While Walmart Dawdles, Ahold and Rivals Scramble to Secure Northeast Supermarkets

Ahold USA knows a break when it sees it, and it's taking advantage of Walmart's slow-motion roll out of supercenters in key Northeastern markets as a chance to boost efficiency and develop new options that will help it survive the onslaught.

In its latest move, Ahold USA -- subsidiary of Amsterdam-based Ahold (AH) -- is consolidating more office functions at the headquarters of Ahold's Giant-Carlisle division in Pennsylvania, away from the Quincy, Mass-based headquarters of its Stop & Shop supermarket chain. It's also cut prices and upgraded its supermarkets with new looks and logos.

At the company's shareholder meeting last week in the Netherlands, CEO John Rishton noted that company is considering the development of convenience and small grocery stores, which could provide better insulation from Walmart than supermarkets while tapping into the company's existing distribution system.

Ahold USA has been assembled over the past couple of decades from dozens of local and regional supermarket chains. It operates four divisions -- Stop & Shop/New England, Stop & Shop/New York, Giant/Carlisle and Giant/Landover, the last based in Maryland.

Ahold is strong in the northeast U.S., which is where Walmart is weakest. Walmart's cautious approach has given the region's supermarkets a chance to gather themselves for the coming battle. Supervalu, for example, just pulled its Shaw's chain out of Connecticut so it can focus resources in its central New England heartland. Stop & Shop picked up five of the 18 stores Supervalu put on the block.
More critically, Ron Burkle, who has used his Yucaipa Co. investment firm to reorganize and sell supermarket chains ranging from Wild Oats to Pathmark, is getting more closely involved in the operation of Ahold USA rival A&P (GAP). Burkle had a small interest in A&P from that company's 2007 acquisition of a controlling stake in Pathmark. Recently, he has invested more money in A&P and sent executives to oversee its turnaround efforts.
Another consideration is Delhaize America. A division of a Brussels-based Delhaize Group (DELB), the company has shifted its emphasis from the trendy Bloom supermarket chain to bargain-oriented Bottom Dollar, which says it can beat Walmart on price.
As so often happens in retailing, what's most important is what Walmart is doing -- or not doing. In New Jersey, Walmart launched its first supercenter in 2005, and has added only six more. It also has five supercenters in Connecticut; nine in Massachusetts; and 60 in New York. For the sake of comparison, in Walmart's tiny home state of Arkansas, there are 68 supercenters.

So Walmart has been picking its spots, and these blue states can be difficult to deal with. But no one thinks the beast of Bentonville is going to sit back and ignore the opportunities in this prosperous, densely-populated region. So Ahold and the rest are doing what they can before Walmart really starts breathing down their necks.

Let the battle begin.