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Wal-Mart vs AholdWal-Mart vs Ahold

Mirjana UzelacNeda Kovacevic

Mónica Pérez

Corporate IntelligenceUnited Business Institute December 2003

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HistoryHistory Ahold1887 Albert Heijn takes over his father’s

small Zaandam grocery store1911 First Albert Heijn brand name

products sold1948 Ahold on Amsterdam stock

exchange1973 Founding Ahold N.V. for

international growth1977 In U.S. for the first time1987 Queen Beatrix awards Ahold

“ROYAL”1990 Goes to Czechoslovakia1992 Portugal1995 New distribution system: store

delivery in 18h1996 Singapore, Thailand, China,

Spain, Poland2000 Acquired U.S. Foodservice2003 Big financial scandal

Wal-Mart1962 Company founded with opening of

first Wal-Mart store in Rogers, Ark.1972 Listed on New York Stock

Exchange1979 Wal-Mart reaches $1 billion in sales1983 First SAM'S CLUB opened1987 Wal-Mart Satellite Network

completed1988 First Supercenter opened 1990 Wal-Mart becomes nation's No. 1

retailer1991 International market entered:

Mexico1995 Argentina and Brazil1996 China in a joint-venture1997 Wal-Mart No. 1 employer in the U.

S.1998 Germany, Korea in a joint venture 1999 Largest private employer in the

world1999 United Kingdom

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Getting Ahold of ThingsGetting 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.

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Competitive Fact SheetCompetitive 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 Ahold’s 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 AholdWal-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 Wal-Mart presence in EuropeEurope

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Wal-Mart Subsidiaries in Wal-Mart Subsidiaries in EUEU

UK250 stores

Asda, Wal-Mart

Germany95 storesWal-Mart

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Ahold Ahold PPresence in resence in EuropeEurope

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Ahold Subsidiaries in Ahold Subsidiaries in EUEU

Netherlands2,333 stores

Albert Heijn, Etos, De Tuinen, Jasmin,

Gall&Gall, C1000, Ter Huurne

Norway1,104 stores

Rimi, ICA, Maxi

Denmark12 stores

ISO

Sweden1,846 stores

Rimi, ICA, Maxi

Estonia3 stores

Rimi

Latvia26 stores

Rimi, Maxi

Lithuania

38 storesRimi, Eko

Poland165 stores

Albert, Mega,

Hypernova

Czech Republic203 stores

Albert, Hypernova

Slovakia2 stores

HypernovaSpain

623 storesSupersol, HiperDino, Netto, HiperSol, Cash

Diplc

Portugal198 storesPingo Doce, Feira Nova

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Sector Trends for next 5 Sector Trends for next 5 yearsyears

Diversification Globalization Strong Retailers Technology

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Sector Trend: Sector Trend: DiversificationDiversification

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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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%

Sector Trend: Sector Trend: DiversificationDiversification22

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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 Sam’s Club Deli XL, Shuitema

5. Expansion abroad

12 international locations

27 international locations

Sector Trend: Sector Trend: DiversificationDiversification

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Sector Sector TTrend: rend: globalizationglobalization33

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.

0

10

20

30

40

1991 1994 2000 2005

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 IndexIGD Global Retail Index11

Rank GRI

Rank by Turnove

rCompany Global Status

1 2 Carrefour Leading Global Retailers2 3 Ahold

3 1 Wal-Mart

4 5 Metro Leading International Retailers (nearly global)

5 7 Tesco

6 8 Ito Yokado (inc. 7 Eleven)

7 20 Casino

8 17 Auchan

9 21 Delhaize

10 13 Aldi

11 10 Costco

12 18 Tengelmann (inc. A&P)Source: IGD Research - Date published 04/02/03

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Competitive Competitive PositioningPositioning11

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.

0

20

40

60

80

100

0 10 20 30 40Nº of Countries

IGD

Euro

pean R

eta

il I

ndex Carrefour

AuchanTescoAhold

ReweWal-MartMetroLidl & SchwarzAldiITM

CasinoLeclerc

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Future Market FocusFuture Market Focus11

Countries Wal-Mart AholdChina Italy

Russia

Japan Hungary

India

United States Poland

Canada France

United Kingdom Germany

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Sector Sector TTrend: Strong rend: Strong RetailersRetailers

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 2003 Global Most AdmiredAdmired

Rank Company1 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 SubsidiariesWal-Mart Subsidiaries

EuropeWal-Mart

Germany Wal-Mart UKASDA

AsiaWal-Mart Korea Wal-Mart ChinaSAM’S Club The Seiyu

AmericasWal-Mart ArgentinaWal-Mart Brazil Wal-Mart Canada Wal-Mart de MexicoWal-Mart Puerto RicoSAM’S ClubSupermercados

AmigoTodo DiaBodega

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Ahold SubsidiariesAhold Subsidiaries

EuropeAhold Polska Ahold Czech

Republic Ahold Slovakia Ahold

Supermercados Albert Heijn Schuitema Etos Gall & Gall Deli XL ICA AB Jerónimo Martins

AsiaTopsTops Market Place

AmericasStop & Shop Giant-Landover Giant-Carlisle Tops BI-LO Bruno’s U.S. Foodservice PeapodLa Fragua CSUCARHCO BompreçoG. BarbosaDisco

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Sector Trend: Sector Trend: TechnologyTechnology

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

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Technology Based Technology Based IntelligenceIntelligence

Wal-Mart Wal-Mart Satellite

Network (largest private satellite communication system in the U.S.)

radio-frequency-identification (RFID) tags—chips

Ahold Sales Information

System RS/6000 ® SP™ servers

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Wal-Mart: SWOT Wal-Mart: SWOT AnalysisAnalysis

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 AnalysisAhold: 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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SourcesSources

1) IGD Research, www.igd.com 2) The McKinsey Quarterly 3) Cap Gemini Ernst & Young, “The Changing

Face of the Worldwide Food Industry” 4) Tansaş, “Presentation of Food Retail Sector”,

www.tansas.com 5) www.hoovers.com