Ahold Delhaize Annual Report 2020
PDF, 15 MB
Our highlights of 2020
Group highlights
- Ahold Delhaize’s 2020 fiscal year consist of 53 weeks.
- In 2020, after €2.7 billion cash capital expenditure (2019: after €2.2 billion cash capital expenditure).
- The 2016 figures presented in the graphs are pro forma figures. To read more about the 2016 pro forma figures, please refer to our Annual Report 2016. 2018 figures have been restated for the change of accounting policies (IFRS 16 leases).
- The reduction is measured against the 2018 baseline. 2019: 3,593 ktonnes, a reduction of 2% compared to the 2018 baseline. See ESG statements for more information.
- The reduction is measured against the 2016 baseline. 2019: 5.0 t/ € million, a reduction of 9% compared to the 2016 baseline. See ESG statements for more information.
2020 Q&A with Frans Muller
CEO Frans Muller sat down for an interview to reflect on 2020, a year unlike any other during his 24-year career in food retail, and shed light on his thoughts about the future.
COVID-19 pandemic
To a large extent, COVID-19 defined 2020 for people and businesses around the world. It presented enormous challenges for Ahold Delhaize, as well as the opportunity to fulfill our pivotal role in society in the best possible way.
During these challenging times, associates at all the Ahold Delhaize brands have been working tirelessly to support their communities in need, across stores, distribution centers and support offices. Together, we make it work. This is an ode to our heroes. Thank you!
Our brands and performance
414,000
Associates worldwide
54 m
Customers served every week, both in stores and online
18
Great local consumer-facing brands
7,137
Stores serving our local communities in Europe and the United States2
- Group performance
- The United States
- Europe
GROUP PERFORMANCE
Net sales for the financial year ended January 3, 2021, were €74,736 million, an increase of €8,476 million, or 12.8%, compared to net sales of €66,260 million for the financial year ended December 29, 2019. At constant exchange rates, net sales were up by €9,293 million or 14.2%.
Gasoline sales decreased by 29.9% in 2020 to €667 million. At constant exchange rates, gasoline sales decreased by 28.6%, driven by the pandemic, resulting in a decrease of both gasoline prices and volumes.
Net sales excluding gasoline increased in 2020 by €8,761 million, or 13.4%, compared to 2019. At constant exchanges rates, net sales excluding gasoline increased in 2020 by €9,560 million, or 14.8%, compared to 2019.
Sales growth was mainly driven by demand related to COVID-19, although underlying sales growth (excluding the impact of COVID-19) is still estimated to have been more rapid than in 2019. Compared to the pro forma 2019 sales based on 53 weeks and at constant exchange rates, net sales excluding gasoline increased in 2020 by €8,214 million, or 12.3% at constant exchange rates.
We continued to see strong sales growth in our online businesses, which contributed €5,547 million to net sales in 2020 (2019: €3,493 million). Net consumer online sales amounted to €7,576 million and increased in 2020 by 67.4% at constant exchange rates. The increase in online sales was driven by the impact of COVID-19 and consumers shifting to online shopping. We saw positive trends across all the brands with online acceleration in the United States supported by more click-and-collect points and thirdparty delivery, and growth in Europe mainly driven by our online brands, bol.com and ah.nl.
During 2020, we further increased the sale of healthy own-brand products as a proportion of total own-brand food sales to 49.8%, slightly lower than the 2020 target of 50.0%.
This increase in healthy own-brand sales was driven by customers’ heightened focus on healthy foods during the COVID-19 pandemic, marketing campaigns, continued product reformulations and increased transparency of healthy products in stores and online through the use of nutritional navigation systems. In the U.S. brands, bottled water, which was previously unrated by Guiding Stars, was included in the nutritional navigation system’s ratings in 2020, helping to increase overall healthy sales.
Operating income in 2020 went down by €472 million, or (17.7)%, to €2,191 million compared to €2,662 million in 2019. The decrease of €472 million is mainly explained by restructuring and related charges and other items in 2020, impacted by the U.S. multi-employer plan withdrawal and settlement agreement, and higher operating costs related to COVID-19, partly offset by higher gross margin. At constant rates, operating income was down €435 million, or (16.6)%.
Underlying operating income was €3,594 million in 2020, up €817 million, or 29.4%, versus €2,777 million in 2019. Underlying operating income margin in 2020 was 4.8%, compared to 4.2% in 2019. At constant exchange rates, underlying operating income was up by €855 million, or 31.2%, compared to 2019. Our 2020 results were impacted by higher operating leverage due to higher sales trends, partly offset by higher operating expenses related to COVID-19.
Tight cost management remains a core objective of our business model. Our Save for Our Customers program delivered €844 million this year, positively impacting our gross profit and operating expenses. This program drives our efforts to provide our businesses with optimized store processes and improved sourcing conditions, and enables us to continue to invest in our customer proposition.
For more information, see the Performance review section of the Annual Report 2020.
UNITED STATES
In 2020, net sales were €45,470 million, up by €5,404 million or 13.5% compared to 2019. At constant exchange rates, net sales were up by 15.6%. Sales growth was positively impacted by the pandemic, the additional week of sales and cycling last year’s strike at Stop & Shop. The additional week of sales amounted to $967 million and the direct and indirect impact of the strike is estimated at $345 million loss on previous year net sales.
Online sales were €1,968 million, up by 105.1% compared to last year at constant exchange rates. The increase was mainly driven by the pandemic, as customers changed their shopping habits and leaned towards the e-commerce market. We responded to this shift with the launch of over 424 additional click-and-collect points, an extended partnership with a third-party delivery service and expansion of our e-commerce offering across all brands.
In 2020, operating income decreased by €662 million, or (39.7)%, compared to 2019. Underlying operating income was €2,466 million, up by €754 million or 44.1% compared to last year. At constant rates, underlying operating income increased by 45.5%.
The United States’ underlying operating income margin in 2020 was 5.4%, up 1.2 percentage points compared to 2019. The 2020 result was positively affected by the pandemic. COVID-19 had a positive effect on sales and shrink, partially offset by higher supply chain costs due to increased volume. Underlying expenses increased compared to last year, mainly driven by added volume, appreciation pay, increased heath care costs, safety supplies (including masks and gloves) and cleaning services; partly offset by our Save for Our Customers program.
For more information, see the Performance review section of the Annual Report 2020.
EUROPE
Net sales in 2020 were $29,266 million, up by €3,072 million or 11.7% compared to 2019. Sales growth was mainly driven by demand related to COVID-19. In Europe, the effect of COVID-19 has been more balanced, with additional sales matching the related costs. In addition to that, the pandemic has a more mixed impact on the different brands across the European region compared to our brands in The United States.
Online sales were $3,579, up by 42.7% compared to last year, mainly driven by the strong performance of our online brands, bol.com and ah.nl. Bol.com continued its strong net consumer online sales growth from 33.2% in 2019 to 56.8% in 2020. The brand’s business in Belgium and its third-party platform – which currently offers a marketplace to more than 41,000 merchant partners in the Netherlands and Belgium – remain important growth drivers. Sales from ah.nl increased significantly in 2020, mainly driven by higher demand related to COVID-19. Other brands also saw a surge in online sales, complementing the total online sales growth.
In 2020, operating income increased by €240 million, or 21.1%, to €1,380 million. Underlying operating income in Europe was €1,325 million, up by €120 million, or 9.9%, compared to 2019. Underlying operating margin in Europe was 4.5% in 2020, down 0.1% compared to 2019. In Europe, some of our brands, including those in Greece, Romania, Serbia and our To Go stores, were negatively impacted by COVID-19 to a greater extent, suffering from decreasing traffic, the absence of tourists and the trend of people moving from the city to the countryside during the lockdown periods. Margins were mainly impacted by higher underlying operating expenses, particularly driven by higher labor, operational and administrative expenses related to COVID-19. In addition, margin was negatively impacted by the increased pension costs in the Netherlands. This was partly offset by better gross margins driven by lower shrink, lower cost of product and savings from our Save for Our Customers program.
Our net sales in Europe consist of sales to consumers and to franchise stores. Franchise stores operate under the same format as Ahold Delhaize-operated stores. Franchisees purchase merchandise primarily from Ahold Delhaize, pay a franchise fee and receive support services.
For more information, see the Performance review section of the Annual Report 2020.
Our growth drivers
In 2020, we tightened our focus to the following four key growth drivers that are helping us fulfill our purpose, achieve our vision and prepare our business for tomorrow. They enabled our brands to respond swiftly to consumers’ evolving needs during the COVID-19 pandemic and supported our leading market share positions across our geographies.
- Drive omnichannel growth
- Elevate healthy and sustainable
- Strengthen operational excellence
- Cultivate best talent
Drive omnichannel growth
Creating a seamless experience in all phases of the customer journey.
We want to help our customers navigate the choices they encounter, from planning to shopping and all the way through to enjoying their meals. So, we’re creating a seamless experience in all phases of the customer journey, enabled by technology. We believe that by doing this, we can deepen the relationship between our brands and our customers and become their one-stop shopping destination.
We are driving omnichannel growth across all our local brands, with four main focus areas: grow e-commerce and profitability; drive seamless omnichannel engagement; optimize our brick-and-mortar footprint; and drive price, value and assortment.
Elevate healthy and sustainable
Making sure decisions are grounded in doing the right thing for people and our planet.
At Ahold Delhaize, we believe that what’s healthy and sustainable should be accessible and available to all. We aim to ensure that every choice we and our brands’ customers make is the better choice. From sourcing locally and helping farmers and other community and neighborhood producers get a fair deal, to working with suppliers to improve the overall food supply chain, the decisions we make are grounded in doing the right thing for people and our planet.
Our healthy and sustainable growth driver is centered around four primary objectives: enable customers to make healthier choices, provide more product transparency, eliminate food and plastic waste and reduce climate impact.
Strengthen operational excellence
By operating as efficiently as possible today, we will be able to invest in evolving the shopping experience for the future.
We continually look for opportunities to leverage our scale and save money to put back into our customer offering.
Technology and data are enablers for creating a seamless omnichannel experience – so, ensuring data privacy and information security is an increasingly important part of operating our business.
Our omnichannel growth ambitions are supported by our strong and predictable cash flow, efficient and scalable infrastructure and critical-scale technology projects.
As we strengthen operational excellence across our local brands, we have four main objectives: save for our customers, improve our supply chain, enhance store operations and strengthen internal operations across all functions.
Cultivate best talent
Our ambition.
We’re in the people business. The 414,000 associates working across our brands and support offices focus every day on ensuring they serve their customers well and deepen connections with their communities. To be successful, our brands need the best people.
That’s why at Ahold Delhaize and our great local brands, we strive to reflect the markets we serve and make sure associates’ voices are heard and valued and we find purpose in our work, have equitable access to opportunities and can grow and contribute to our fullest.
Our brands place diversity and inclusion at the center of their ambitions. We have a bold aspiration to be a company whose brands and support offices are 100% gender balanced, 100% reflective of the markets they serve and 100% inclusive.
Our four main priorities as we work to cultivate best talent are: create the future of work, pivot our culture, transform our capabilities and cultivate talent.
Our business model
Across Ahold Delhaize, each of our great local brands works hard to save for customers, drive same-store sales and fund growth. We continuously evaluate every area of our businesses to see where we can do things smarter to save money, conserve resources and reduce waste. Our impact goes beyond what happens in stores and distribution centers: from farming to consumption, we work with our suppliers and partners to make our value chain more sustainable and provide customers with more of the meals they enjoy each day, and healthier choices to help them live better.
- 1. Raw materials and fresh produce
- 2. Own brand
- 3. Consumer packaged goods
- 4. Supply chain
- 5. Retail
What we do
Many of our products originate from farms around the world. While Ahold Delhaize does not own or operate farms, our brands have long-standing strategic partnerships with farmers and local producers. The raw materials for our own-brand products are sourced from and processed by selected partners to ensure the highest quality. We are committed to sourcing all of the tea, coffee, cocoa, palm oil, soy, wood fibers and seafood used in our own-brand products with certification against an acceptable standard. The commodities that we have identified as “critical” are linked to major environmental and social issues such as deforestation, carbon emissions, child labor, forced labor, illegal fishing and overfishing.
What we do
Our products are made from raw materials and packaged for sale. Ahold Delhaize’s own-brand products offer great value across different price points and the most relevant local assortment. We develop them in-house, including branding and marketing, and actively work to reduce plastic and increase the use of recyclable materials in packaging. We are re-formulating many own-brand product recipes to reduce sugar, salt, colorants and additives, and our brands achieved 49.8% of own-brand sales from healthy products in 2020.
What we do
Various suppliers manufacture branded products that are delivered to our distribution centers. We give small consumer packaged goods companies the chance to sell their product innovations in our brands’ stores and reach a wider audience. Our suppliers can benefit from our unique customer insights resulting from our strong local presence and over a century of experience in grocery retail. We share our expertise and scale with other food retailers as part of the Coopernic European Buying Alliance and through our partnership with AMS. This enables us to improve product quality and buy more efficiently
What we do
Products are delivered to our warehouses and prepared for transport to stores, pick-up points and customers’ homes. We are continuously adapting our supply chain to serve customers better. Our brands’ automated warehouses and fulfillment centers enable faster distribution to stores and delivery to customers’ homes. In the U.S., we are transforming our supply chain to a fully integrated, self-distribution model.
What we do
Customers can shop with our brands in stores and online. Ahold Delhaize is known for our great local brands, which serve 54 million customers each week. We create the leading local food shopping experience in more than seven thousand local grocery, small-format and specialty stores as well as our online stores. And we sell more than just food – our brands include the top online retailer in the Benelux.
Creating value for our stakeholders
As a global company, Ahold Delhaize has a diverse range of stakeholders. But the four main groups we impact are customers, associates, communities and shareholders.
- Customers
- Associates
- Communities
- Shareholders
Customers
Our business is built on our relationships with customers.
We help them eat well, save time and live better by creating the leading local food experience. We want to be there for them through the entire process from planning to shopping to enjoying our products at home or on-the-go.
Associates
Working together across stores, distribution centers and support offices, associates bring to life the “local” in our vision.
They are at the heart of our brands’ ability to understand and serve the needs of customers and communities.
Communities
Our brands play a role in the lives of millions of people every day.
We feel a deep sense of responsibility for helping people live better and making communities stronger. We work to create an impact locally and meaningful change globally.
Shareholders
Ahold Delhaize has a long and proud tradition of serving local communities and associates with care, building customer trust and developing strong brands.
This enables us to retain leading market share positions almost everywhere we operate. Our brands’ deep connections with local communities are fundamental to creating long-term shareholder value and underpin our consistent results.
