Ahold Expansion Rumours In Key US Market

There have been reports recently linking the Netherlands based retailer Royal Ahold with the potential acquisition of the US retailer Harris Tweeter . Sitting on the $3.1 billion it received for disposing of its 60% ownership of Swedish grocery arm ICA ( announced earlier this month ) , the move could signal greater presence in one its key markets. Currently accounting for 60% of its sales, a deal would cement the US as a central feature of Ahold 's growth strategy. If the acquisition goes ahead, it will tie in with our view that the company would continue to focus on its well established consumer bases in the US and at home in the Netherlands.

Netherlands Growing Faster
Netherlands and United States Total Mass Grocery Retail Sales (% change year-on-year) - Historic & Forecast

What the potential deal reveals about the company's strategic vision for growth, one vigorously outlined by CEO Dick Boer, makes for interesting analysis. Reliance on both the Netherlands and the US is set to continue but questions about where growth will come from going forward cannot be avoided. With other Western European retailers such as Jeronimo Martins setting the pace for impressive growth in markets such as Poland , and Ahold's own chains in countries such as the Czech Republic struggling over recent years, whether the company seek s further opportunities in growth markets remains to be seen. Competition is increasing at home, with the Netherlands - based Jumbo (who purchased retailer C1000 in 2011) increasing its market share to an estimated 25%, slowly edging towards Ahold's position as the country's largest grocery retailer.

We see stronger growth opportunities in the Netherlands in comparison with the US, with forecast compound annual growth for mass grocery retail sales at 6.5% to 2017 compared to 2.6% to 2017 in the US. With limited long-term growth opportunities (particularly in the latter market), it will be interesting to see if Ahold can sustain sales without returning to the acquisition spree it pursued in the 1990s. Ahold will have to continue working hard for annual sales growth given the relative maturity of its two key markets - Netherlands and the United States . However, Ahold's future growth strategy will need to be carefully considered, with the company facing a balancing act of maintaining competiveness in the US and Netherlands whilst seeking out future global growth opportunities. As demonstrated by Tesco and Carrefour , focusing too vigorously on growth markets abroad can cause unsettling difficulties at home, an over-stretch Ahold would be wise not to repeat.

This article is tagged to:
Sector: Food & Drink
Geography: Czech Republic, Global, Czech Republic, Netherlands, Poland, United States, Global, Global, Global

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