How a merger between Ahold and Delhaize could transform the US

How a merger between Ahold and Delhaize could transform
the US retail landscape
A merger between Ahold and Delhaize would be considered a new milestone in a retail
sector that has been consolidating itself since the 80s. There has been a lot of buzz about
this possible fusion lately. On the one hand, analysts estimate that the benefits range from
500 Million to 1 Billion Euro and on the other hand, there are the labor unions worrying about
reorganizations and job losses.
Ahold and Delhaize both have the lion’s share of their activities in the US so ORTEC looked
at publicly available data and compared both companies’ US operations to determine what
the merger could mean in the US retail market - the largest and most innovative in the world.
We have written this article to find out how a merger between two retail giants would look
like but maybe even more important: how we could use analytics techniques and methods
to create relevant information
Ahold and Delhaize in USA in a nutshell
Ahold
Delhaize
768
Number of stores
1295
11
Number of states
15
€19,557,000,000
Revenue 2014
€13,400,000,000
€25,464,843
Revenue per store
€10,347,490
114,000
Employees
96,696
€171,552
Revenue per employee
€138,578
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Geographic analysis
Geographically, Ahold and Delhaize complement each other perfectly. Both are active exclusively in the East
Coast. In states where Ahold stores like Giant and Stop & Shop are present (namely Pennsylvania, Connecticut,
Massachusetts), Delhaize is hardly present. In states where Delhaize is present with Food Lion and Hannaford,
Ahold is barely active. With a merger, they would cover the entire East Coast.
Store locations
Number of stores per state
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Demographic analysis
By combining publicly available census data with store locations, we have gained various demographical insights.
These maps, if combined with the maps of store locations above, show that Ahold is mainly present in urban areas
with a high population density and a higher real income per capita. While Delhaize is mostly present in areas with
a lower income and lower population density.
Population per county
Real income per capita per state
Weighted average distance to store per state
n Generally speaking, in all states where Ahold operates (70.6 million inhabitants), a person lives at an
average distance of 25km from one of the company’s stores.
n On the whole, in all states where Delhaize operates (95 million inhabitants), a person lives at an
average distance of 53km from a Delhaize establishment.
If the companies merge, a person living in one of these states would live at an average distance of 24.6 km from
an Ahold or Delhaize store. This would be great for business. Together, the companies would cover 109 million
people. In other words, over a third of the entire US population would live in states where on average, an AholdDelhaize store is located within 25km.
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Population Coverage
Relative population coverage per state
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Population Coverage
Population coverage: the amount of people living in a radius around a store. This radius is relative to population
density. In denser populated areas the range is smaller than in urban areas.
The graph above shows the average population coverage of all stores per state relative to the maximum value of
District of Columbia. In District of Colombia coverage is highest due to population density.
As shown above, Ahold is located in states that are more densely populated. In states where both retailers are
active, Ahold also has a higher average population coverage per store.
After a merger By combining the store population coverage and the number of stores, the total population coverage
can be calculated. Ahold currently covers approximately 61% of the total population that both companies would
cover when merged. As expected, Ahold reaches more people with less shops.
The tail is getting longer.
Aside from operating traditional stores, Ahold owns a very successful online grocery: Peapod. Peapod works with
several Ahold brands in the US: Stop & Shop, Giant Food Stores and Giant Food. After a merger with Delhaize,
Peapod would have access to the Delhaize network and potentially 1300 new pick-up points that have the benefit
of being located in less populated areas - a great advantage for an online grocer.
Conclusion
To conclude, Ahold and Delhaize are highly complementary. Ahold has a larger footprint in urban areas, while
Delhaize has its presence in rural areas. Considering the amount of stores, Delhaize is the larger party. Looking at
financial figures, Ahold has the upper hand. Since both companies are operating different brands and formulas in
mostly different regions, in the early stages of the intended merger, benefits will be mainly found outside the supply
chain. Other benefits of a possible merger are:
n Higher purchasing power;
n Product line integration;
n The application of best practices in store operations. Since Ahold has both a larger turnover per employee
as per store and seems to be geographically better positioned, there are best practices to share.
n Increased reach - both players would reach 1/3 of the American market with good accessibility
for the consumer,
n Expanding Peapod’s reach, both in number and spread of pick-up points but after integration of assortment.
n A merger would turn Ahold and Delhaize into a very strong player in the US retail market, and particularly on the East Coast. This would constitute a major change for a business with foreign roots in the fast-paced
American market.
Disclaimer
This article has been written solely based on publicly available data. ORTEC didn’t use any data provided by Ahold
/ Delhaize. Analytics were done in R and Spotfire. Geographical, Economical and Demographical Data courtesy
of US Census: www.census.gov and Bureau of Economic Analysis: www.bea.gov.
ADDING CREDIBILITY