Vendors Concerned About AUSA’s Slipping Sales, Increasing Demands
About a year after its vendor meeting usually occurs, Ahold USA finally held its annual confab with its top suppliers, distributors and brokers, and nearly 1,400 vendors visited the GiantCenter in Hershey, PA last month to hear what the Northeast’s largest supermarket retailer had to offer.
And from the feedback I received from many vendors after the meeting, Ahold is going to have to perform better to gain greater consideration of its demands of the vendors.
To be fair, Ahold USA is in the midst of a huge transition affecting everything from internal culture, leadership style and “go to market” approach.
COO James McCann, who assumed the top U.S. job 14 months ago, has been very frank and consistent in delivering a message of extreme urgency to his associates and AUSA’s vendors. McCann’s pressing approach certainly has merit given how quickly the landscape has changed and to criticize him simply on “style points” would be unfair, too.
But to dismiss some of the motion that exists among the associates, which was also echoed by the vendors with whom I communicated, would be to ignore the fact that those changes are currently adversely impacting both parties.
At this year’s meeting in Hershey, which had a snappier and better pace than in the past, many of the same executives who spoke in recent years – Mark McGowan, Erik Keptner, Bhavdeep Singh, Jodie Daubert, Jeff Dichele, Ray McCall and Tracy Pawelski – once again outlined their objectives and “requests” from AUSA’s large supplier community. And several first time presenters – Jan Van Dam, executive VP/supply chain, e-commerce and now marketing; and John Ruane, senior VP/fresh – also addressed the large crowd detailing the top priorities of their departments.
In a nutshell, the meeting could have been titled “The Big Ask,” because there was little offered in terms of hard numbers substantiating performance, and a lot of references to future improvements and to the importance of showing faith in one of “your best customers.”
McCann has bold plans and a grand vision for Ahold USA. He currently views AUSA as a good retailer, substantially ahead of many of its competitors, but trailing both Market Basket and Wegmans in many measurable metrics. One of his desires is to make the company “famous” across a broader spectrum with upgraded products, better in-store execution and improved services, which would enhance AUSA’s overall value image, consumer perception and presumably financial performance.
Produce, “own” brands and digital retailing have become top priorities for the chain to concentrate on in 2014 to achieve “fame.” In other departments such as meat and natural/organics, the goal is to equal the best in class, and in price, Ahold USA’s objective is to “meet expectations.” Those are certainly noble goals for which to strive, although based on the vendor feedback I received, there’s a lot of work to be done to elevate both produce and “own” brands to the “famous” category. Here’s the challenge: McCann and his leadership team are “asking” the vendors for more, but offering them tangibly less in an environment that many vendors believe is also becoming more confrontational.
Nearly a month after the meeting, I have communicated with approximately 50 brokers, direct sales reps and DSD executives who attended the meeting. Their collective takeaway has been remarkably consistent. Here are a few of their comments: “They want us to invest in their organization, but we’re sales people – by nature and by corporate policy – we live in a ‘what have you done for me lately?’ world. And lately, Ahold’s number have been sliding and the demands are increasing,” said one executive for a very large CPG company.
“If McCann wants to change the culture, if he believes that radical surgery is needed and that there are too many complacent people in Carlisle, that’s his prerogative – he’s the boss. However, when sales continue to slide, the financial demands increase significantly and we’re told that private label items are going to replace many of the branded items we represent, betting ‘on the come’ on behalf of Ahold isn’t all that appetizing anymore,” declared one veteran brokerage senior leader.
“Ahold is still a very important customer for our company,” said a large national DSD vendor executive. “But Ahold’s sales are trending downward and if you add in the reality that many of the associates are confused or unhappy, that’s not going to make their new challenges any easier to achieve. And when you add in the increased cost of doing business with Ahold, you’ve got to question their perspective on the realities of the total market landscape.”
As I mentioned in a column I wrote last month, it’s still early in McCann’s tenure. He clearly feels it’s necessary to move mountains – and move them quickly. But MountAhold is a very tall peak which is tricky to navigate, and with 122,000 associates it’s also a crowded mountain top. McCann’s high intelligence quotient and his tireless work ethic will become moot if he can’t communicate more effectively with his entire audience. That includes not only a large and diverse group of associates, it also covers AUSA’s vendors and ultimately its current and perhaps future customers.
To be balanced, Ahold USA is undergoing seismic changes in many departments. To say the least, this is a highly ambitious effort involving the very core of the organization. The company is nearing a crossroads at which the associates ultimately will either buy into those changes or they won’t. AUSA’s results over the next few quarters will be the most important indicator of success or failure.
In other words, change can be productive, but only if it works.