December 13, 2017 / 10:22 PM / 2 months ago

Dutch-Belgian supermarket to battle Amazon on two fronts

ZAANDAM, Netherlands (Reuters) - Unlike investors who sold off rival food retail stocks in response to Amazon’s plan to buy Whole Foods, Ahold Delhaize boss Dick Boer took the news in stride.

Ahold Delhaize, a 62 billion euro ($73 billion) Dutch-Belgian supermarkets group with two thirds of its business in the United States, is half the size of Amazon, which this year broke into not one, but two of the European company’s core markets.

But rather than panic, CEO Boer said he saw Amazon’s move as encouragement.

“It only tells me we have been on the right track investing in the physical world and the online channel,” he told Reuters, adding that the challenge it faces now is to become faster in implementation.

The announcement of the $13.7 billion Whole Foods deal in June knocked 16 percent off Ahold’s share price, prompted by fear that Amazon’s foray into bricks-and-mortar retailing would upend the grocery industry.

But Boer said that Ahold Delhaize has several advantages over Amazon, which he said is reversing into a competitive business.

“We were putting this business online since the early days of this century,” Boer said, referring to its online grocery service Peapod, which is the U.S. leader with roughly $800 million in sales, equating to 5 percent of the market.

Amazon scaled back its AmazonFresh grocery service in some areas in November, highlighting how tough it is to deliver perishable goods across a vast territory like the United States.

Ahold Delhaize CEO Dick Boer poses for a picture after an interview with Thomson Reuters at the Ahold Delhaize headquarters in Zaanstad, Netherlands, December 5, 2017. REUTERS/Michael Kooren

After first entering the traditional U.S. supermarket business in the 1970s, Ahold Delhaize now has stores from South Carolina to Maine, with more than 50 million customers in its delivery coverage area.

Last month Amazon also launched its Prime subscription service in the Netherlands, where Ahold Delhaize is the largest supermarket operator and online non-food retailer.

Ahold Delhaize CEO Dick Boer speaks during an interview with Thomson Reuters at the Ahold Delhaize headquarters in Zaanstad, Netherlands, December 5, 2017. REUTERS/Michael Kooren

BIGGER THAN AMAZONFRESH

But the key battleground is the United States, with roughly $800 billion in annual grocery market sales and where Amazon aims to take a slice of the business by virtue of its sleek, supply-chain logistics.

The online share of U.S. grocery sales is only 1-2 percent, but statistics portal Statista expects it to more than double by 2021 from $14.2 billion to $29.7 billion.

Boer doesn’t plan to expand outside the East Coast, but he would like to add pick-up points for groceries ordered online, where some of the sharpest growth is expected.

Boer said that Ahold Delhaize’s distribution network of more than 2,000 supermarkets, including its Stop & Shop, Food Lion, Giant and Hannaford stores along the East Coast, give it a wider client network than Amazon’s Fresh.

“We, of course, have much more presence with our stores. More presence, closer to where customers live, so that’s a strong position,” he said.

($1 = 0.8503 euros)

Reporting by Anthony Deutsch; Editing by David Goodman

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