Eighteen months after announcing its future plan, Belgian retailer Delhaize is turning the page: almost all stores have been transferred, while sales and market share are rising faster than expected. Still, the retailer still has to work on its price perception, CEO Xavier Piesvaux admits.
Double-digit growth
For a year and a half, the CEO stayed under the radar as much as possible, to focus on implementing the plan that made the retailer sell its 128 own stores to independent entrepreneurs. 118 of those supermarkets have since made that transition, in November the last ones will follow. Time for the first results then, and they are positive across the board, Piesvaux says in a session the assembled Belgian press: “We made the right decision.”
The performance of the transferred stores is more than encouraging, and even exceeds expectations for the first year: “We see double-digit growth for the reopened stores that have been open for a year. Some stores are already at the level we had anticipated only for the second, third or fourth year. At the same time, the existing affiliated stores continue to perform well. We are confident about the future, we are turning the page.”
Highest market share in five years
Delhaize’s market share is back to the same level as before the announcement of the future plan, and is significantly higher than in 2022, the retailer says. “That confirms that we are recruiting new customers. Normally we do not give figures, but I can tell you that in August we achieved a 23 % market share, our best performance in the last five years. All customers who defected to competitors during the period of turmoil have returned. We even attracted new ones.”
The affiliates add three key strengths, according to Piesvaux: local assortment, service and local anchoring. The extension of Sunday openings is another factor. “80 % of the transferred stores are already open on Sundays, we expect this to become 90 % after all stores are transferred. There will remain some stores that do not have the option to open on Sundays, for instance because they are in a shopping centre that remains closed on Sundays.”
Sunday, Delhaize Day
Opening on Sunday responds to a need of customers, the CEO says: “They like coming to our stores on Sundays, because we offer a lot of fresh products. Sunday is a day of conviviality: you receive people, you come together. That corresponds to Delhaize’s positioning.” The Sunday opening does not cause turnover from other days to dilute: it is a means of selling more and recruiting new customers. “Even people who shopped at Delhaize during the week might have shopped elsewhere on Sundays. This creates new value.”
Competitor Colruyt Group recently attacked Delhaize, saying that the retailer would abuse the more favourable conditions for independent stores to create an uneven playing field. Piesvaux is clear in his response: “We do not really appreciate what Colruyt says, and we do not agree with it. Those different conditions have their right to exist, as they allow both large groups and smaller players to function well. If you look at the market share evolution over the last ten years, you see that some integrated chains have improved as well as some affiliated chains. You cannot say that one set of conditions offers a definitive competitive advantage.”
Competitive price level
Besides Sunday openings, price is also a key growth driver, the CEO stresses. “We think our price level is extremely competitive at the moment, it is at the lowest level ever thanks to a combination of different things. There are the 1,300 “Little Lions”, which offer the unchanged Delhaize quality at prices comparable to the discounters. We also have the Nutri-Boost, which gives a 10 % discount on all fresh products with a Nutri-Score A or B: pretty much all fruit and vegetables, more than half of the butchers, fish… If you subtract 10 % from the Delhaize prices, you arrive at the lowest price in the market for fresh products.”
Strong promotions and the personalised offers in the app also play their part. “That is why we do not like price comparisons that simply compare products. We have the same price nationalwide, while others work with local prices – with sometimes big differences for the same product. So which stores do you compare? If you compare, you have to do it right, and put all local prices next to our national price. Moreover, if you compare private brands, you have to factor in the quality differences. We will never compromise on quality to bring down the price.”
“We are not a premium brand”
With the big price hikes for food, customers are choosing private label products more often as they are cheaper but can offer the same quality. “Our private brand is growing 50 % faster than national brands, and the “Little Lions” are still growing 50 % faster than our private brands. This is good news for us: a customer who buys a Delhaize product for the first time and gets to know our quality will continue to buy that private brand, even if the market changes again. So it contributes to customer loyalty.”
It is therefore no coincidence that just as Nutella is launching a plant-based variant, the retailer itself is also coming out with a vegan spread under its own brand, without palm oil and only half as expensive. Yet Delhaize is not yet where it wants to be: “Our biggest challenge today is the fact that this price reality is not yet picked up by customers. We still have a lot of work to do there. We are going to continue our efforts to make sure the price perception is in line with the reality of prices.” The CEO is keen to stress that “We are not a premium brand, we are an aspirational brand: people want to come to Delhaize. We need to make that possible for everyone. We want to broaden our customer base, hence our initiatives on prices.”
Entrepreneurial freedom
The discussions on the revised franchise contracts, which was feared to restrict entrepreneurs’ freedom, seems to be completely forgotten already. “We do not talk about franchisees, we talk about affiliates, precisely because we leave a lot of space to our entrepreneurs. We see the new contract as a clarification of the existing contract. The freedom of the entrepreneur remains central, but we want to ensure that customers across the country find the essential elements of the Delhaize brand.”
In addition, the contract provides for a different remuneration model, which should guarantee entrepreneurs better margins. “We want to ensure that our affiliates can maintain the best profitability despite the large investments they have to make in sustainability and in pricing. There is still huge growth potential due to the fact that we can now fully focus on affiliated stores.”
Profitable again
What role can entrepreneurs play in the e-commerce story? “We have different models. There is home delivery, where we are the market leader and where we are gaining market share. We cover almost all of the country. We also have the collection points in the 128 transferred shops. That may also become the future formula for the whole of our affiliate network. But it is difficult to make a profit from e-commerce in food, we are still looking for the ideal formula. It is, however, a way to recruit new customers: people who get to know Delhaize through e-commerce also visit the stores later and that also benefits our entrepreneurs.”
Finally, when will Delhaize become profitable again? “We were profitable before the plan, albeit with integrated shops that did not perform optimally, and with thin margins. The good news is that today we are profitable again, and so are our affiliates. The year of the future plan, we did not make a profit, but that was also expected: you could see that this would inevitably trigger big emotions. For that, we paid the price. That we experienced a difficult 2023 is entirely due to that future plan. But the fact that we are already profitable again, even more than before the plan, gives us a lot of confidence.”
