Royal Ahold goes global with supermarket sale

Promotion running in 4,000 stores includes Giant chain

Food retailing

October 02, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

In a sign of just how global -- and competitive -- the supermarket business is becoming, Dutch food retailer Royal Ahold is running its first coordinated promotion at nearly all of its 4,000 stores in 17 countries, including its Giant Food Inc. chain.

During a two-week period that ended Oct. 10, consumers from White Marsh to Buenos Aires to Prague are being offered discounts on food and nonfood products at Ahold chains under the "World Champions" banner.

It's one of the first such internationally coordinated promotions of its kind and an effort by Ahold to use its formidable buying power to increase its profit margins and market share, analysts said.

To coordinate the marketing strategy, Ahold negotiated agreements with 15 major international suppliers of brands such as Kellogg, Kraft, Pepsi, Braun, Chiquita, Tropicana, L'Oreal, Franco American and Disney.

"That creates a massive promotion for the product and significantly increased volume, and therefore we are in a position to offer local customers a real best buy," said Jan Hol, a spokesman for Royal Ahold in the Netherlands. "We are really leveraging our international scale."

The types of products and discounts vary from chain to chain, Hol said. Ahold, with 32 supermarket chains and $35 billion in annual sales, left the decision of which products to sell in local markets up to the individual supermarket companies, he said.

Additionally, subsidiaries such as Giant negotiated separate agreements with more than 100 national or local suppliers, Hol said.

At Giant, most products included in the promotion have been discounted as much as 50 percent, said Kevin Hancock, Giant's director of advertising, who also coordinated the promotion for the chain.

"This will lay the ground work for future endeavors of this type," said Hancock.

Besides increasing volume, Ahold hopes to use the promotion to introduce new products, primarily in divisions outside the United States, Hol said.

Ahold set the stage for the promotion two years ago, when it began developing technology that enables procurement and buying specialists company-wide to compare suppliers' offers and conditions. The company also brought in a coordinator who oversees the relationship between Ahold supermarket chains and the more prominent suppliers.

"We want to learn from [the promotion] and know what our opportunities are for the future," Hol said, adding that, in the first week, stores have seen increased sales on the promotional items as well as spinoff sales as additional customers are visiting stores.

Even if Ahold chains lose money on deeply discounted items, they stand to gain in the long run, said Gijsbert Groenewegen, a senior analyst with the Europe Co. Limited in London.

As more consolidation occurs in food retailing, companies are looking to maintain their margins either by cutting costs or increasing their customer base.

"They're trying to get the customer into their supermarket," Groenewegen said. "If you get a customer who normally goes to Wal-Mart or another competitor into your shop, and the customer is pleased by what he sees, it will add to the existing" customer base.

Carrefour SA, France's top food retailer, may have been first with a worldwide promotion, which it ran during a two-week period in May.

The retailer saw an increase in sales and gained market share in all markets. That showed Carrefour's ability to leverage global purchasing power with suppliers on a worldwide basis, analysts said.

Pub Date: 10/02/99

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