Ahold Delhaize Annual Report 2018
PDF, 10 MB
Full year 2018 results
Group highlights
- The 2016 figures presented in the graphs are pro forma figures. To read more about the 2016 pro forma figures, see our Annual Report 2016.
- In 2018, after €1.8 billion capital expenditure (2017: after €1.7 billion capital expenditure).
- 2018 and 2017 figures include Peapod, Gall&Gall and Etos.
- DJSI changed its methodology in 2018 and restated the 2017 score from 73 to 67 for comparability to 2018.
- We have restated our 2017 figures to include more accurate GWP for our refrigerants, sales area and actual fuel usage. The 2017 figure excludes Gall & Gall and Etos.
Message from the CEO
I’m happy to present our Annual Report for the first time as Chief Executive Officer. In 2018, we essentially finalized our merger and integration and turned our focus to the next, exciting chapter of our company. I’m very proud of the associates across our great local brands who have made our success possible.
Five drivers for growth
As we note in our Annual Report, we have a strong foundation and top-notch talent – and are well-positioned to win. Through our five growth drivers, we will accelerate on what will make a difference in the future food retail landscape.
- Omnichannel growth
- Technology
- Healthy and sustainable
- Portfolio and scale efficiencies
- Best talent
Omnichannel growth
Making it possible for our customers to shop however and whenever is most convenient through our omnichannel offering.
We will boost our omnichannel growth by investing in our store network and online capabilities – and our scale will help us do this. We will continue to reposition our store brands – including our largest brand, Stop & Shop – to be even more customer-centric and locally differentiated.
At the same time, we are investing more in our home delivery capabilities, developing our pick-up points and further leveraging our online brands such as bol.com and Peapod. People are cooking less and want easier, fresher, healthier meal options. We see a great opportunity to keep expanding into meal solutions, focusing on meal kits, food counters, and meals-on-demand.
Technology
including artificial intelligence and robotics
Partnering to invest in the technology of the future and deploy it across our company today, to improve the customer experience and increase efficiency.
We are using technology to make the three billion offers we send out each year more personalized and compelling. When we adjust our assortment using machine learning, our customers find more of the products they want. By simplifying the checkout process and rolling out technology to help customers navigate stores and build shopping lists, we are making shopping easier. We are also making fulfillment more efficient by investing in fully mechanized distribution centers, micro-fulfillment and optimized forecasting and replenishment.
Healthy and sustainable
Taking the lead in offering our customers healthier and more sustainable options
Customers and communities across all our markets are looking for ways to eat cleaner, smarter and healthier, and are concerned about the impact of their shopping on people and the environment. Our vision is to be the leading sustainable retailer in our markets by innovating to improve health, drive sustainable consumption and maximize human potential. To meet the increasing demand for healthier diets we will continue improving the nutritional value of our products and supporting customers in finding healthier options, while accelerating our focus on affordability and personalization. We are committed to creating more circular systems for plastic packaging, and are testing blockchain and other methods to improve transparency about our products. In addition, we will build new, ambitious climate targets to accelerate emission reduction from our operations and supply chain.
Portfolio and scale efficiencies
Having both the ambition and the opportunity to grow our business in a fragmented retail market while scaling our efficiencies to partially self fund our growth
We have built a solid platform, and the right capabilities to enable us to pursue both organic and inorganic growth. We will continue to evolve our portfolio: building and strengthening our leading market positions, leveraging our scale and expanding our strong local brands, customer reach and our geographical presence. We strive for a #1 or #2 position in each market, and will also grow in attractive existing or adjacent markets. Our commitment is to partially self-fund our growth investments and acceleration through our Save for Our Customers cost program and we believe there are many more efficiencies to go after and to scale across our group.
Best talent
Staying in the lead by attracting, developing and retaining the best talent, with new capabilities
Our leadership team has the strength and experience to drive our strategy and grow our business even further. And our larger team of 372,000 associates are engaged, experienced and passionate about serving customers and communities across all our brands. It is essential we offer them the right opportunities because they make everything we do possible. Our brands will continue to improve their working environment with an engaged, inclusive, balanced and healthy workplace for their associates.
Leading Together
Leading Together strategy provides a framework for success, leveraging both scale and local strength. It guides our decisions and defines shared values and promises, while giving our great local brands the flexibility to best serve their customers, associates and communities.
- Our purpose
- Our business model
- Our promises
- Our values
Our purpose
Together, we build Great Local Brands, bringing Fresh Inspiration Every Day.
This is the reason we are in business -- and shapes everything we do.
Our business model
Our business model is a continuous cycle that shows how our great local brands create value for all our stakeholders.
Across Ahold Delhaize, each brand works to save, drive same-store sales and fund growth.
By continuously looking for ways to buy better, operate smarter and waste less, we maintain the ability to invest in our evolving customer proposition and offer an omnichannel shopping experience:
Save for our customers
To jump-start this continuous cycle, we always look for ways to save for our customers. We evaluate every area of our businesses to see where we can do things smarter and better to save money, conserve resources and reduce waste.
- Buy better
- Operate smarter
- Waste less
Invest in our customer proposition
Our brands invest into the local customer proposition to provide a great shopping experience that meets consumers’ changing needs and builds loyalty.
- Fresher and healthier
- Best own brands
- Local, personal & convenient
- Dependable value
- Sustainable
Offer an omnichannel experience
Ahold Delhaize seeks to fund growth in three key channels – supermarkets and smaller stores, eCommerce and meal solutions – so that our brands can be there wherever and however customers shop, providing more of the meals our customers enjoy each day. We are building a portfolio of strong brands that reach #1 or #2 positions in their local markets.
- Supermarkets and smaller stores
- eCommerce
- Meal solutions
Our promises
We promise customers, associates and communities that we will always strive to be a better place to shop, a better place to work, and a better neighbor – every day.
A better place to shop
People everywhere are demanding more convenience from the shopping experience.
A better place to work
As one of the world’s largest retailers, people are at the center of everything we do. Today, maybe more than ever, people want to feel engaged in their work and know that it has a purpose.
A better neighbor
The world around us is changing fast, and as a global retailer, we can have a significant impact on issues important to people in our local communities, such as climate change, health and waste reduction.
Our values
We will continue to improve our working environment with an engaged, inclusive, balanced and healthy workplace for our 372,000 employees. To do this we will rely on our core values: Courage, Integrity, Teamwork, Care and Humor.
Courage
We drive change, are open-minded, bold, and innovative.
Integrity
We do the right thing and earn customers’ trust
Teamwork
Together, we take ownership, collaborate, and win.
Care
We care for our customers, our colleagues, and our communities.
Humor
We are humble, down-to-earth, and we don’t take ourselves too seriously.
Our role in the value chain
As a food retailer, Ahold Delhaize is positioned in the middle of the value chain, delivering products from farmers and suppliers to consumers through retail stores and online operations. As we explain further in our Annual Report 2018, with our scale and leading position, we can have a significant influence on making each stake of the value chain more sustainable, in partnership with our stakeholders.
Business review
Net sales in the financial year ended December 30, 2018, were €62,791 million, a decrease of €99 million, or 0.2%, compared to net sales of €62,890 million for the financial year ended December 31, 2017. At constant exchange rates, net sales were up by €1,533 million or 2.5%. This would be 2.8% when adjusted for remedy stores sold over the course of 2017.
Gasoline sales increased by 4.2% in 2018 to €1,017 million. At constant exchange rates, gasoline sales increased by 8.3%, due to an increase in gasoline prices, while volume was slightly down.
Net sales excluding gasoline decreased in 2018 by €139 million, or 0.2%, compared to 2017. At constant exchanges rates, net sales excluding gasoline increased in 2018 by €1,456 million, or 2.4% compared to 2017. Sales growth was driven by the growth of our eCommerce businesses, new store openings, and positive comparable sales growth in all segments.
Ahold Delhaize continued to see strong sales growth in its online businesses. The Company’s online businesses contributed €2,817 million to Ahold Delhaize’s net sales in 2018 (2017: €2,393 million). Ahold Delhaize’s net consumer online sales amounted to €3,494 million and increased in 2018 by 24.8% at constant exchange rates.
Underlying operating income was €2,554 million in 2018, up €98 million, or 4.0%, versus €2,456 million in 2017. Underlying operating income margin in 2018 was 4.1%, compared to 3.9% in 2017. At constant exchange rates, underlying operating income was up by €160 million, or 6.7%, compared to 2017, mainly as result of higher gross profit as a result of synergy savings, partly offset by higher underlying operating expenses.
In 2018, net synergies of €432 million were delivered: an additional €164 million of synergies compared to 2017. Additional synergies have mainly been realized in sourcing initiatives, including not-for-resale.
For more information, please go to the Business review section of the 2018 Annual Report.
In 2018, net sales were €37,460 million, down by €980 million or 2.5% compared to 2017. At constant exchange rates, net sales were up by 1.9%, or 2.3% adjusted for remedy stores sold over the course of 2017. Online sales were €751 million, up by 10.3% compared to last year at constant rates, driven by same-day, third-party delivery, Hannaford To Go and Peapod.
Comparable sales excluding gasoline for the segment increased by 2.1%, with positive volumes. All of the U.S. brands had positive comparable sales growth for the year.
In 2018, underlying operating income was €1,563 million, up by €28 million or 1.9% compared to last year. At constant rates, underlying operating income increased by 6.2%.
The United States’ underlying operating income margin in 2018 was 4.2%, up 0.2 percentage points compared to 2017, mainly driven by higher gross profit as a result of strong synergy savings. Underlying expenses increased slightly compared to last year, mainly driven by cost inflation and non-recurring items, and were partly offset by our Save for Our Customers program.
For more information, please go to the Business review section of the 2018 Annual Report.
Net sales in 2018 were €14,218 million, up by €512 million or 3.7% compared to 2017 and 4.0% adjusted for remedy stores sold over the course of 2017.
This increase was due in full to a 3.8% growth in comparable sales, driven by strong sales growth at bol.com and ah.nl. For the full year, market share at Albert Heijn decreased from 35.3% in 2017 to 34.7% in 2018 (Source: Nielsen).
Bol.com accelerated its net consumer online sales growth from 28.8% in 2017 to 32.0% in 2018. The business in Belgium and the Plaza platform – which currently offers a marketplace to more than 20,000 merchant partners in the Netherlands and Belgium – remain important growth drivers.
In 2018, underlying operating income in The Netherlands was €715 million, up by €39 million or 5.8% compared to 2017. The underlying operating margin of The Netherlands was 5.0% in 2018, up 0.1 percentage points compared to 2017. Margins mainly improved as a result of synergies realized from the merger with the Delhaize Group and an improvement in the dilutive impact of our online businesses as a result of their improved performance; these were partly offset by higher logistics costs.
Excluding bol.com, the underlying operating income margin was 5.6% in 2018. This was flat compared to 2017 as a result of saving programs, including synergy savings, and good cost control, offset mainly by the growth of ah.nl.
For more information, please go to the Business review section of the 2018 Annual Report.
Net sales in 2018 were €5,095 million, up €142 million or 2.9% compared to 2017, and comparable sales increased by 2.2%. Net sales growth was 3.1% adjusted for remedy stores sold over the course of 2017. Delhaize showed an improved performance across all store formats. The affiliated network and stores in Luxembourg continued to show strong growth, while comparable sales growth in the company-operated stores improved significantly compared to last year, mainly driven by improved operational performance.
Delhaize.be, our online business in Belgium, accelerated growth from 7% in 2017 to 25.7% in 2018, as more customers utilized the convenience of home delivery.
Our market share in Belgium for the year increased to 24.0% from 23.8% last year (Source: Nielsen)
Underlying operating income in 2018 was €141 million, up by €30 million, or 26.6%, compared to last year. Underlying operating income margin in 2018 was 2.8%, up 0.6 percentage points compared to 2017. Underlying operating income benefited from improved gross profit, partly offset by increased logistics costs and higher labor costs.
Our net sales in Belgium consist of sales to consumers and to affiliate stores. Affiliates receive goods at a wholesale price that includes a mark-up on our purchase price.
For more information, please go to the Business review section of the 2018 Annual Report.
In 2018, net sales in Central and Southeastern Europe (CSE) were €6,018 million, up by €227 million or 3.9% compared to 2017. At constant exchange rates, net sales were up by 3.1%.
Sales growth was driven by comparable sales growth of 0.9% and by the net addition of 130 stores in 2018, which contributed 2.2% to sales growth. Comparable sales growth was driven by our businesses in the Czech Republic, Romania and Serbia, while Greece’s comparable sales growth remained negative as a consequence of competitive re-openings.
2018 underlying operating income in CSE was €237 million, down by €5 million or 1.8% from €242 million in 2017. Underlying operating income margin was 3.9%, which was 0.3 percentage points lower than in 2017, mainly driven by an increase in labor costs across the region and lower sales in Greece.
For more information, please go to the Business review section of the 2018 Annual Report.
The following key indicators show group performance against our Sustainable Retailing 2020 strategy and a few additional material topics. Grouping these indicators under people, planet and product shows how we create value in a broader perspective through our sustainability activities.
People
Our Company-wide associate engagement scores increased by one percentage point in 2018, in line with our 2020 targets.
Workplace injury absenteeism rates fell by 4.0%, of which 1.1% was due to the inclusion of bol.com, Etos, and Gall & Gall in 2018 data.
Planet
In 2018, Ahold Delhaize brands reduced food waste per sales by (1.9)%, making progress toward the Sustainable Development Goal (SDG) 12.3 and our 2020 target of 20% reduction. In 2018, we increased food waste recycling by 9 percentage points and total waste by 3 percentage points.
CO2 equivalent emissions per sales area were 456 kg/m2, a decrease from 2017 and a 28% reduction from Ahold Delhaize’s 2008 baseline.
Product
In 2018, our brands increased sales from free-from or organic own-brand lines by 7.1% compared to 2017. By better meeting consumer needs for healthier assortments, our brands increased sales of healthy own-brand food by 1.0%
Ahold Delhaize drives sustainable sourcing practices through sourcing targets on seven critical commodities (tea, coffee, cocoa, palm oil, seafood, soy and wood fiber). All of our brands made positive progress in this area, with the exception of sourcing sustainable cocoa. The decrease in our cocoa figures is due to changes in the assortment of products containing cocoa at each of our brands.
For more information, please go to the Business review section of the 2018 Annual Report.
