Last week, Netherlands-based Ahold and Belgium’s Delhaize Group announced their intention to combine businesses through a merger.

Overnight, this means the creation of a company boasting a complementary base of more than 6,500 stores. The new retail giant will be called Ahold Delhaize and enjoy retail banner sales of around €60bn (£42.5bn).

Looking at the conditions of the merger, it is clear who is going to be the top dog. Despite the fact that Delhaize Group has a presence in more European markets and in more states on the US east coast, Ahold - which generates higher sales - is to take the lead in this merger. As a result, current Ahold chief executive Dick Boer will become boss of the new Ahold Delhaize operation. Frans Muller, currently Delhaize Group chief, will oversee the integration process.

Rumours of potentially combining the two well-matched businesses have been around for nine years. In May, the news of a potential merger and/or acquisition leaked to the press. The cynic in us wonders whether it was mere coincidence that share prices for both companies saw significant rises shortly afterwards.

Stateside, Ahold would benefit not only from Delhaize Group’s larger store footprint, but also from its cost structure and own efficient logistics. Ahold, for its part, outsources its logistics to C&S Wholesale Grocers. Perhaps not for much longer however, as according to reports from Het Financieele Dagblad, Delhaize US distribution centres offer enough capacity to also stock goods to supply Ahold’s stores.

However, Ahold’s US formats seem better positioned to target the local shopper. They are following an everyday low price strategy, but are, in general, not targeting the most price-sensitive US shopper segment thanks to being situated in higher-income areas.

Delhaize, in contrast, has been selling several of its stores - most recently Bottom Dollar to Aldi.

Consolidation trend

Right now, consolidation is the watchword in the US market. Kroger has acquired mid-Atlantic and southeastern chain Harris Teeter, Albertson’s bought five banners from Supervalu, and both moves put pressure on the Benelux-based players.

In Europe, there will be obvious synergies between the two retailing giants with the private label structure of Ahold and Delhaize Group being quite similar. Both have a clear tiering system with economy, standard and premium ranges plus added value lines (eg organic). Both are very innovative in terms of new products.

In Belgium, Delhaize Group, although having a stronger infrastructure and more expertise in the market, could benefit from Ahold’s brand image - with the latter’s stores perceived as attractive in terms of price and assortment.

All in all, although the act of signing a deal is only the start of the long road to successful integration, the merger looks promising. We’ll be watching with a keen eye over the coming months to see how the integration plays out. Completion is expected in mid-2015.

Planet Retail merger

As the merger shows, the world of retail continues to undergo seismic shifts, which is why we are combining Planet Retail with a US based consulting company Retail Net Group. This combination gives us far greater reach and scale in the largest retail market to support our customers’ domestic and international strategies. Furthermore, our joint customers will be able to take advantage of a far wider portfolio of intelligence and analytics as well as benefiting from a very strong US team.

  • Denise Klug, research analyst, Planet Retail