JJ Fleeman took the reins as CEO of Ahold Delhaize USA (ADUSA) back in April. Previously, he had served as ADUSA’s chief e-commerce officer and president of its Peapod Digital Labs unit since May 2018, when he was promoted from executive vice president and chief commercial services and strategy officer. Before that, he spent more than 10 years at Food Lion, most recently as VP of strategy, business planning and development, and held a range of retail operations, merchandising and organizational development roles in over 14 years at Delhaize America. ADUSA’s chains include Stop & Shop, Giant Food, Giant/Martin’s, Food Lion and Hannaford plus online grocer FreshDirect.
Winsight Grocery Business Executive Editor Russell Redman got a chance to sit down and talk with Fleeman last week after his keynote at the Groceryshop 2023 conference and trade show in Las Vegas. Here are edited excerpts of the discussion.
WGB: Ahold Delhaize USA executives have spoken of creating “omnichannel ecosystems” in certain markets. What does ADUSA envision with this concept, and what are some examples where the company has or is creating such ecosystems?
JJ FLEEMAN: Well, we always start with the [supermarket] brand, right? We believe that expanding the brand’s permission set with customers is really the unlock inside of that. And the purpose of omnichannel is to do just that. We’re seeing that our customers are spending more with us through different channels. If you would compare customers who shop across all of our channels to those who shop only in-store—of course we value all of them—but we see a bigger basket when they shop omnichannel.
So if you look at the developments that we’ve made, I mentioned a bit on Prism, which is our proprietary platform that is not just an e-commerce platform, but it’s also a fully integrated digital platform—loyalty, e-commerce and the ability to look at an ad, almost anything that you would do from a pre-shop to a post-shop would be found there. So we continue to look at features and functionality there, and we do a lot of builds on an ongoing basis. We A/B test those to make sure that they’re resonating with customers. The ones that do we roll out, and for the ones that don’t, we change them.
We’ve also been focusing a lot on our in-store capabilities, making sure that we’re providing our teams with new tools and technology. A core one is Spectrum, our picking application. We’ve seen an enormous increase in our online shop, but a lot of our pick actually happens in our stores, either from a [customer] pickup at a store or a pick-at-store and then deliver from store. So that picking application and the ability to navigate the store is another example. Another I would mention is we’re now working on a new point-of-sale integration that will allow a full integration with e-commerce across the brand. So those are a few examples of how we’re continuing to learn and advance the omnichannel capabilities inside the company.
WGB: I guess some of the omnichannel ecosystem markets are Stop & Shop and FreshDirect in metro New York and The Giant Company in Philadelphia, where ADUSA has stores and e-commerce coming together.
FLEEMAN: Oh, for sure. Actually, all of our stores—across our entire network—now have omnichannel capabilities. And all of our stores now have the opportunity to either deliver groceries or partner with delivery companies. They have the opportunity to do pickup at store, and then all of them have their own branded loyalty programs, personalization programs and those types of things across all their geographies. The [omnichannel ecosystem] markets that you pointed out are some of the larger ones and are continuing to grow.
Online grocery expansion
WGB: As you mentioned during your keynote, there are ways to capture market share that aren’t just brick-and-mortar. When you have a strong brick-and-mortar presence, you can fill that in with the e-commerce reach and they feed off each other.
FLEEMAN: Exactly. I think that’s well said.
WGB: Each quarter, Ahold Delhaize gives an update on delivery and pickup expansion. How is that going across its U.S. stores? How are delivery and pickup service being expanded and enhanced?
FLEEMAN: We continue to see acceleration in online, and we’re seeing it both in click-and-collect and delivery. Click-and-collect is growing rapidly. Part of that is because we continue to roll them out and grow them way, which is a natural progression. But what we’re most pleased with is that we’re seeing our digital engagement grow. The amount of customers preparing their grocery-shop online before they shop, for us, is a key strategy for the future. It’s simply to better understand customer preference and to be able to give them the things that are important to them.
The ability to look across the different channels and satisfy their shopping experience in each one is really the thing that we’re passionate about.
Transition to self-distribution
WGB: One huge initiative for ADUSA is its shift to an integrated self-distribution network. I think about 85% of the network is self-managed now. How does this supply chain transformation set up the company to drive its omnichannel growth strategy?
FLEEMAN: I’ll get you the exact percentage [he types into in his cellphone], but we’re pretty close to that. We’re almost done.
Well, we’ve talked a number of times about the e-commerce integration with our stores. One thing I would mention that we haven’t had the opportunity to talk about is that we’re integrating our category teams with the supply chain teams. Now that we have the network built and kind of functional, we’re working on bringing the teams together to have this closely integrated focus. I think we call them pods. So you have teams that are dedicated to categories and certain assortments. Now that we have our own supply chain, we have our category teams, our supply chain teams, our digital teams, our private brand teams all working together to create the best shopping experience.
But also, you’re looking at the best flow of goods, when to move products in and out of the warehouse, where to store products, where to position products either for the holidays or what have you. All of that you’ll continue to hear us talk about and grow in the future. So those are a few examples of the benefit that we’re getting from it.
[ADUSA spokesperson Erin Dewaters interjects.]
ERIN DEWATERS: Hey, Russ. Real quick. I got the number for you. It’s 85% self-distributed by year-end, and then we’ll finish up next year. Automated freezer facilities, etc.
Bringing more value to shoppers
WGB: This also came up in your keynote and Kroger CEO Rodney McMullen’s keynote beforehand, the period of high food price inflation that customers have gone through. How is ADUSA using its loyalty programs and personalization capabilities to extend more value to customers?
FLEEMAN: That’s a good question. I didn’t see Rodney’s presentation, but I would imagine he probably said a thing or two about price. And price is a really important attribute for all of our [supermarket] brands. But the way we think about the opportunity at hand here, Russ, is about creating the right value proposition for customers. That’s a form of quality, it’s a form of service and it’s a form of price. But it’s also a form of convenience and exploration as well as personalization.
So our loyalty programs are continuing to grow. I forget the exact number, but I think our personalized offers this year will be close over 12 billion, or something like that. We’re continuing to partner with CPGs to find the right offers for our customers.
We’ve advanced a number of different programs inside of loyalty. There has been quite a bit of work done on the membership program we created at Giant Food [Giant Flexible Rewards]. Effectively, you are giving the customer the opportunity to choose more. So there’s a way that they’re looking at personalized coupons, delivery price and those sorts of things, and there’s a lot we’re doing inside of that.
Our loyalty engagement is really high. It’s a core part of the value proposition at each brand. Each of the brands plays a little bit different. Some are more focused on the price of items or benefits towards price, and others are more focused on loyalty rewards or points so that you can stack up points for redemption at a later time. They’re continuing to advance all of those. But we’ve had a fully mature loyalty program for many, many years, and now we’re just continuing to integrate it into online and offline together.
Growth vehicles: Private label and prepared foods
WGB: Two other big growth areas for ADUSA—and two big areas of rising customer demand—are private brands and prepared foods. How is the company improving its offerings in those areas?
FLEEMAN: Private brands obviously are key for us. It’s something that we’re really, really proud of. Our private brand offering inside of organics, Nature’s Promise, continues to see really explosive growth for us. The teams are working on each of the private brands, making sure we’ve got good price positions. We’re looking at our assortments with change in the economy. So they’re looking at ways to improve that from day to day.
When you look at meal replacement, every [supermarket] brand is a little bit different in how they position that. For example, Stop & Shop has a commissary kitchen where we’re looking at common assortment across many stores. But they have unique SKUs that come from this kitchen in which we are able to leverage the kitchen’s scale to get the cost of goods down, and also to provide unique recipes for customers of our deli and bakery operations, our meat operations and things such as that.
Evolution of the store
WGB: How is ADUSA evolving its brick-and-mortar stores to align with an omnichannel retail strategy?
FLEEMAN: That’s a great question. There are lot of different things they’re doing. One that I would use as an example is the Food Lion team just remodeled one of their key markets. They actually called it—I’ll get the name wrong—something like the “omni remodel.” They took all of the learnings over the last couple of years and put it into the store. That could be a combination of new assortments. That could be a combination of new picking rooms inside the store to accommodate click-and-collect and make sure that they’re sized correctly. They’ve had a lot of expansion and growth in their hot food category.
To your point on meal replacement, they’ve expanded hot foods in their stores. So the way that the brands are applying that is different, but it’s typically done inside of the remodels. Some of those are full remodels. Sometimes it’s a small remodel just to get a point of differentiation in more quickly, But that’s how they [our supermarket brands] are leveraging that. Thus far, knock on wood, it has gone quite well.
WGB: What about stores with micro-fulfillment on-site? Is that something that you’re looking into more? I know there were some locations with Stop & Shop.
FLEEMAN: We don’t have any more stores where micro-fulfillment is on-site, but we do have a micro-fulfillment center for The Giant Company in Philadelphia. They use that both for delivery and supplying groceries to some of their stores as well. So it’s a combo of e-commerce fulfillment and specific-assortment store fulfillment. That’s one of the tests that we have. We don’t have any [micro-fulfillment facilities] attached to stores any longer.
WGB: Wasn’t there one at a Stop & Shop store on Long Island?
FLEEMAN: Yeah, with Takeoff [Technologies]. It was a pilot.
Grocery retail market consolidation
WGB: You were asked about industry consolidation during your keynote. Two large supermarket industry mergers are in the works: Kroger-Albertsons and Aldi-Southeastern Grocers. How open is ADUSA to brick-and-mortar acquisitions?
FLEEMAN: Well, we've done our own M&A. If you take a look at the Southeast expansion at Food Lion, we’ve done some tuck-in acquisitions down with Bi-Lo and a few things like that. We’ve done a number of those over time. What I would say is that we really do have a unique opportunity in many of our markets for strong organic expansion. We have really good pop[ulation] growth, we have really good areas for growth in many of our markets. So you’ll continue to see us be very aggressive with a few of our brands in that we are, for sure, looking at inorganic expansion. So brick-and-mortar expansion.
And the way that we would think about that is much like we do our core business. We would evaluate it, look for the potential of the market, and then look for capabilities that we could bring to that organization. And of course, in turn, like capabilities or skills that we could get from them. That would be the combination we’d look at. I think you’ll see us remain aggressive in both of those spaces. But the other area for growth for us is in some of these other revenue streams. We talked about digital media as one area, but there are a lot of areas like that. Data is a focus for us. It’s less of an income stream and more of a capability, to where we can provide customers a better shopping experience—which is, at the end of the day, where you’re going to win or lose.
WGB: You already have scale because ADUSA is part of a global operation. So I guess you feel a little less pressure than some of the other big regional operators to build more scale.
FLEEMAN: Scale is important to us. But to your point, we have a lot of scale already, and it will continue to be a key focus for us. We want to make sure that we’re not only looking at it as brick-and-mortar scale but also leveraging our scale on technology plays. When we talk about Prism, for example, we use that across the company. So we’re investing one time, but we can use it many times. That makes a big difference for us.
WGB: One last question. How does FreshDirect fit into the picture? Is that more of a market play in the metro New York area, or can that be something bigger as part of your e-commerce strategy?
FLEEMAN: It’s a key focus inside New York for us right now. And that’s really the core market where we believe that brand serves, and we’re super proud of what the teams are doing there.