Delhaize America’s Smith Seeks To Accelerate Food Lion Progress

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In his first public remarks since taking the helm at Delhaize America last October, CEO Roland Smith discussed his priorities during a Delhaize Group earnings conference call last month. He said the retailer’s focus going forward would be on accelerating the transformation of Food Lion, strengthening the Hannaford banner though increased price competitiveness, and optimizing Bottom Dollar Foods. He also discussed the organizational changes he has put in place as he has sought to revitalize the retailer’s U.S. operations.

Smith told investors and analysts: “In terms of priorities, I believe it’s important that we focus our resources, people, money and time on the few critical priorities that will ensure we achieve our goals in 2013 and beyond.”

Accelerating the transformation of Food Lion, which accounts for more than 60 percent of the retailer’s U.S. volume, is Smith’s top priority. In May 2011, Food Lion began a strategic phase of rebranding its stores by reducing prices, enhancing quality and improving service. To date, 65 percent of the store base has been completed and the overall total is expected to reach 80 percent by May. Smith said the progress in these stores has been good, but that the work is not complete.

“While we are pleased with the continued progress of Food Lion, we know that we must continue to grow sales and market share and we also much better differentiate Food Lion from its competition,” Smith stated.

Among changes that Smith disclosed was the decision to abandon testing of running fewer promotions and more everyday low pricing, which it launched in the dairy and frozen departments of rebranded Food Lion stores in October. Originally, the company had planned to expand that test to other departments, but Smith said that the results did not create the volume increases in departments throughout the store and thus the focus will change to making the banner more competitive through a combined strategy of promotions and low pricing: “We have to do this product by product, category by category,” explained Smith, “being sure we’re competitive with what’s happening in the market and that we provide enough promotion pressure to get people into the store.”

A second focus for the retailer will be strengthening its Hannaford banner. Smith said that the retailer fares well in all categories except pricing, where they are perceived to be too high. In light of increasing competition in the Northeast, Smith said it is important to invest in price reductions at Hannaford to address the perception and drive sales momentum. He reported that fourth quarter results showed positive item growth and improved transaction trends, which they hope to build on. “This year, we will continue to improve our overall price competitiveness, which we believe will drive sales momentum at Hannaford.”

At the company’s discount banner Bottom Dollar Foods, Smith said the company will continue to grow sales and reduce operating costs as it creates a model that will be poised for future expansion.

Smith said he would provide greater detail about the overall transformation plans during the retailer’s annual investor conference May 8.