: Albert Heijn Online,
bol.com and Peapod.
As we move forward, our online growth strategy will
revolve around three elements: "more customers,"
benefiting from general market growth and driving
share growth; "more places," expanding into new
regions; and "more choices," expanding the offering
for customers and partners.
We continue to invest in our online capabilities,
technology and marketing in order to stay at the
forefront of omni-channel retail. Albert Heijn Online
is experiencing its highest growth ever and offers
a wide assortment of products and more choices
to our customers. In the U.S., we opened a new
distribution center in the New Jersey area to expand
the capacity of our Peapod business so we can serve
more places and more customers in the metro New
York market.
Ahold
Annual Report 2014
Our online general merchandise retailer bol.com
reached a milestone in 2014 when its store partners,
who are able to sell products on bol.com's site
through its Plaza marketplace, together achieved
sales in excess of €100 million over a 12-month
period. By opening its doors to outside retailers,
bol.com has increased its offering by over 2.5 million
items and customers can now choose from over nine
million in all.
This year we reached €1.4 billion in total online
consumer sales. In November, we announced the
next stage of our ambition, aiming for a growth in
online consumer sales to €2.5 billion by the end
of 2017 We believe our online business and our
omni-channel offering are crucial for our future growth
and long-term value creation.
Our own brands are another important part of our
strategy - they enable us to provide a more relevant
assortment of products in different price ranges,
develop new and innovative alternatives and build
customer loyalty.
We further strengthened our own brands this year,
particularly in the U.S., where we increased own-
brand penetration by 0.5% to 376%. Our natural
and organic Nature's Promise and premium Simply
Enjoy ranges are so well executed they are perceived
by customers as separate consumer brands, helping
us drive sales and differentiate our stores. Albert Heijn
expanded its assortment of natural products and
products for special dietary needs during the year,
and launched a new organic own brand, to help
customers make healthy choices. Albert in the Czech
Republic leveraged the scale of our group when it
launched Albert Heijn's value brand in all its stores
this year.
