Ahold – Delhaize merger required to survive in United States

No other choice

The two retail groups confirmed in May that they were have preliminary talks about a possible merger and Het Financieel Dagblad has now quoted several retail experts saying that both will have to collaborate on the American East Coast in order to survive there in the long run.

Over the past few years, there have been several large mergers and acquisitions in the United States: supermarket group Kroger bought competitor Harris Teeter for 2.6 billion dollars in 2013, while Safeway and Albertson’s merged earlier this year and now represent a network of 2,230 stores.

Het Financieele Dagblad quotes McMillan Doolittle’s Neil Stern who says that retailer cannot do anything else but merge as there are very few new traditional supermarkets being built. He also issues a warning: “Companies have a tendency to overestimate the cost-saving benefits and to underestimate the time required for integration. Ahold and Delhaize have their own formulas, with their own discount strategies and different competitors.”

Added value

Ahold and Delhaize have complementary activities on the American East Coast through their respective chains Hannaford and Food Lion: they are both active in the area, but are not each other’s competitor. Analysts estimate there is barely a 20 % overlap in their network of more than 2,000 supermarkets.

Several experts have said both groups can offer each other some advantages in the United States. While Delhaize has lower costs and a distribution chain (something Ahold outsources), the Dutch group performs better when it comes to profitability and its investments in growth formulas.