Wal-Mart vs Ahold

Mirjana Uzelac Neda Kovacevic Mnica Prez

Corporate Intelligence United Business Institute

December 2003

History

Wal-Mart

Ahold

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
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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

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.

Competitive Fact Sheet

Wal-Mart
Mission/ Vision To give ordinary folk the chance to buy the same thing as rich people.

Ahold
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 1. Food retail 2. Food distribution (U.S. Food service) 3. Liquor, beauty care stores 4. On-line food retailer

Activities

1. Food retail 2. Non-Food retail 3. On-line food retailer

Wal-Mart vs Ahold
Wal-Mart
2002 Sales (mil) 1-Year Sales Growth Grocery Sales (%) Domestic Sales (%) Foreign Sales (%) 2002 Employees 1-Year Employee Growth $244,524 12% 34 84 16 1,383,000 1.2%

Ahold
$59,267 -1% 84 15 85 270,739 (15.5%)

Wal-Mart presence in Europe

Wal-Mart Subsidiaries in EU
UK 250 stores Asda, Wal-Mart

Germany 95 stores Wal-Mart

Ahold Presence in Europe

Ahold Subsidiaries in EU
Spain 623 stores Supersol, HiperDino, Netto, HiperSol, Cash Diplc Denmark 12 stores ISO Norway 1,104 stores Rimi, ICA, Maxi Slovakia 2 stores Hypernova Portugal 198 stores Pingo Doce, Feira Nova Czech Republic 203 stores Albert, Hypernova Poland 165 stores Albert, Mega, Hypernova Lithuania 38 stores Rimi, Eko Sweden 1,846 stores Rimi, ICA, Maxi Estonia 3 stores Rimi Latvia 26 stores Rimi, Maxi

Netherlands 2,333 stores Albert Heijn, Etos, De Tuinen, Jasmin, Gall&Gall, C1000, Ter Huurne
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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: 1995 2000 2005 2025 32% 35% 38% 50% 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%.

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Sector Trend: Diversification

Wal-Mart
1. Non-food

Ahold
Ethos, Gall & Gall

Tire & Lube Express, WalMart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations, Wal-Mart's Used Fixture Auctions Wal-Mart Stores, Bodega, Todo Da WalMart.com Sams Club 12 international locations

2. Discount format 3. E-commerce 4. Wholesale 5. Expansion abroad

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RIMI, Netto, Balaio Peopod, ICA Deli XL, Shuitema 27 international locations

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. 40

Market Share of top 5 Retailers in the EU (Carrefour, Metro, 20 Tesco, Rewe, Intermarch)
Source: Lebensmittel-Zeitung 2002

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10 0 1991 1994 2000 2005

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IGD Global Retail Index1

Rank GRI
1
2 3 4 5

Rank by Turnover
2
3 1 5 7 Ahold

Company
Carrefour
Wal-Mart Metro Tesco

Global Status
Leading Global Retailers

6
7 8 9

8
20 17 21

Ito Yokado (inc. 7 Eleven)

Casino Auchan Delhaize

Leading International Retailers (nearly global)

10
11 12
15

13
10 18

Aldi
Costco Tengelmann (inc. A&P)

Source: IGD Research - Date published 04/02/03

Competitive Positioning1
IGD European Retail Index
100 80 60 40 20 0 0 10 20 30 40 Carrefour Auchan Tesco Ahold Rewe Wal-Mart Metro Lidl & Schwarz Aldi ITM Casino Leclerc

N of Countries
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
China Italy Russia Japan Hungary India United States Poland Canada France United Kingdom Germany
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Wal-Mart
P

Ahold

P P P P

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
1 2 3

Company
Wal-Mart Stores General Electric Microsoft

4
5 6 7

Dell Computer
Johnson & Johnson Berkshire Hathaway Procter & Gamble

8
9 10
Source: Fortune

IBM
Coca-Cola FedEx

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Wal-Mart Subsidiaries

Europe

Wal-Mart Germany Wal-Mart UK ASDA

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

Asia

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

Americas

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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 Jernimo Martins

Tops Tops Market Place

Asia

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

Americas

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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

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Technology Based Intelligence

Wal-Mart

Ahold

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

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) 2) 3)

4)

5)

IGD Research, www.igd.com The McKinsey Quarterly Cap Gemini Ernst & Young, The Changing Face of the Worldwide Food Industry Tansa, Presentation of Food Retail Sector, www.tansas.com www.hoovers.com

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