March 1, 2012

Albert Heijn plans German convenience stores

AH to go (photo: Ahold)
AH to go: Let's hope the Germans like sandwiches (photo: Ahold)
Dick Boer could have done so, but he didn't. Ahold's ultra-cautious CEO gave no hint at the presentation of the annual results yesterday as to when the Dutch retail giant will be entering the German convenience market.

Instead, we were told about an admittedly creditable performance which has outfaced the current financial crisis: 2011 net sales gained 5.5 per cent at constant exchange rates to €30.3bn, and net income jumped 19.2 per cent to just over €1bn.

The reticence about the entry into Germany really wasn't necessary though. After all, everyone is shouting from the rooftops that the Flying Dutchman of international retailing will be opening in the Dusseldorf/Cologne area this August.

Welcome to Germany

You don't exactly need to be Sherlock Holmes to follow the trail. One Google click confirms the incorporation of a Ltd. company in Dusseldorf last November named Ahold Germany GmbH.

The MD is stated as "Albert Voogd", who is known to be responsible for the company's European development in Belgium and Germany and who directly reports to Sander van der Laan, COO Ahold Europe.

The Batavians already told us in 2011 the war horse they would choose in order to do battle with those penny-pinching Huns east of the Rhine. In the first instance, they intend to open ten convenience stores under the "AH to go" banner.

This concept has proved relatively successful at high-frequency locations in the Netherlands, and, of course, was never influenced by Tesco Metro and Tesco Express in the UK.

PlanetRetail counts 90-odd "AH to go" outlets in the Netherlands with average store surfaces of around 150m². They stock between 1,000 and 1,200 lines. Annual revenues are estimated at around €150m.

Honed for a decade

Ahold has been honing the format since its inception in 2001 and obviously now feels confident enough to export it beyond Dutch borders.

Given the ambitious expansion plans of Swiss convenience specialist Valora in Germany, are the Dutch in for success or failure?

Most experts believe that the answer depends on the terms of reference of their entry. If they plan to go big on the hard-discount dominated German market, then they will bite their teeth out as a dozen, or so, international retailers have done before them.

If they go for a niche and keep within a small defined geographic area, such as the regional state of North Rhine-Westphalia, the risk will be limited. This solution has the advantage that stores could be delivered from Ahold's distribution centres in the eastern Netherlands, if necessary.

Once burnt, twice shy

Given the company's recent traumatic history (a proud retailer with a long tradition became a victim of its own financial growth rhetoric, overextended itself internationally in the 90s, and nearly hit the skids in 2003), they'll probably go for caution.

In its latest "Summary Report" Ahold reiterates the importance the Amsterdam-based retailer attaches to retaining investment grade status. On page 4 one reads: "Net debt does not include our commitments under operating lease contracts, which, on an undiscounted basis amount to €5.9bn".

Such a company is not likely to go storming in to Germany where angels fear to tread and Walmart was laid to rest.

Clearly Germany's second-largest food retailer Rewe Group, which has been dabbling with its own "Rewe to go" concept since April 2011, isn't particularly worried. Otherwise, the Cologne-based retailer would have put the spurs on the concept by now in order to pre-empt their future Dutch rivals on sites.

So little risk, little gain for Ahold; but why, one asks, do it at all?


Lebensmittel Zeitung with its online sisters (photo: LZ)
Lebensmittel Zeitung with its online sisters
Read in German: 'Text' by retail news editor Manuela Ohs on page x of Lebensmittel Zeitung, no. 9, 01.03.2010

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