Wal-Mart vs Ahold

1
Wal-Mart vs Ahold

• Mirjana Uzelac
• Neda Kovacevic
• Mónica Pérez
• Corporate Intelligence
• United Business Institute December 2003

2
History

• Ahold
• 1887 Albert Heijn takes over his fathers small
  Zaandam grocery store
• 1911 First Albert Heijn brand name products sold
• 1948 Ahold on Amsterdam stock exchange
• 1973 Founding Ahold N.V. for international growth
• 1977 In U.S. for the first time
• 1987 Queen Beatrix awards Ahold ROYAL
• 1990 Goes to Czechoslovakia
• 1992 Portugal
• 1995 New distribution system store delivery in
  18h
• 1996 Singapore, Thailand, China, Spain, Poland
• 2000 Acquired U.S. Foodservice
• 2003 Big financial scandal

• Wal-Mart
• 1962 Company founded with opening of first
  Wal-Mart store in Rogers, Ark.
• 1972 Listed on New York Stock Exchange
• 1979 Wal-Mart reaches 1 billion in sales
• 1983 First SAM'S CLUB opened
• 1987 Wal-Mart Satellite Network completed
• 1988 First Supercenter opened
• 1990 Wal-Mart becomes nation's No. 1 retailer
• 1991 International market entered Mexico
• 1995 Argentina and Brazil
• 1996 China in a joint-venture
• 1997 Wal-Mart No. 1 employer in the U. S.
• 1998 Germany, Korea in a joint venture
• 1999 Largest private employer in the world
• 1999 United Kingdom

3
Getting Ahold of Things

• The fraud was simplicity itself. Food
  manufacturers frequently pay a fee to supermarket
  operators to encourage them to buy in bulk and
  then to promote the products to the ultimate
  consumers. These promotional allowances typically
  are a function of the volume purchased. The
  company then aggressively accounted for these
  promotional allowances, but did not have the
  volume to justify their recognition. Prematurely
  and incorrectly recognizing these promotional
  allowances of course increased their profits for
  some 500 million euros.

4
Competitive Fact Sheet
Wal-Mart Ahold
Mission/ Vision To give ordinary folk the chance to buy the same thing as rich people. Serve the needs of our customers by integrating a close-knit family of world-class food retail and foodservice operations that make the whole of our company worth more than the sum of its parts
Strategy 1. Respect for the individual 2. High standards of service 3. Constant strive for excellence Low prices, In-stock positions, Customer service 1. Re-engineer food retail 2. Recover U.S. Foodservice 3. Reinforce accountability, controls and corporate governance 4. Restoring Aholds financial help
Activities 1. Food retail 2. Non-Food retail 3. On-line food retailer 1. Food retail 2. Food distribution (U.S. Food service) 3. Liquor, beauty care stores 4. On-line food retailer
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Wal-Mart vs Ahold
Wal-Mart Ahold
2002 Sales (mil) 244,524 59,267
1-Year Sales Growth 12 -1
Grocery Sales () 34 84
Domestic Sales () 84 15
Foreign Sales () 16 85
2002 Employees 1,383,000 270,739
1-Year Employee Growth 1.2 (15.5)
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Wal-Mart presence in Europe
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Wal-Mart Subsidiaries in EU
UK 250 stores Asda, Wal-Mart
Germany 95 stores Wal-Mart
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Ahold Presence in Europe
9
Ahold Subsidiaries in EU
Slovakia 2 stores Hypernova
Portugal 198 stores Pingo Doce, Feira Nova
Spain 623 stores Supersol, HiperDino, Netto,
HiperSol, Cash Diplc
Czech Republic 203 stores Albert, Hypernova
Denmark 12 stores ISO
Poland 165 stores Albert, Mega, Hypernova
Norway 1,104 stores Rimi, ICA, Maxi
Lithuania 38 stores Rimi, Eko
Netherlands 2,333 stores Albert Heijn, Etos, De
Tuinen, Jasmin, GallGall, C1000, Ter Huurne
Sweden 1,846 stores Rimi, ICA, Maxi
Estonia 3 stores Rimi
Latvia 26 stores Rimi, Maxi
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Sector Trends for next 5 years

• Diversification
• Globalization
• Strong Retailers
• Technology

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Sector Trend Diversification

• The maturity of the food market has led
  supermarkets to look for new opportunities
• non-food1
• discount format1
• e-commerce2
• expansion abroad2

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Sector Trend Diversification2

• But almost all have ignored the rise of wholesale
  food and drink trade
• However, it is the most interesing retail sector
  
• percentage of consumption of food and drink in
  places other than homes has risen compared to the
  total consumption
• demographic change increase in the proportion of
  older, wealthier people in the population
• higher wholesale margins
• Wholesale demand from the food service segment
  increases by 4 to 5 a year across Europe,
  compared with growth in retail demand of 1 to
  2.

1995 2000 2005 2025
32 35 38 50
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Sector Trend Diversification
Wal-Mart Ahold
1. Non-food Tire Lube Express, Wal-Mart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations, Wal-Mart's Used Fixture Auctions Ethos, Gall Gall
2. Discount format Wal-Mart Stores, Bodega, Todo Día RIMI, Netto, Balaio
3. E-commerce WalMart.com Peopod, ICA
4. Wholesale Sams Club Deli XL, Shuitema
5. Expansion abroad 12 international locations 27 international locations
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Sector Trend globalization3

• The consolidation and internationalisation of the
  food retail can be expected to continue.
• 4 or 5 large retail organizations will operate on
  a worldwide scale,
• a number of dominant regional and national
  retailers will exist,
• the traditional small supermarket is approaching
  the end of its lifecycle.

Market Share of top 5 Retailers in the EU
(Carrefour, Metro, Tesco, Rewe,
Intermarché) Source Lebensmittel-Zeitung 2002
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IGD Global Retail Index1
Rank GRI Rank by Turnover Company Global Status
1 2 Carrefour Leading Global Retailers
2 3 Ahold Leading Global Retailers
3 1 Wal-Mart Leading Global Retailers
4 5 Metro Leading International Retailers (nearly global)
5 7 Tesco Leading International Retailers (nearly global)
6 8 Ito Yokado (inc. 7 Eleven) Leading International Retailers (nearly global)
7 20 Casino Leading International Retailers (nearly global)
8 17 Auchan Leading International Retailers (nearly global)
9 21 Delhaize Leading International Retailers (nearly global)
10 13 Aldi Leading International Retailers (nearly global)
11 10 Costco Leading International Retailers (nearly global)
12 18 Tengelmann (inc. AP) Leading International Retailers (nearly global)
Source IGD Research - Date published 04/02/03
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Competitive Positioning1
The IGD 'European Retail Index' gives a more
accurate ranking of the region's top 30 retailers
than those rankings traditionally based on
turnover size alone.
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Future Market Focus1
Countries Wal-Mart Ahold
China P
Italy
Russia
Japan P
Hungary
India
United States P P
Poland
Canada P
France
United Kingdom P
Germany P
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Sector Trend Strong Retailers

• The power of the retail sector will grow
  retailers are expected to rule the food chain in
  the coming five years.3
• Retailers are trying to present themselves as a
  strong brand, but only a few will succeed.3

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2003 Global Most Admired
Rank Company
1 Wal-Mart Stores
2 General Electric
3 Microsoft
4 Dell Computer
5 Johnson Johnson
6 Berkshire Hathaway
7 Procter Gamble
8 IBM
9 Coca-Cola
10 FedEx
Source Fortune
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Wal-Mart Subsidiaries

• Europe
• Wal-Mart Germany
• Wal-Mart UK
• ASDA

• Asia
• Wal-Mart Korea
• Wal-Mart China
• SAMS Club
• The Seiyu

• Americas
• Wal-Mart Argentina
• Wal-Mart Brazil
• Wal-Mart Canada
• Wal-Mart de Mexico
• Wal-Mart Puerto Rico
• SAMS Club
• Supermercados Amigo
• Todo Dia
• Bodega

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Ahold Subsidiaries

• Europe
• Ahold Polska
• Ahold Czech Republic
• Ahold Slovakia
• Ahold Supermercados
• Albert Heijn
• Schuitema
• Etos
• Gall Gall
• Deli XL
• ICA AB
• Jerónimo Martins

• Asia
• Tops
• Tops Market Place

• Americas
• Stop Shop
• Giant-Landover
• Giant-Carlisle
• Tops
• BI-LO
• Brunos
• U.S. Foodservice
• Peapod
• La Fragua
• CSU
• CARHCO
• Bompreço
• G. Barbosa
• Disco

22
Sector Trend Technology

• Cooperation will become increasingly important1
• between manufacturers and retailers to improve
  the quality, velocity and dynamics within the
  chain,
• between stores to share best practices.
• Technology strength will be a critical success
  factor for retailers and manufacturers3

23
Technology Based Intelligence

• Wal-Mart
• Wal-Mart Satellite Network (largest private
  satellite communication system in the U.S.)
• radio-frequency-identification (RFID) tagschips

• Ahold
• Sales Information System
• RS/6000 SP servers

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Wal-Mart SWOT Analysis
Strengths Scale Home market strong position Technological pionneers Focus on discount Weaknesses International presence and profits Low penetration in EU Lack of international experience
Opportunities Growing supercenter format Product diversification (food) New markets (EU, Asia) E-commerce Threats Too large too manage Internationalisation costs Union opposition Not present in large communities
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Ahold SWOT Analysis
Strengths International experience Non-food, discount format, wholsale, e-commerce Strong domestic presence Ability to integrate acquisitions Weaknesses No global brand Not in EU key markets (FR, GB, D) Loss of investors confidance Scale vs Wal-Mart
Opportunities Diversification of format Diversification of products Acquisition of major EU retailers Presence increase in Asia Threats Risk of joint-venture failure Strengthening Euro, weakening dollar Too complicated to manage Wal-Mart position in the US
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Sources

• 1) IGD Research, www.igd.com
• 2) The McKinsey Quarterly
• 3) Cap Gemini Ernst Young, The Changing Face
  of the Worldwide Food Industry
• 4) Tansas, Presentation of Food Retail Sector,
  www.tansas.com
• 5) www.hoovers.com