Q&A: Supermarket Maker
Delhaize CEO Pierre-Olivier Beckers says the Belgium-based grocery chain is expanding to beat these tough times.
Print
E-mailPierre-Olivier Beckers’ great-grandfather founded Belgium-based Delhaize Group (DEG), which now owns nearly 2,700 grocery stores around the world, in 1867. Beckers’ grandfather worked for the company, as did his father. Still, Beckers says he never felt any pressure to join the family business, and after college he served as a manager for a small bakery in Liège. He soon realized, however, that supermarkets were in his genes, and in 1983 he joined Delhaize, spending the next three years in the U.S. as a manager at a Cub Foods in Atlanta. Now in his 11th year as president and CEO, Beckers says he cannot imagine doing anything else. “Food retail is the most exciting sector because you have to re-prove yourself every single day, both personally and as a company,” he asserts. “Every day we open our stores and have to persuade consumers to shop here.”
The biggest challenge is staying relevant to consumers. We have to anticipate the evolution of lifestyle and adapt in our stores, even taking some risks and pioneering new products or services.
The Delhaize network includes U.S. chains Food Lion, Hannaford and Sweetbay. Reported worldwide revenues for 2008 were $28 billion, a 5.6 percent annual increase. Beckers credits attractive promotions and robust private-brand sales for the growth, especially in the U.S., where the company generates two-thirds of its revenues. And the recession isn’t dampening his outlook. While the company reports that it’s cutting capital expenditures by limiting renovations and remodelings, Beckers says Delhaize will open as many as 116 stores this year, nearly the same number as in 2008. In his free time, the CEO enjoys skiing and mountain climbing and relaxing with his three college-age sons, none of whom have expressed an interest in joining the family business — yet.
How has the recession affected your business?
We’re not losing customers; in fact, the number of transactions per week has remained stable or is growing in all of our regions. But in early 2008, we started to see customers trading down to cheaper goods. For many months, they tried to consume the same product but chose a less expensive alternative. Over time they’ve traded down from one brand to another. They’re still buying, but they’re going for products with more attractive prices.
Does the recession offer opportunities?
In Belgium, Delhaize “Le Lion” supermarkets generate about 40 percent of sales with private brands. Historically, private-brand products in the U.S. were positioned as a price alternative to the national brands. Until 2007, private brand was less than 20 percent of sales at our U.S. companies. But in recent years, we’ve developed private-brand products that are better in quality and packaging. This came at the right time. The products account for 23 percent of sales at Hannaford, 19 percent at Food Lion and more than 21 percent at Sweetbay, which is our chain in Florida, where the recession has hit much more severely.
Which other consumer trends are shaping the industry?
Consumers in Europe are becoming more attracted to smaller stores that are close by. Hypermarkets — 25,000- to 50,000-square-foot stores that offer merchandise as well as food — are facing real challenges. In Western Europe, we’re seeing the resurgence of stores that average 10,000 to 20,000 square feet in city centers, and I can see the growth of similar-size stores in the U.S. Consumers want a more active lifestyle, and with that comes the need for fast and convenient shopping. American retailers are also beginning to take a much more serious look at product assortment. Until recently, they presented all the products in a category that they could, thinking that they were offering choice. But now both consumers and retailers realize that they’re offering not choice but confusion. By providing a smaller assortment, we can reduce store size, which cuts capital expenditures and operating costs. That, in turn, can lead to lower prices, and it makes consumers’ lives easier too. We’re already testing smaller stores at Hannaford, because we believe this is the future.
Explain your expansion strategy.
It’s built on three buckets. The first is growing same-store sales, which is the most important. If you can’t maintain dynamic growth in your existing stores, you become more vulnerable to competition. We need to constantly find new products and improve convenience for shoppers. The second bucket is opening new stores in countries and cities where we already do business. It’s important to continue growing. Companies that do will be best positioned when the recession is over. The third bucket is growing the number of stores through acquisitions.
What are your biggest challenges and opportunities in the next decade?
The biggest challenge is staying relevant to consumers. It sounds obvious, but it’s not. We have to anticipate the evolution of lifestyle and adapt our stores, even taking some risks and pioneering new products or services. Volatility is a very big challenge when you’re trying to decide what the main trends are and where you’re going to put your bets. One area of opportunity is sustainability. Our consumers and associates expect us to behave responsibly. At Food Lion, we’ve reduced our energy usage by 27 percent since 2000, partly by switching to low-energy lighting and redirecting waste heat from refrigerators. When you accomplish these things, you do good for society and for business.
What’s the most important lesson you’ve learned as CEO?
In my early years as CEO, I firmly believed that people expected me to have all the answers. But I’ve learned that I can’t, that I don’t have to be the genius of growth. What I do have to do is set a tone of energy and optimism. Setting the right tone at the top is paramount. If you want your company to improve and grow, a certain dose of humility is essential too.
