APPLYING THE DUTCH TOUCH TO RUNNING U.S. CHAINS TOP EXEC AT AHOLD MAKES PRESENCE FELT

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Bob Zwartendijk $7 billion business

Mr. Zwartendijk, 55, is based in Zaandam, the Netherlands, and is Advertising Age correspondent Elena Bowes spoke to Mr. Zwartendijk, a former Unilever country manager, about his company's plans for the U.S.

Advertising Age: Why has there been so much interest by European chains, such as Tengelmann buying into A&P and Sainsbury buying Shaw's, in the U.S.?

Mr. Zwartendijk: There has been some interest but also a lot of companies which have withdrawn. I think Sainsbury is successful and they've done a pretty good job with Shaw's but a lot of French retailers have withdrawn. The U.S. is a very fascinating market .*.*. but it's highly competitive. If you don't get the right formula, you could be in big trouble.

AA: What mistakes were made?

Mr. Zwartendijk: I think mainly [the French] took formulas over to the U.S. and did not adapt. There are only two Dutchmen in [our] American operation out of 65,000 employees. We use the local know-how and help them where we can, but we also listen a lot.

How large would you like to be in the U.S.?

Mr. Zwartendijk: We're approaching $8 billion now and I think we will keep on growing at a steady rate. To be in the major league in the future, you need to be about twice as big.

What kind of synergies have We are doing a lot in terms of buying product from the manufacturers. Also, we have synergies in buying equipment for our stores. We are looking at computer systems .*.*. Distribution is another area-we have one central warehouse for slow movers in the U.S.

AA: Is Ahold doing more or less advertising in the U.S., and what kind of strategy does it take?

Mr. Zwartendijk: We're doing more advertising. We're turning from mainly promotion to doing theme advertising, because we see the necessity of differentiating ourselves from other chains.

Each chain is responsible for its own advertising [and has its own agency].

For example, in one chain-Giant-CEO Alan Noddle comes on TV and in his own funny way tells why we [Giant] are different [than the competition]. ....Another shows why our perishables are so good. We have this mythical character named Walter who takes care of the quality of our perishables. The program started in one chain and is now in four: Bi-Lo, Edwards, Tops and Giant.

AA: Have you shifted your media mix?

Mr. Zwartendijk: TV is used for theme advertising and press [print advertising] mainly for promotion. We do cooperative advertising .*.*. in all our chains. We're increasing TV [spending]. Direct mail and newspaper [outlays] are stable.

AA: Your company has been cited as being on the cutting edge of movements such as efficient consumer response and continuous replenish We are doing quite a lot at our Dutch operation, at Albert Heijn in Holland. Because they [the chain] are masters of efficiency, they have had a lot of ECR initiatives. We are bringing them to the U.S....

But you can't translate a lot of these procedures easily to the American marketplace. You can translate the experience. The inventory in our stores in the U.S. [lasts] between three and four weeks. In Holland, the inventories [last] less than one week.

If you haven't got ECR working for you, you won't be able to get your inventories down.

AA: How quickly will you be able to bring your U.S. inventory period down to your European standard?

Mr. Zwartendijk: If I can get there by the end of the century, I'll be happy. That's how complicated it is. [The problem is] not only systems, it's also the cooperation of the manufacturer; it's transportation, distribution. It's a whole lot of things.

Mr. Zwartendijk: We do have a test in the Netherlands where there's a self-scanning apparatus, a hand-held self-scanner in the store.

The customer uses the device by scanning products on the shelf before putting them in his grocery cart. He then goes to the end of the store, puts the self-scanner back into a socket in the wall, where it records all the data. An electronic screen flashes the amount of money the customer will have to pay. The customer then put his [debit] card into the wall. It shows that he's paid and he can walk out of the store.

[The test] looks very successful. .*.*. We are going to test the same thing in one of our Finast stores in Cleveland this fall.

AA: How does debit card usage in supermarkets compare in Europe and the U.S.?

Mr. Zwartendijk: We have seen a very fast development over the past couple of years, but that's because the banks [in Holland] cooperated. Today, 30% of our sales and half our transactions are from the debit card, since we introduced it two years ago. In the U.S., we have both debit and credit but it's just starting. [That business] isn't significant yet.

AA: Private label has been a huge factor in Europe, accounting for up to 40% of all sales at some chains. Can it become a bigger force in the U.S.?

Mr. Zwartendijk: If you look at Albert Heijn's sales in Holland, taking out all the unbranded perishable stuff, 38% of our sales are for private-label products. I think the only chain with more than us is Sainsbury.

In the U.S., we have between 18%-20% of sales accounted for by private-label products. The potential will be higher. Most retail chains in the U.S. are looking to increase that figure because it's one way of differentiating yourself from another chain.

We have 300 [private label] stockkeeping units. We should be going up to over 1,000 SKUs in the U.S.

AA: Much is said about tensions between the manufacturer and the retailer. You've worked on both sides of the fence, at Unilever and now at Ahold. What perspective does that bring to your job?

Mr. Zwartendijk: In the U.S., it's still war.[Manufacturers and retailers] should get together because we both have the consumer's interest [at heart]. We should cooperate to make the product go to the consumer in the best possible way. ECR is such a movement.

If you've worked on both sides of the fence, it's a bit easier to get the two sides to cooperate.

In Holland, we have a stamp program .... at Albert Heijn. They can redeem their stamps for money later. That's very successful as a way of building customer loyalty. Lately, we have added air miles to our....system so you can collect air miles while you shop at Albert Heijn.

In the U.S., we'll also be looking at these things.

AA: How do you see the supermarket industry changing?

Mr. Zwartendijk: We will have a dramatic change in our industry. A lot of supermarket operations won't be in business by the turn of the century because they will have either been swallowed up by big combinations or they will have gone back into niche services. In six to seven years, there will be half as many supermarket chains. It's a world of change and challenge that we're facing.

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