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Delhaize Group Company Flipbook PDF
Delhaize Group, one of the biggest retailer company in Europe.
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2012
annual
review W W W . D E L H A I Z E G R O U P . C O M
TogeTher The besT for life
DELHAIZE GROUP, A leading food reTailer
Delhaize Group has leading positions in food retailing in key markets. Our operating companies have acquired these leading positions through distinct go-to-market strategies. The Group is committed to offer its customers a locally differentiated shopping experience, to deliver superior value and to maintain high social, environmental and ethical standards. Our Group’s strength is supported by the close cooperation of its operating companies at both the regional and global levels.
840 stores 16 304 associates
belgium
see&a
usa
158 000
associates
1 553 stores 104 613 associates
11 3
countries continents
nYse euronext brussels (ticker symbol: DELB)
new York stock exchange (ticker symbol: DEG) 3 //
1 058 stores 36 859 associates
3 451
stores (+ 43 vs 2011)
22.7 bil € of revenues
CONTENT GROUP 02 Key Performance Indicators 04 Interview with the Chairman and the CEO 08 Segment Overview 10 Visions, Values and Principles
STRATEGY 12 Our strategy at work 14 Growth 18 Efficiency 23 Sustainability
REVIEW 26 Financial Review 29 United States 32 Belgium 35 Southeastern Europe & Asia
GOVERNANCE 38 Our Board of Directors 39 Our Executive Committee
INVESTORS 40 Shareholder Information DELHAIZE GROUP ANNUAL REVIEW ‘12 // 1
GROUP
KEy PERFORMANCE indicaTors
7m72 io €
free cas
h flow
reVenues operaTing profiT
14.0%
158 000
22.7 billion €
343
associates
64.4%
3 451 stores + 224 new
688 mio €
capital expenditures
2 //
-113
United States Belgium SEE & Asia
United States Belgium SEE & Asia
202
21.6%
number of associaTes 10.4%
23.3%
dividend
157 910 66.3%
gross
United States Belgium SEE & Asia
5 144 mio € enterprise value
1.40 €
($ in millions except per share amounts)(4)
(€ in millions except per share amounts)
Change vs Prior Year
2012
2012
2011(5)
2010
29 213
22 737
21 110
20 850
+7.7%
+1.2%
502
390
813
1 024
-52.0%
-20.6%
Net profit from continuing operations
161
125
477
576
-73.7%
-17.2%
Net profit (Group share)
135
105
475
574
-77.8%
-17.4%
Free cash flow
992
772
-231
665
N/A
N/A +12.8%
RESULTS Revenues Operating profit
(1)
FINANCIAL POSITION Total assets
2012
2011(5)
15 335
11 936
12 292
10 902
-2.9%
Total equity
6 672
5 193
5 419
5 069
-4.2%
+6.9%
Net debt(1)
2 647
2 060
2 647
1 787
-22.1%
+48.1%
Enterprise value(1)(3)
6 609
5 144
7 069
7 400
-27.2%
-4.5%
PER SHARE INFORMATION (in €/$) Group share in net profit (basic)(2)
1.35
1.05
4.71
5.73
-77.8%
-17.7%
Group share in net profit (diluted)(2)
1.34
1.04
4.68
5.68
-77.7%
-17.6%
Free cash flow(1)(2)
9.84
7.66
-2.29
6.64
N/A
N/A +2.3%
1.35
1.05
1.32
1.29
-20.4%
Shareholders’ equity(3)
65.46
50.95
53.18
49.91
-4.2%
+6.6%
Share price (year-end)
38.87
30.25
43.41
55.27
-30.3%
-21.5%
RATIOS (%) Operating margin
1.7%
3.9%
4.9%
-213bps
-106bps
Net margin
0.5%
2.2%
2.8%
-178bps
-51bps
39.7%
48.8%
35.3%
-9.1ppt
+13.6ppt
Net dividend
Net debt to equity(1) CURRENCY INFORMATION Average € per $ rate
0.7783
0.7184
0.7543
+8.3%
-4.8%
€ per $ rate at year-end
0.7579
0.7729
0.7484
-1.9%
+3.3%
3 451
3 408
2 800
+1.3%
+21.7%
Capital expenditures
688
762
660
-9.7%
+15.5%
Number of associates (thousands)
158
160
139
-1.2%
+15.3%
OTHER INFORMATION Number of sales outlets
Full-time equivalents (thousands) Weighted average number of shares (thousands)
120
122
103
-1.5%
+18.0%
100 777
100 684
100 271
+0.1%
+0.4%
(1) These are non-GAAP financial measures. (2) Calculated using the weighted average number of shares over the year. (3) Calculated using the total number of shares at the end of the year. (4) Calculated using an exchange rate of €1 = $1.2848. (5) 2011 was adjusted for the reclassification of the Albanian operations in discontinued operations and of the finalization of the purchase price allocation of the Delta Maxi acquisition.
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 3
GROUP
Interview
“The best chef makes the tastiest dishes with the simplest ingredients and resources” On May 26, 2012 Mats Jansson succeeded Count Jacobs de Hagen as Chairman of the Board. Mats Jansson brings significant experience, notably in food retail, to Delhaize Group. Together with Chief Executive Officer Pierre-Olivier Beckers he shared his reflections on his first year and looks forward to the next. How do you look back on 2012? Mats Jansson: 2012 was both a challenging and an exciting year for Delhaize Group and for me as Chairman. Challenging because the performance of the Group was under pressure as a result of the difficult market circumstances in most of the countries where we operate and exciting because as Chairman of the Board I found myself accompanied by a diverse and professional team with one single mission: to guide Delhaize Group through this challenging period. And although I am aware that there are still many challenges ahead of us, I was nevertheless happy that we were able to announce at the end of 2012 that we firmly achieved two important targets: underlying operating profit and free cash flow. As my father had a grocery store, I learned from my childhood that retail is about giving your customers what they deserve: excellent service, a high quality assortment and affordable prices. After becoming a member of the Board in 2011, the Group’s spirit really reminded me of my father’s store and the way he treated his customers as his most important asset.
How would you describe 2012 from an operational point of view? See the video on www.delhaizegroup.com
4 //
MJ: In the past, when there was a downturn or a recession, food retail companies showed much more resilience than they do today. Food retail, as one of the few defensive sectors,
over de
livered o
was considered an exception with continued attractive growth prospects. This is less the case in the current and more complex environment. Food retailers, including Delhaize Group, are challenged to find the right answers to satisfy a customer focused on price but not wanting to compromise on the expectations on quality and sustainability. Delhaize Group has continued to work hard to take on that challenge with already some visible results in 2012. pierre-olivier beckers: Already at the end of 2011 we recognized that 2012 would be a difficult year. And although we ended the year with 2.9% revenue growth at identical exchange rates, we realize we can do better and aim higher to claim our position among the best-in-class food retailers. I have stated it before; we are in the middle of the river. We have left the shore of steady healthy margins and low revenue growth and decided to go to the other side where we will be able to achieve sustainable and higher growth. It is true that the water is rougher than we had expected, but we have already made some significant moves in the right direction by investing in prices at all our banners, strengthening our presence in higher growth markets and developing new store formats. mJ: Crossing a wild river requires fast and decisive action and that is what
we are doing. We have made and will continue to make the necessary decisions in the coming months to make sure that we reach the other side of the river as a stronger company.
€ 500
n
million a nnual g ross savings target
what decisions do you have in mind? pob: Through the years, our company grew considerably in size and complexity. In the current environment it is critical to increase our agility. We are therefore determined to reduce the complexity of the organization and increase the speed of decision making. Our mindset is really changing in this respect. Simplification and cost awareness is really becoming everyone’s focus. Because retail is detail, we need to turn every penny twice before we spend it and when we spend it, it has to benefit both the customer and the company. mJ: We are operating in an industry that is going through important changes and that is facing important challenges, so it is of the utmost importance that we keep our structure and our procedures simple. In 2013, we will continue to strengthen our focus on cost control and capital allocation discipline. In times like these, you must focus your resources even more than usual and you need to come up with the best of what you have. For everything you do. The best chef makes the tastiest dishes with the simplest ingredients and resources.
what are the ingredients to make a winning recipe? mJ: If you are at the end of the value chain, you have to be extremely customer oriented. you have to understand what the customer needs, monitor the trends and challenge yourself to verify that you are positioned correctly to fulfill the long term demands of the customer. And in order to have enough room to invest in the customer offer, you have to search continuously for productivity improvements. you have to be extremely efficient in all parts of the value chain, from the supply chain, to the wholesale operations and finally on the store level. I am convinced that we are making the right moves and are on our way to reach this level. A third element is that as a company, you need to be able to attract talent. At Delhaize Group we have developed strong programs to achieve this goal. In addition to those, our very real and lively values are a strong point of attraction for young talent. DELHAIZE GROUP ANNUAL REVIEW ‘12 // 5
GROUP
is the delhaize group strategy still founded on the new game plan? pob: Food retail is indeed about large quantities and efficient processes. This makes people highly important. An example of what we did in this respect is the launch of a high level international trainee program in 2009. Today these trainees have found their way in our company and have become valuable ambassadors of the Delhaize Group brand and the banners it represents. The number of candidate trainees is now close to one thousand for each class of 10 selected recruits, underlining on the one hand our determination to look for the best human capital and on the other hand the attractiveness of Delhaize Group as an employer.
mJ: Absolutely. The three pillars, accelerated growth, higher efficiency and sustainability that were set forward when Delhaize Group launched the strategic plan at the beginning of 2010, are more than ever crucial in our efforts to become a best-in-class retailer. The whole organization is focused on delivering on this strategy for all of our stakeholders. And in order to retain talented associates it is crucial to offer them a common set of visions and values. They are the overarching element of our strategic framework. pob: However, we realized that, in order to make fast and coherent decisions to execute our strategic choices across three continents, we needed to improve our tools. So we developed eight principles (see overview on page 11). They are designed to help all of our associates, from the store floor to the members of the Executive Committee, to make daily decisions that are consistent with and in support of our Group strategy.
generating free cash flow became one of the critical action points in 2012. why is this so important?
maTs Jansson
chairman delhaiZe group i learned from my childhood that retail is about giving your customers what they deserve: excellent service, a high quality assortment and affordable prices.
6 //
pob: In 2012, we set a target of €500 million free cash flow. As technical as this may sound, the importance of this key performance indicator cannot be underestimated. It is crucial in these difficult times to safeguard the liquidity and the financing of the company. It is the blood we need to ensure that we can keep the virtuous circle turning and continue to focus on our customers. When we announced the €500 million target it was considered very ambitious, but at the end of 2012 we are pleased to have over delivered on our promise. This was made possible by rigorously monitoring our working capital, by a ruthless discipline on capital allocation and by driving the operations in the stores. It provides us with confidence in our future. The focus on cash flow was also an important signal to the investor community. In December we suc-
cessfully refinanced a Euro and Dollar bond with a new €400 million bond, resulting in lower financing costs and improving our debt profile.
in the u.s. food lion got a lot of attention in 2012. pob: The preparation work for the Food Lion Brand strategy and the first steps of its implementation took place in 2011 and we continued the roll-out in 2012. Given its importance, it was paramount to do the job right from the start. With 62% or more than 700 of the Food Lion stores repositioned today, we can say that we have made significant progress. More importantly, the results of the repositioned stores continue to be pleasing. We see meaningful uplifts in transactions, volumes and ultimately comparable store sales growth. Also, the stores that have cycled the first 12 months show year-on-year growth in transactions, items and sales. Customer feedback points to improved perception in terms of service levels in the store, in terms of variety in fresh produce and private label and finally in terms of price as the accompanying price investments have not gone unnoticed. mJ: Food Lion had to step up its efforts to be more in line with what customers need on service levels and prices. I was in the U.S. several times last year and I was impressed by our operations. The repositioning work we are doing is a reflection of the new reality in food retail, so what we are doing, i.e reducing the price gap, closing underperforming stores and polishing the image of the brand, is the right approach. It is too early to say that we have solved all problems, but we are clearly doing the right things to increase and further deploy the real potential of Food Lion.
what are the next steps you will take to fire up the u.s. operations? pob: It is obvious that we want to stay on top of our game to safeguard the Group´s interests in the U.S. In 2012, we were faced with increased competitive pressure for our Hannaford banner. In order to stay relevant to our customers in this market, we
pierre-oliVier beckers ceo delhaiZe group
have adapted and we will continue to invest in price, in assortment and in our stores. We are serious about stepping up our efforts in the U.S. This is also demonstrated by the appointment of Roland Smith as the new CEO for Delhaize America. He took over from Ron Hodge who retired at the end of the year after successfully creating the Delhaize America structure and initiating the Food Lion repositioning. Roland came on board with energy and determination to further build and accelerate our efforts in order to solidify and secure the future of the operations in the U.S.
looking at the evolution of the market share in belgium, it looks like your historic base could also use some attention. pob: When we look at the market share trend in Belgium, it is obvious that we can do better and, of course, have that ambition. There are a number of elements to explain this evolution. The current economic crisis and waning consumer confidence are in the advantage of the so-called price players in the market. On top of that, some of our competitors found traction again and new competitors entered the market. So yes, the battleground has changed and we lost some ground. But we know we have the tools and the people, to regain what we have lost. Over the last years, we have invested heavily in the back office, now we will focus more on our network and on our product offering. Delhaize in Belgium has always been recognized as a food innovator offering unique products and service. It will be our goal in the months and years to come to make these points of differentiation stronger than ever before.
while delhaize group seems to have difficulties in its mature markets, with the portfolio in southeastern europe it clearly has a winning hand. pob: The performance of our newer operations and formats, like South-
simplification and cost awareness is really becoming everyone’s focus. because retail is detail, we need to turn every penny twice before we spend it and when we spend it, it has to benefit both the customer and the company.
62%
of all f o lion sto od reposit res ioned
eastern Europe, Indonesia, Red Market in Belgium and Bottom Dollar Food in the U.S., was without any doubt one of the bright spots in 2012. In Romania, we opened at an incredible speed 89 new stores in 2012 and in Indonesia Super Indo celebrated the opening of its 100th store. As was the case last year, our operations in Greece weathered the tough economic conditions in the country well. Alfa Beta succeeded again in market share growth thanks to the consistent implementation of its strategy, based on low prices and affordable private brand alternatives. Of course we are satisfied with this performance, but we nevertheless stay vigilant with regards to the future of the country within the Euro zone. Not being prepared would be irresponsible.
pob: In 2013, more than ever before, our focus will be on accelerating revenue growth and on value creation. Further price investments, selective store openings and comparable store sales growth should result in an increased top line while a ruthless discipline in our capital allocation in combination with a new strategic cost plan and focus on free cash flow generation should result in value creation. By delivering on these two key priorities we will not only reach the other side of the river, will be well positioned far beyond 2013.
looking forward, what are the key priorities for 2013? mJ: I have had significant experience navigating through rough waters. The most important lesson I have learned from those experiences is that an organization has to be focused on a limited number of high impact priorities. Speed and impeccable execution will be required to win the hearts and the wallets of the customers and to keep you in the game. And as I said before, the overall priority is to continue to deliver on this strategy and increase the value for both our customers and our shareholders.
+ 224 new stores
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 7
GROUP
usa
The american markeT
1 627
1 650
1 553
998
742
441
operaTing profiT (in millions of $)
10
11
12
10
11
12
103 839
107 237
104 613
number of associaTes
18 800
reVenues (in millions of $)
19 230
At the end of 2012, Delhaize Group operated companies in eleven countries on three continents: America, Europe and Asia. For reporting purposes, these companies have been grouped into three segments: the United States, Belgium and Southeastern Europe & Asia. Delhaize Group operates a total network of 3 451 stores
number of sTores
18 807
delhaiZe group, an inTernaTional local food reTailer
With $18 800 million (€14 632 million) in revenues and a network of 1 553 stores at the end of 2012, the U.S. is the largest market for Delhaize Group. Of total Group revenues, 64.4% came from the five U.S. banners operating along the East coast, from Maine down to Florida and covering 18 states.
10
11
12
10
11
12
Ò read more on page 29
8 //
SEE ASIA BE
236
243
202
368
937
1 058
10
11
12
10
11
12
10
11
12
11
12
NUMBER OF ASSOCIATES
4 922
17 207
16 857
16 304
1 863
2 450
3 183
17 469
35 651
36 859
REVENUES(1) (in millions of €)
4 845
NUMBER OF ASSOCIATES
10
4 800
REVENUES (in millions of €)
OPERATING PROFIT(1) (in millions of €)
-113
840
NUMBER OF STORES
821
OPERATING PROFIT (in millions of €)
805
NUMBER OF STORES
Delhaize Group’s Southeastern Europe & Asia segment (SEE & Asia) includes the operations in Greece, Romania, Indonesia and the Maxi-operations in four Balkan countries (Serbia, Bulgaria, Bosnia & Herzegovina and Montenegro). The Albanian activities were sold at the start of 2013. The SEE & Asia segment generated revenues of €3 183 million in 2012 (14% of the Group total).
81
Belgium is Delhaize Group’s historical home market. At the end of 2012, Delhaize Group operated a multiformat network of 840 stores in Belgium and the Grand Duchy of Luxembourg. In 2012, Delhaize Belgium’s revenues of €4 922 million accounted for 21.6% of the Group total.
THE SEE & ASIA MARKET
68
THE BELGIAN MARKET
10
11
12
10
11
12
10
11
12
10
11
12
Ò READ MORE ON PAGE 32
(1) 2011 figures have been restated as Albanian operations are now included in discontinued operations.
Ò READ MORE ON PAGE 35
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 9
GROUP
OUR VISION Nutritious, healthy, safe, affordable and sustainable. Together, we deliver the best of Delhaize for life. Together, we aspire to enrich the lives of our customers, associates, and the communities we serve in a sustainable way. Together, we offer assortments, products and services that are nutritious, healthy and safe, everyday, at prices all customers can afford. We are connected with our colleagues across the Group. We learn, we grow talent and we innovate. We support, we respect and we inspire each other. Together, we deliver the best of Delhaize for life.
OUR VALUES Determination, integrity, courage, humility, and humor 10 //
OUR principles To reinforce the New Game Plan, Delhaize Group established Principles. They inform how we conduct our business.
8
f ples o princi rategy our st
1
We connect with our customers and act on their feedback
2
We share and live one common vision and values across the Group
3
Each banner will achieve and maintain its unique differentiation
4
We commit to growing and defending strong market densities
5
Continuous productivity improvement drives our value proposition
6
We are a leader in sustainability
7
Our team is built with excellent people to deliver excellent results
8
Simpler is better
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 11
STRATEGY
OUR STRATEGY THE NEW GAME PLAN AT WORK IN 2012 The New Game Plan is the backbone of the Delhaize Group Strategy and is built on three equally important pillars: growth, efficiency and sustainability. By executing on this consistently, Delhaize Group will be able to claim its place among the best-in-class food retailers worldwide and will create value for all its stakeholders: customers, suppliers, employees and shareholders.
JANUARY
MARCH
FEBRUARY
Appointment of Pierre Bouchut as Chief Financial Officer of Delhaize Group
Portfolio Optimization
+14
new stores
Bottom Dollar Food
in Pittsburgh JULY
Delhaize Belgium launches test of enlarged local assortment Food Lion Launches New Brand Strategy in 269 North Carolina and South Carolina Stores
Food Lion launches phase 2 of brand strategy work
Publication of the first Digital Annual Report
MAY
Hannaford implements sweeping sustainable seafood policy Mats Jansson elected new Chairman Shari Ballard elected Board Member
$
€
APRIL
AB brings prices back to 2008 level Delhaize Belgium launches Delhaize Direct Cube Maxi launches “Prices speak for themselves”-campaign Fred Marlin receives first Delhaize Group Store Manager of the Year Award
JUNE
Delhaize Serbia and Montenegro change offices Delhaize Bulgaria receives Mystery Shopper award
5th Report
Sustainability
AUGUST
Launch of Strategic Cost Plan
SEPTEMBER
Piccadilly paves way to
Alfa Beta rewarded by Greek customers
BER m OCTaO ize Belgiu
tores Delh es City s announc Proxy e to becom nd nt of Rola e m it ru Rec f CEO o Smith as America e iz a lh De
12 //
Recruitment of Marcus Spurrell as Delhaize Group’s first Senior Vice President Digital Delhaize Group becomes member of the Dow Jones Sustainability Index
zero
waste
NOVEMBER
DECEMBER
Alfa Beta implements first phase of SAP Retail successfully
Creation of a new Delhaize America Leadership Team structure
Delhaize Serbia closes TP Srbija stores and distribution center
Food Lion Launches New Produce Initiative
Delhaize Belgium pioneer in the use of stevia
100 store th
opened by Super Indo
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 13
STRATEGy
h T w o gr
e growth ble revenu ta fi ro p g n f the Accelerati ey pillars o k e re th e this is one of th omprising C . y g te a tr roup s tiation, Delhaize G all differen w ru fo re lar a rowth and growth pil network g o li fo rt o p braced organic re fully em a ts n e m le the se e ies within n M&A. The a p m o c ting mpany by all opera erating co p o h c a e ves, Group and wth initiati ro g c ifi c e p ped s ortment, has develo alized ass c lo g n ri e v li ds, such as de rivate bran p d e iz m sto tiveness, offering cu e competi c ri p g in v ro fit the further imp gy to bene lo o n h c te ucing ence. and introd ing experi p p o h s s r’ custome
14 //
4-wall DIFFERENTIATION assortment Although Delhaize Group operates as an international food retailer, the company believes that the importance of a strong local identity cannot be overestimated. This belief comes to life within each operating company as it tailors its local assortment as well as price and promotion strategy to the needs and tastes of the local customers. The success of this local approach of Delhaize Group can easily be measured when looking at its performance in Greece. Although fully owned by Delhaize Group, Alfa Beta remains first and foremost a Greek retailer. Alfa Beta perfectly understands what its customers desire, especially during difficult economic times, like the ones currently experienced in Greece, when shoppers are looking for ways to control their budgets. In addition to a wide range of affordable products, the assortment in our Alfa Beta stores offers a great number of local products as well, giving not only to customers the best of what they need but also offering opportunities to local suppliers. In the United States, DG’s Hannaford banner uses the same approach with its “Close to Home” campaign. The campaign is well received by cus-
tomers and continues to gain traction. In addition to using local management to understand the local customer and offer the right assortment, several operating companies within the Group also devote significant attention to data analysis. These data come, where available, from loyalty programs and give banners the possibility to identify the shopping behaviors of their customers. With this information DG operating companies, like both Food Lion and Delhaize Belgium, can personalize promotional offerings and optimize the individual customer’s shopping experience.
private brand Within the assortments, one of the strongest differentiators are the Delhaize Group Private Brands. They give the Group the opportunity to offer tailor-made solutions to different customer segments, balancing both quality and price. In Belgium top chefs recognize the quality of many of the private brand items, including 365. This feedback should come as no surprise since Delhaize Group does not compromise on product quality, even in the value range 365 product line. And being able to
offer these quality products at affordable prices demonstrates a deep knowledge of the entire production cycle reflecting the expertise within the Delhaize Group that makes a difference. In addition to the 365 value line in Europe and MyEssentials in the U.S., the DG private brand assortment includes a house brand at most of our banners, the Taste of Inspirations gourmet brand, and some category-specific brands that target specific assortments, such as Care (health & beauty), Bio (organic), Kids (children), and Baby (infants). Every year DG operating companies develop new products to better meet the needs and satisfy the demands of our customers. For example, at Delhaize Belgium, 11 new vegetarian products were launched in the Bio assortment in 2012. In the U.S., Hannaford became the first grocery chain in the country to document that all 2,500 private brand seafood products – no matter where they are located in the store – have been sustainably harvested. The company can trace every seafood product back to its source fishery and provide that information to customers when they request it.
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 15
STRATEGy
price Having an attractive assortment and innovative private brand products is necessary. But it is not sufficient – the Group also needs to offer both at attractive prices. This is why Delhaize Group continues to invest in price competitiveness and looks for value leadership, which is translated into offering quality products at affordable prices. Delhaize Group’s commitment to value leadership was tested again in 2012 and the Group took many actions to defend its relative price position with the price leaders in the markets where it operates. Delhaize Group’s operating companies maintained their targeted price gaps and further reduced them where possible. The Group has also undertaken efforts to further strengthen its pricing systems, allowing its respective operating companies to make price investments where those investments have the highest impact for our customers.
118 16 //
delhaize direct pick-up points in belgium
And for customers to understand the impact of the price investments, Delhaize Group’s operating companies have to clearly communicate these investments to the customers. As done in previous years, several marketing campaigns in different countries underscored the fact that Delhaize Group’s many operating companies really care about the purchasing power of the customers. One of the local campaigns that Delhaize Serbia ran, “Falling Prices at Maxi” even received international attention for its clarity and humor.
Technology It has been discussed before and remains the case today – Technology is increasingly present in supermarkets and this is expected to be the case for the foreseeable future. Our customers demand more technological convenience and the company benefits from the increased transparency and efficiency resulting from technological investments. To coordinate the Group’s customer-facing technological efforts, implement a global digital strategy and ensure that remain competitive in the industry, Delhaize Group created and filled in 2012 the new role of Senior Vice President – Digital.
In 1989, with Caddy Home, Delhaize Belgium was one of the first supermarkets to offer home delivery to its customers. Today Delhaize Belgium is building on this experience and on this service with its buy-and-collect service – Delhaize Direct. With Delhaize Direct a customer can order at home via a dedicated website and then pick up the ready-togo, filled, grocery bags at store of the customer’s choice. At the end of 2012 118 stores were equipped with a Delhaize Direct pick-up point. Building on this success in Belgium, the Group is running trials for this technology at other operating companies with the intention to deploy the concept as soon as it proves feasible. In addition, Delhaize Belgium also created the Delhaize DirectCube, a virtual supermarket that allowed customers to do their shopping using their mobile device by scanning products on a billboard. In the U.S., Delhaize America’s Hannaford banner uses the Hannaford.com website to support customers who want to plan both their shopping and cooking experiences, offering detailed information on products (from pricing to ingredients) and a comprehensive list-making app.
In addition to driving comparable store sales, the Group is active in organically growing its store network. In spite of the portfolio optimization program at the beginning of 2012, by which Delhaize Group announced that it was closing a total of 146 stores and converting another 64, mostly in the U.S. as part of the Food Lion repositioning work, the Group nonetheless added 224 stores. This resulted in a net increase of 43 stores for the Group as a whole. Two-thirds of this growth occurred as part of the strong expansion within Southeastern Europe and Indonesia where 153 stores were opened.
Affiliated stores Finally, the affiliated stores, also in Belgium, are an important lever for
10
11
224
182
158
99
EVOLUTION OF NEW STORES
105
In addition to expanding in the Group’s newer markets, Delhaize Group also pushed the further expansion of new formats like Bottom Dollar Food, its innovative discount concept in the U.S. At the beginning of 2012 Bottom Dollar Food entered the Pittsburgh market, opening 14 stores in 2 weeks and finished the year with a total of 56 stores. Red Market in Belgium, comparable to Bottom Dollar Food from a format perspective, opened 2 new stores in 2012 and was operating 9 stores by year-end.
growth and in 2012 the Group had 24 new affiliates enter the Delhaize Belgium network, of which 16 in the Proxy format. These additions increased the contribution of affiliates in Belgium to more than 50% of total sales. Entrepreneurs are attracted by the historical strengths of Delhaize Belgium, the solid reputation of the Delhaize brand, and the prospects that both offer them for the future.
59
Leading the way for the Group with 89 new stores, Mega Image was the most active operating company within Delhaize Group and the most dynamic retailer in Romania in 2012. After having celebrated the opening of its 100th store in 2011, Mega Image came close to celebrating the 200th store mark in 2012. In Indonesia, Super Indo celebrated the opening of its 100th store.
12
Newer Operations Total New Stores
Focus on
NETWORK GROWTH
In 2012, the Delhaize Gro up activities in the U.S. were first and foremo st focused on the brand repositioning wo rk at Food Lion. After completing the preparatio n work and testing the repositioning initiatives in the 2011, the company continu first two markets in ed the repositioning implementation in more than 500 stores in 2012. By the end of 2012 more than 60% of the Food Lion network had been revitalized and made ready for the future. “We ’ve clearly reached a tipping point. Looking at the performance of the repositioned stores it is clear that we stabilized our business, reconnect ed with our customers and created a platform for future growth”, explains Cathy Cheely, Director Strategy and Innovation for Food Lion . Previous to the reposition ing work, Food Lion had lost some of its luster and as a result some of its attractiveness to custom ers. Well aware of this evolution, Delhaize Group wanted to address this challenge promptly but methodically and began with a thorough analysi s of the strengths, weaknesses and opportunitie s at its largest operationa l banner. The results of this exercise were both revealing and inspiring. Customers wanted to take the Food Lion stores back to their roots; they wanted a simple and con venient supermarket with an attractive assortm ent at affordable prices. Delhaize Group manag ement listened, learned, and established new fram ework to tackle the issues. Simple – Quality – Price: these are the keywords for the reposit ioning work and the strategy behind it. “It is inspiring to see that, wh en you ask customers what they want and then you give them what the y want, they reward you for it with their business,” com Director of Intelligence and ments Matt Yates, Planning for Food Lion. This reward can be read in the performanc e of the repositioned stores in comparison with the ones that have not yet und ergone repositioning. “For the first time sinc e 2007, Food Lion has succeeded in realizing two successive quarters of real growth,” says Cathy Cheely, “but we are not there yet. The reposition ing work is only enablin g us to seek a new peak.” Through the brand strateg y implementation, Food Lion improved its ove rall price position by achieving a better balanc e between base price and promotion. The adv ertising campaign of the repositioned stores include d low price messaging that ran across the sto re with emphasis on center store, produce and private brand. This last element is a very importa nt differentiator. Almost simultaneously with the start of the repositioning work, the new private bra nd, MyEssentials, was launched in the U.S. Tod ay the repositioned stores are offering a full range of MyEssentials products that are well received by customers looking for affordable choices within their budgets, without having to compromise on quality.
STRATEGy
Y c n e i c i eff
e growth fitable revenu ro p g tin ra le as been Acce aize Group h lh e D s. e rc u the requires reso urces within so re se o th g ndin turning. focused on fi rtuous circle vi e th p e ke rk of company to the framewo in ith w d n a text blished With this con e Group esta th , n la P e m a 500 the New G gs target of € n vi sa st co ss of 2012. an annual gro d by the end ve ie ch a e b et, million to ieved this targ ch a rve o p u cross the Delhaize Gro e time and a m sa e th t a creating n costs and ew mindset o n a y n a p m all, every co g years. After in m co e th r g efficiency fo mes to creatin co it n e h w rs lders. penny matte and shareho rs e m o st cu r value fo to procuring the products, g n si a h rc u p em… From , to stocking th m e th g in p ip them, to sh customer, in ecking out the ch to y a w e s to be all th efficiency gain re a re e th p every ste saved. These ennies to be p s u th d n a , p deploys found rces the Grou u so re e th re ve her pennies a er and impro m o st cu e th e to better serv erience. shopping exp
18 //
CUSTOMIZE FOR THE cusTomer AND STANDARDIZE FOR saVings The efficiency of the retail cycle starts with buying products. Across its different banners, Delhaize Group has a team of experienced buyers ensuring the right products for the right assortment at the right price. This is the result of both their knowledge of products within their own category enhanced with the knowledge and experience of buyers in other countries and in other categories across the Group. In order to capitalize even better on this collective experience from across the Group, and to benefit from the synergies of scale, Delhaize Group started already a few years ago centralizing its buying activities in the U.S. Combining the procurement teams from across the different operating companies within Delhaize America into
one organization ensures that Delhaize America fully benefits from the available knowhow and best-practices with respect to sourcing, assortment, promotional planning , and private brand management. Migrating these back-office systems and processes from the individual operational companies gives those more resources to do what they do best: listen and respond to the needs of their customers and serve them the way they deserve to be served. Finally, the Delhaize America structure also centralized and standardized other non-customer-facing functions like accounting, financial analysis, legal and business development. On top of that, the Delhaize America structure comes with the systems to support it like a common finance platform and centralized human resources and payroll systems.
The success of this standardized structure at Delhaize America proved to be a good example for the creation of the Delhaize Europe structure in 2012. Important efforts were made to harmonize and standardize local activities on a European level such as finance, IT, legal and human resources. From a systems perspective this new structure will be supported by SAP. Efforts are also being made in Europe to create better procurement efficiencies in order to leverage knowhow and economies of scale. Already, since early 2009 all European operations have been benefiting from the membership to the buying alliance, AMS, giving them access to the best possible quality products at the best possible prices.
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 19
STRATEGy
VALUE CHAIN VirTuous circle efficiency gains in
33
distribution centers.
After purchasing the products, Delhaize creates more savings with efficient logistics. Whether from helping a supplier find the best lanes or via back-hauling by Delhaize-owned transportation, there is always room for incremental improvement. At Delhaize Group’s distribution centers, further efficiency gains are made. Storage is expensive and so is installing warehouse management systems. In order to achieve the highest return possible it is crucial that products find their way into, through, and out of the warehouse as fast and efficiently as possible. One example of a state-of-theart warehouse complex within the Delhaize Group network can be found in the semi-automated distri-
20 //
bution centers of Delhaize Belgium in Zellik, near Brussels. In these warehouses, fresh products can both be processed at a very high speed and with a high level of customization. This standardized customization not only makes it possible to increase the freshness of the products delivered to the store, it also enables the distribution center to supply a store with only the number of products that store expects to be able to sell. This increased speed as well as heightened selectivity both significantly diminishes food waste store level and increases inventory rotation at the distribution center, which results in fresher products for the customer and higher returns for the Group. In the U.S., Delhaize America installed an overarching Supply Chain Master Network to increase the performance of its distribution centers and logistic network. This master network not only results in better conditions from suppliers, because of the scale advantages, it also increases the quality of the products and reduces the transportation costs.
While warehouse management systems work well at distribution centers, small inventories at store level require a very different ordering system. At all operational companies across Delhaize Group, systems have been installed to optimize the store inventory levels. For example, In 2012 Food Lion implemented Computer Assisted Ordering (CAO) for center store items at all 1,138 Food Lion stores. Three Food Lion districts are piloting CAO in fresh departments. In Delhaize Europe, an important support tool being implemented is SAP Retail. This implementation represents a new common way of working across the region that unites the foundational operating systems and supply chain standard practices across Delhaize Europe. It includes the purchase, sale and handling of products throughout both warehouses and stores. The first phase of the system implementation was successfully launched in Greece in 2012 and will be further rolled out in the rest of the European operations in 2013.
The efficiency work continues when products reach the store. Intelligent planograms, planned truckunloading, and purposeful inventory placement increase speed to shelf. Shelf-ready packaging, being developed in conjunction with suppliers, will further improve labor efficiency. These advances mean store associates spend less time stocking the product and more time improving the customer experience. This is especially the case at the discount format, Bottom Dollar Food. There, most of the store inventory of
many products can be found on “sky shelves” located above the top selling shelf. Fresh fruit and vegetables are presented in their original case inside a walk-in cooler. Presenting produce this way means less handling from associates, improving not only efficiency of the associate but also improving quality of the product. The less an orange is touched before it is sold, the better its quality. This is another example of the way Delhaize Group increases its efficiency without compromising its offer to the customers.
Focus on
saVing AT THE STORE
2012 was another wrench ing year for the Greek economy. GDP wa s down 6% in the fourth quarter and the une mployment rate remained at historical leve ls. However, even in this difficult env ironment, Alfa Beta showed resistance and even succeeded in capturing a market sha re from its competitors. “In these uncertain times for customers, Alfa Beta has benefited from its strong identity. We have been known for decades for our high quality assortm ent and excellent service. And long before the effects of the crisis started to hurt the Greek population, we started investing hea vily in lower prices,” explains Kostas Mache ras, Executive Vice President of Delhaize Gro up and Chief Executive Officer Southeastern Europe. “While in 1998 we were significan tly more expensive than our competitors, tod ay that situation has changed dramatica lly and we are even price leaders for many categories. The perception of low prices has maybe not been fully established yet, but what is important is that through this proces s we have managed to safeguard our identit y.” Alfa Beta is able to offe r its customers lower prices than its competitor s because of its disciplined cost control. “We keep costs low by being alert and by wa tching every line. We also benefit strongly from being part of an important internation al group. As such, we are in an excellent pos itio suppliers. We can guaran n to talk to tee them that they will get paid on time, wh ile we are guaranteed to receive the best conditions for our products. It is a clear win -win,” underlines Mr. Macheras.
greek + locality = gre
ekality
Another important feature through which Alfa Beta won the hearts and the wallets of customers is its inhere nt Greek character. “I like to call this our Greekality,” says Mr. Macheras. “Although we are part of an international group, we have been able to keep our strong local ide ntity. Greeks like food and like to eat and while they like to discover new tastes, the y are also very loyal to what their country has to offer. So we went to look for those loca l products and gave Greek food to the Greeks, amongst others, with our highly app reciated ‘Close to Greek Nature products.”
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 21
STRATEGy
Finally, for many customers the real frustration in grocery shopping is checking out and paying. Customers do not like to wait too long and prefer to minimize their time spent on this tedious part of their shopping trip. Improving this aspect of the customer’s experience is why Delhaize Group offers a wide variety of check out systems at most of its stores. One of the most innovative and award-winning check-out systems is at the discount format,
Red Market, in Belgium. There the checkout already starts when entering the stores. Customers “check as they shop” using a handheld device to scan the products they buy. Then when they are finished shopping they cue in an airport-like single line to then pay at the first available checkout desk. No extra manipulation, like moving products from one basket to another, is needed.
500 mio € free cash flow generaTion strong cash flow generation is the life blood of any business and delhaize group is no exception. facing the difficulties in 2012 and preparing for the coming challenges ahead, delhaize group has emphasized the creation of strong free cash flow. “The importance of this key financial indicator cannot be overestimated. it is crucial in assessing both the current health of the company and securing the performance going forward. The initial target at the beginning of the year was set at generating €500 million of free cash flow by the end of 2012. at the end of the year, delhaize group largely overachieved this target and even set aside €772 million in free cash flow”, comments delhaize group chief financial officer pierre bouchut. going forward delhaize group aims at creating an average annual free cash flow of around €500 million for the next three years. “This should give the company sufficient financial breathing space to further implement its strategy of achieving profitable top line growth and creating added value for all its stakeholders in both the short and long term”.
€ 772 million
free cash flow generated in 2012
22 //
Y T i l i b a susTain
bility, not gy is sustaina te ra st p u ro G is part ize g responsibly in r of the Delha ct a a ill p se d u ir ca th e e Th lling good ut rather b sts itself in se fashionable b ife is n it a m se A u N ca D e b is ating the ates, and tre e company. Th ci th o f o ss a A N its D f o e eps re of th k important st ers, taking ca o m to o p st u cu ro G its e to 12 Delhaiz products strategy its own. In 20 ucing a new d re o e tr w in it y if b s r a a t 0 in eb plane ability by 202 ven raised th e in a d n st a su in in a r m e in this do d as a lead be recognize to n o iti ets. b m a and all of its mark
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 23
strategy
Given the importance of food in everybody’s life, food retail has emerged as a central industry in the conversation on sustainable development. Delhaize Group has been participating in this conversation and working on sustainability, formerly known as Corporate Responsibility, for many years. In 2008 the Group formalized its commitment in business strategy and two years later, in 2010, made it one of the three pillars in the New Game Plan comprising the key areas of People, Products and Planet. In 2012, in an exceptionally tough business climate, Delhaize Group launched new initiatives and already moved towards the 2020 ambition, which places a much stronger focus on building sustainability into private brands and puts more emphasis on reducing waste across the Group.
Product
Some 2012 steps on the path to sustainability leadership.
In 2012 Delhaize Belgium stepped up its efforts to offer more local
Store manager of the year
From 2012 on Delhaize America ensures that all seafood products sold in its stores are harvested in a sustainable manner. This means that seafood is fished or farmed in a way that will enable it to be around for generations to come. Delhaize America will only sell seafood from fisheries and farms that are managed by competent authorities that use a science-based approach to their management plans. Similar efforts were made in Belgium where Delhaize reached a significant milestone in its partnership with the World Wide Fund for Nature (WWF). Now, all fresh fish sold at Delhaize supermarkets is harvested in a sustainable way. All frozen fish will be sustainably sourced by the end of 2013.
People
In 2012 Delhaize Group organized for the first time the Store Manager of the Year (SMYA) Award across the entire Group. DG launched the SMYA program as a way to recognize the key role Store Managers play every day at the heart of the multi-national food retailing business. While the program selects one overall winner, its intent is to recognize and celebrate the important role that all Store Managers play in growing a stronger business, associates and communities every day.
24 //
products. These products are not only excellent choices for the customers; they offer also a unique opportunity to support local communities. “I think customers like products that they can link to the people who make them. And for a small company like ours it is important to be supported so we can be present at different places in our region”, explains a local producer of pancakes. Just like the other operating companies within Delhaize Group, Delhaize Belgium has always given priority to local products and local producers. 100% of the eggs, 95% of milk, 85% of meat and 90% of the fruit and vegetables sold in Belgian Delhaize stores are Belgian. So with broadening its assortment of local products, Delhaize Belgium also provides local farmers and producers opportunities for growth.
Planet Beginning in 2012, most of the Delhaize Group banners launched new programs to reduce store waste. Delhaize Belgium, a longtime partner of food banks, launched a test program in three cities to provide a daily selection of items to local food organizations. Volunteers from Saint-Vincent de Paul Society arrived at the stores every afternoon to pick up pre-assembled packages of select dry foods, fresh foods that reached their sell-by dates, and fro-
100%
of seafo harveste od products d at Delha sustainably ize Ame rica
zen bread to distribute to the needy that same day. In the U.S., Hannaford launched a “moving to zero waste” project in its entire store network that combined (1) a reinvigorated focus on waste and recycling standard procedures, (2) strengthening relationships with local food pantries to ensure that edible food that can’t be sold is donated to feed people in local communities, and (3) adding food waste recycling programs where they didn’t exist already. The pilot was successful, leading to much lower waste and higher recycling, bringing waste cost at Hannaford down by 15% from 2011 to 2012.
2020 While the above steps are good, there remains much to be done; being recognized as a leader in sustainability by 2020 is a long journey and a work in progress. Moving forward, Delhaize Group has crafted its sustainability ambition as a “journey to Supergood”. Supergood is about embedding the sustainability approach into everything Delhaize Group and all of its operating banners do. Supergood means supermarkets filled with good products, where what’s good for the bottom line goes hand-in-hand with what’s good for the community, the company, and the planet. To achieve Supergood by 2020, the Delhaize Group sustainability strategy focuses on three categories: Areas we intend to WIN (exceed our competitors’ efforts in local markets); areas we intend to LEAD (be among the leaders in our local markets); and areas we will address EVERYDAY (ensuring we meet core environmental and social standards across our business).
Delhaize Group entered for the first time the Dow Jones Sustainability Index (DJSI), both at the world and European levels, for food and drug retailers. “This is a great acknowledgement that we are building a solid foundation of sustainable business practices. As we move toward our ambitious 2020 sustainability strategy, this recognition from the world’s leading business indexes reinforces that we are on our way to embedding sustainability across our business and using it to drive clear business value.” commented Megan Hellstedt, Director of Sustainability at Delhaize Group. The Dow Jones Sustainability World Index was launched in 1999 as the first global sustainability benchmark. The indexes track the stock performance of the world’s leading companies in terms of economic, environmental and social criteria, such as corporate governance, risk management, supply chain management, health and nutrition, environmental efficiency, and labor practices.
Read more on our progress towards sustainability leadership in the Sustainability Report, published on the Delhaize Group website in June www.delhaizegroup.com/SustainabilityReport/2012
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 25
REVIEW
financial REVIEW income statement
20.8
21.1
22.7
reVenues (in billions of €)
10
11
12
4.9
3.9
1.7
operaTing margin (in %)
10
11
12
1 024
813
390
operaTing profiT (in millions of €)
10
11
12
26 //
477
10
11
125
576
neT profiT from conTinuing operaTions (in millions of €)
12
In 2012, Delhaize Group achieved revenues of €22.7 billion. This represents an increase of 7.7% at actual exchange rates, mainly due to the strengthening of the U.S. dollar by 8.3% against the euro compared to 2011, or 2.9% at identical exchange rates. Organic revenue growth was 2.1%. The revenue growth was the result of the performance of all segments. In the U.S. revenue growth was 0.9% in local currency, excluding the impact of the 126 stores closed in the first quarter of 2012. Revenue growth in Belgium was 1.6% as a result of network growth and comparable store sales growth of 0.6%. Finally, Southeastern Europe & Asia delivered a solid revenue growth of 34.1% at identical exchange rates following the acquisition of the Maxi operations in 2011 (+10.0% at identical exchange rates excluding Maxi) and the strong performance in Greece and Romania. The U.S. operating companies generated 64% of Group revenues, Belgium 22% and Southeastern Europe and Asia 14%. gross margin was 24.5% of revenues, a 102 basis points decrease at identical exchange rates due to price investments across the Group. The lower margin of our Maxi business also contributed to the decreased gross margin. other operating income was €122 million, an increase of €4 million compared to last year. selling, general and administrative expenses were 21.4% of revenues and were flat at identical exchange rates as expenses related to our strategic initiatives in the U.S. and salary indexations
in Belgium were offset by cost savings across the Group, a payroll tax refund in Belgium related to the prior year and the reduction of our U.S. bonus accrual. other operating expenses were €428 million compared to €169 million last year primarily due to a €125 million charge linked to the portfolio optimization announced in January 2012 and a €270 million impairment charge recorded in the fourth quarter of 2012, mostly related to Maxi, and to a lesser extent to planned Sweetbay store closures. operating profit decreased by 52% at actual exchange rates to €390 million mainly due to price investments, store closing expenses of �€125 million in the first quarter of 2012 and the impairment charges of €270 million recorded in the fourth quarter of 2012. underlying operating profit decreased by 13.4% at actual exchange rates to €810 millions. net financial expenses were €241 million, an increase of €50 million at identical exchange rates mainly due to the premiums paid as part of the debt refinancing at the end of 2012 and to the additional debt to partially finance the Maxi acquisition. At the end of 2012, the average interest rate on our long-term debt was 4.4% compared to 5.0% at the end of 2011. net profit from continuing operations decreased by 73.7% (-78.9% at identical exchange rates) as a result of the portfolio optimization charge in the first quarter, the impairment charge in the fourth quarter and a decline in operating profit which was partially offset by the resolution of tax matters and
51.5% of total capital expenditures were invested in the U.S. activities of the Group, 22.3% in the Belgian operations, 22.8% in the Southeastern Europe & Asia segment and 3.4% in Corporate activities. Investments in new store openings amounted to €160 million (23.3% of total capital expenditures), a
At the end of 2012, Delhaize Group’s net debt decreased by €587 million to €2.1 billion mainly as a result of strong free cash flow generation partially offset by the payment of dividends.
475
105
574
11
1.05
10
12
capiTal eXpendiTures (in millions of €)
688
At the end of 2012, total equity decreased by 4.2% to €5.2 billion. In 2012, Delhaize Group did not purchase any treasury shares and issued 29 308 shares of common stock for €1 million in the fourth quarter as a consequence of the exercise of warrants, and used 139 813 treasury shares to satisfy the vesting of restricted stock units that were granted as part of the share-based incentive plans. The Group owned 1 044 135 treasury shares as of December 31, 2012.
12
basic neT profiT (group share) (in €)
4.71
At the end of 2012, Delhaize Group’s sales network consisted of 3451 stores, a net increase of 43 stores compared to 2011. Of these stores, 700 were owned by the Company. Delhaize Group also owned 29 warehousing facilities in the U.S., Belgium and Southeastern Europe.
11
10
11
12
neT debT (in billions of €)
2.1
During 2012, Delhaize Group made capital expenditures of €688 million, consisting of €590 million in property, plant and equipment, €92 million in intangible assets and €6 million in investment property. In 2011 capital expenditures amounted to €762 million.
At the end of 2012, Delhaize Group’s total assets amounted to €11.9 billion, 2.9% less than at the end of 2011.
10
762
net cash used in investing activities decreased by €628 million, mainly due to the acquisition of Delta Maxi in 2011 as well as more capex discipline in 2012.
balance sheet
group share in neT profiT (in millions of €)
2.6
In 2012, net cash provided by operating activities was €1 408 million, an increase of €302 million compared to 2011, primarily as a result of inventory reduction initiatives across the Group and especially in the U.S., an improved payment process in Belgium and improvement in the working capital position at Maxi over the course of 2012.
Net cash used in financing activities amounted to €262 million, an increase of €116 million compared to the prior year mainly due to the higher repayment of longterm loans partly offset by higher proceeds from the issuance new bonds.
revenues in 2012
5.73
cash flow statement
Capital spending in information technologies, logistics and distribution, and miscellaneous categories amounted to €293 million (42.6% of total capital expenditures), compared to €346 million in 2011.
22.7
billion €
660
group share in net profit amounted to €105 million, a decrease of 77.8% at actual exchange rates (-82.9% at identical exchange rates) compared to 2011, mainly due to portfolio optimization and impairment charges, partly offset by the favorable impact of lower effective tax charges. Per share, basic net profit was €1.05 (€4.71 in 2011) and diluted net profit was €1.04 (€4.68 in 2011).
decrease of €71 million compared to 2011 due to capex discipline. Delhaize Group invested €235 million (34.1% of capital expenditures) in store remodeling and expansions (€185 million in 2011).
1.8
was €125 million or €1.27 basic earnings per share (€4.74 in 2011). Delhaize Group recorded a loss of €22 million in discontinued operations related to the Albanian operations (including an impairment charge of €16 million) following an agreement to sell these operations in February 2013.
10
11
12
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 27
REVIEW
non-gaap measures
At the end of 2012, Delhaize Group had total annual minimum operating lease commitments for 2013 of €312 million, including €21 million related to closed stores. These leases generally have terms that range between 1 and 45 years with renewal options ranging from 3 to 30 years.
in its financial communication, delhaize group uses certain measures that have no definition under ifrs or other generally accepted accounting standards (nongaap measures). delhaize group does not represent these measures as alternative measures to net profit or other financial measures determined in accordance with ifrs. These measures as reported by delhaize group might differ from similarly titled measures by other companies. we believe that these measures are important indicators for our business and are widely used by investors, analysts and other parties. a reconciliation of these measures to ifrs measures can be found in the chapter “supplementary information” of the financial statements (www.annualreports.delhaizegroup.com). a definition of non-gaap measures and ratio composed of non-gaap measures can be found in the glossary. The non-gaap measures provided in this report have not been audited by the statutory auditor.
events after balance sheet date On January 3, 2013, Delhaize Group redeemed the remaining $99 million of the $300 million 5.875% senior notes due 2014 and the underlying cross-currency swap. On January 17, 2013, Delhaize Group announced the decision to close 52 stores, 45 stores in the U.S. (34 Sweetbay, 8 Food Lion and 3 Bottom Dollar Food), 6 stores in Southeastern Europe and 1 store in Belgium. As a result, the group recorded an impairment charge of €49 million in the fourth quarter of 2012. During the first part of 2013, the Group expects earnings to be impacted by approximately €80
211
54
400
225
400
341 8
232
164
627
debT maTuriTY profile(1) (afTer swaps) (in millions of €)
2013 2014 2015 2016 2017 2018 2019 2020 2027 2031 2040
28 //
(1) Excluding finance leases; principal payments (related premiums and discounts not taken into account) after effect of cross-currency interest rate swaps.
million to reflect store closing liabilities including a reserve for ongoing lease and severance obligations. In addition, the Group will record charges of approximately $20 million (€15 million) in the first quarter of 2013 related to the severance of senior management and of support services associates in the U.S. In January 2013, the Greek parliament prospectively enacted an increase in the Greek corporate tax rate from 20 to 26%. The impact on Alfa Beta will be immaterial. In February 2013, Delhaize Group launched a tender offer to acquire 16% non-controlling interest in C-Market (Serbian subsidiary), held by the Serbian Privatization Agency, at a price of €300 per share. At December 31, 2012 Delhaize Group owned 75.4% of C-Market, or 150 254 shares. In February 2013, Delhaize Group completed the sale of its Albanian activities and recorded a gain of approximately €1 million.
United States With 64% of total group revenue, the U.S. is the biggest market for Delhaize Group. With a network of 1 553 stores and 104 613 associates, Delhaize America generated €14.6 billion ($18.8 billion) in revenues in 2012 and €850 million in EBITDA. Through multiple formats and banners, Delhaize America operates stores on the East Coast of the United States; from Maine to Florida.
64%
of total group revenue
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 29
REVIEW
REVENUES
(total: $ 18 800 million) NUMBER OF STORES BY STATE (as of December 31, 2012) Delaware 23 Florida 113 Georgia 91 Kentucky 3 Maine 56 Maryland 79 Massachusetts 26 New Hampshire 33 New Jersey 11 New York 49 North Carolina 507 Ohio 3 Pennsylvania 50 South Carolina 130 Tennessee 32 Vermont 17 Virginia 312 West Virginia 18 Total 1 553 Number of states 18
Hannaford Bottom Dollar Food Food Lion Harvey’s Sweetbay
36% / Other segments
US / 64%
1 553
stores
104 613 associates
KEY FIGURES (as of December 31, 2012)
v
sq.ft.
30 //
1 138
73
56
181
105
Southeast and Mid-Atlantic
Georgia, Northern Florida, South Carolina
New Jersey, Ohio, Pennsylvania
Northeast
Westcoast of Florida
25 000 - 45 000
25 000 - 45 000
18 000 - 20 000
25 000 - 55 000
25 000 - 50 000
15 000 - 20 000
15 000 - 20 000
6 000 - 8 000
25 000 - 46 000
28 000 - 42 000
In 2012, revenues in the U.S. decreased by 2.2% in local currency. This was mainly the result of closing 126 stores in the beginning of 2012. Excluding this impact, revenue growth stood at 0.9%. Comparable store sales decreased by 0.8%. While this performance is unsatisfactory, it does not yet demonstrate the full impact of the Food Lion repositioning. In 2012 the number of repositioned stores reached more than 700, representing more than 60% of the Food Lion network. Since their launch, the repositioned stores showed increases in transaction counts and real sales volume growth. In these repositioned markets, comparable store sales growth outperformed stores that have not yet repositioned by more then 5% at the end of the 4th quarter 2012. In addition to the Food Lion repositioning, the Group took other important measures in the U.S to solidify the health and the future growth of the company. At the beginning of the year management made the decision to retire the Bloom banner. This decision was not taken lightly, but it was deemed necessary in light of the strategic choice to focus resources on a limited number of projects. Similarly, expansion of Bottom Dollar Food was focused on increasing density in its first two markets: Philadelphia and Pittsburgh. Finally, at the beginning of 2013, Delhaize America trimmed its Sweetbay store network to provide more oxygen for the remainder of the portfolio. As a result of price investments, especially at Food Lion, and the negative impact from the closure of 126 stores, the U.S. gross margin decreased in 2012 by 107 basis points to 26.2%. At the same time, lower sales and the impact of the Food Lion brand repositioning resulted in an increase of selling, general and administrative expenses as a percentage of revenues by 21 basis points to 23.0% mainly. This increase was partly offset by the reduction of the U.S. bonus accrual. The operating margin of the U.S. business decreased from 3.9% in
2011 to 2.3% in 2012 mainly because of the $249 million impairment and store closing charges. Total capital expenditures were $455 million, an decrease of 21.4% compared to prior year.
Food Lion Founded in 1957, Food Lion prides itself on offering customers convenient stores providing a good assortment of quality products at low prices. At the end of 2012, Food Lion operated 1 138 stores located in 10 states in the Southeastern United States. In 2011 the company launched the brand repositioning project which focused on the elements Simple, Quality and Price. Using a combination of limited capital and associate training these elements aimed, amongst others, at enhancing the customer satisfaction through price, fresh produce and an easy and convenient shopping experience. The brand repositioning project created a positive dynamic around Delhaize Group’s largest banner. In 2012 more than 500 stores were repositioned in Virginia, West Virginia, North Carolina and South Carolina. By lowering prices, training associates and investing its capital smartly, Food Lion stabilized the business in launched markets and set the foundation for future growth.
Bottom Dollar Food Bottom Dollar Food is Delhaize Group’s discount format in the U.S. offering a limited assortment of about 7 000 products, including meat and produce, with a laser-like focus on keeping prices low for customers. At the end of 2012, the Bottom Dollar Food network numbered 56 stores, 29 in Philadelphia and 13 in Pittsburgh, its two core markets. At the start of 2012 the banner opened 14 stores in two weeks in Pittsburgh and ended the year with a total of 27 new stores.
and fresh products. The banner possesses strong brand recognition and customer loyalty. At the end of 2012, Harveys operated 73 stores.
Hannaford Hannaford is a chain of 181 large stores, with an average selling area of 40 000 square feet. The stores offer a wide range of high quality and fresh products, typically carrying on average 35 000 SKUs. Additionally, more than 81% of the stores has pharmacies. Hannaford augments its quality positioning and increases its value proposition by being priced right every day. This everyday pricing is a foundational element in the Hannaford strategy and substantial work to support this was done in 2012. Hannaford also takes pride in offering sustainable seafood as well as locally-grown and locally-made products.
Sweetbay
62%
Located in Southwest Florida, Sweetbay has a reputation for quality, price and fresh food. of all Food Lion stores were The banner is also wellrepositioned, meaning more than 700 stores. known for its strong Hispanic food offering. At the end of 2012 Sweetbay operated 105 stores. However, in the first quarter of 2013, Sweetbay closed 34, primarily loss making, stores throughout its network.
Harveys Harveys is a supermarket format focused on serving rural markets in Georgia, South Carolina and North Florida and offering a highly localized assortment of regional favorites DELHAIZE GROUP ANNUAL REVIEW ‘12 // 31
REVIEW
belgium Belgium is Delhaize Group’s historical domestic market. Delhaize Belgium operates a wide variety of company-operated and affiliated store formats including supermarkets, convenience and proximity stores, specialty stores and the recently added discount supermarkets Red Market. At the end of 2012, Delhaize Belgium operated 840 stores in Belgium and Luxemburg, a net increase of 19 stores compared to the prior year.
32 //
Delhaize Belgium generated €4.9 billion in revenues in 2012, an increase of 1.6% compared to 2011. The 2012 growth numbers were a combination of both a positive comparable store sales evolution of 0.6% and network growth. In total 35 new stores were opened in 2012 and 9 stores were remodelled in line with the New Generation Store Concept that was launched at the end of 2011. The affiliated store model for supermarkets and convenience stores was once again a strong pillar in the network growth model in 2012. During 2012, Delhaize Belgium’s gross margin decreased by 71 basis points to 20.3% of revenues as a result of price investments. Selling, general and administrative expenses decreased by 6 basis points to 16.7% of revenues mainly as a result of a payroll tax refund related to prior year partly offset by the impact of automatic salary indexation. Total capital expenditures at Delhaize Belgium amounted to €153 million, compared to €142 million in 2011.
Supermarkets - Delhaize With 146 company-operated stores, Delhaize “Le Lion” is the leading supermarket banner of Delhaize Group in Belgium and Luxemburg. The strengths of Delhaize “Le Lion” are its assortment of high quality and affordable products, its broad private brand assortment with both innovative and low price items, and its emphasis on customer service.
Go stores are small convenience-oriented and located mainly at gas stations. They are responding to customers’ expectations on proximity, convenience, speed and longer operating hours.
Low-cost / low-price supermarkets Red Market Red Market supermarkets are newer concept stores that combine high quality products, private as well as national brands, new technologies and ease of shopping with helpful associates and very low prices. The first two Red Markets were opened in 2009. With the addition of two more new stores in 2012, the Red Market network reached a total of 9. Striking and humorous add campaigns, like hiding piggy banks with Red Market vouchers in big cities to raise brand awareness, underlined the dynamics around the youngest Delhaize Belgium banner.
Everything for your pet stores - Tom & Co Tom & Co is the leading pet food chain in Belgium. The 136 stores sell pet food, care products, care services and accessories for pets. In 2012, Tom & Co launched Tom & Care, “health insurance” for animals. It is sold exclusively at Tom & Co and is unique in its kind.
Affiliated supermarkets - AD Delhaize Just like the company-operated Delhaize “Le Lion” banner, AD Delhaize is a supermarket banner but operated by independent owners. These stores are similar but on average smaller than the company operated supermarkets. Our affiliated stores continue to be the most important contributor to Delhaize Belgium’s growth. In 2012 another 24 supermarket affiliates joined the network throughout Belgium and Luxemburg.
Company operated urban convenience stores - City In 2012 Delhaize Group decided to convert its 15 company-operated City neighborhood stores in Belgium into independent Proxy stores. As such they will benefit from the greater flexibility needed to run urban stores and will be able to better adapt to their specific environment. In Luxemburg Delhaize continues to operate 3 City stores.
Affiliated convenience stores Proxy and Shop ‘n Go Proxy is a convenience store format with a focus on fresh products and private label products. In 2012 the Proxy network expanded with 18 new stores, The Shop’n
cooking event
Delhaize Belgium wants to be recognized as an expert in nutrition, in excellent food and in culinary trends. The company considers it as part of its mission to guide and inspire customers for both their everyday as well as their festive cooking. So for the year-end holiday season in 2012, Delhaize Belgium gave its customers the unique opportunity to take a cooking class with five of the most important Chefs in Belgium: Peter Goosens, Lionel Rigolet, Yves Mattagne, Wout Bru and Bart Desmidt. This was the second largest cooking event ever organized worldwide. No fewer than 18 000 candidates signed up for the experience and 1 600 were eventually chosen to be guided by the five chefs who collectively have earned nine Michelin Stars. DELHAIZE GROUP ANNUAL REVIEW ‘12 // 33
REVIEW
35
new an 9 remod d elled stores
25%
market share
in belgium
16 304 associates
keY figures (as of December 31, 2012)
m2
146
223
18
208
100
9
136
1 900
1 125
500
500
140
1 200
450
17 000
12 000
6 500
6 500
2 000
5 700
3 600
mulTi channel iniTiaTiVes delhaize belgium also operates e-commerce initiatives like delhaize direct, delhaize wineworld, and a home delivery service, caddy home. • Delhaize Direct: customers do their shopping on-line on a dedicated store website and collect their groceries at one of the 118 stores that have a dedicated collection point. The ambition is to further increase this number in 2013 and continue the roll out to affiliated stores. in 2012, with the launch of delhaize direct cube, a new virtual supermarket in train stations was created to promote the delhaize direct service. • Delhaize Wineworld: with more than 1 300 different wines, delhaize belgium offers its customers one of the broadest selections of wines in belgium. Through a new and easy-to-navigate website, customers can explore a unique wine cellar, offering both everyday and exclusive wines from all over the world. after completing the ordering process, the wines are delivered to the customer at home. • Caddy Home: for customers who are pressed for time or mobility-challenged and therefore cannot visit one of the delhaize stores, groceries can be ordered online, by telephone or fax and will be delivered at a time of the customers convenience at home.
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souTheasTern europe & asia Southeastern Europe & Asia comprise Delhaize Group’s fastest growing segment. Combining the acquired Maxi-operations in five Balkan countries with the existing operations of Alfa Beta in Greece, and Mega Image in Romania and then adding the Super Indo operations in Indonesia resulted in total 2012 revenues of €3.2 billion. These combined revenues comprise 14% of total Group revenues, up from 12% in 2011.
revenues of the Southeastern Europe & Asia segment increased by 34.1% in 2012, at identical exchange rates. The Maxi-operations, for the first time fully consolidated for the entire year in 2012, account for a significant portion of this growth. However, excluding the impact of Maxi, revenue increased 10% at identical exchange rates thanks to impressive network expansion at Mega Image in Romania and solid growth in Indonesia. In a declining Greek market Alfa Beta managed to gain market share in 2012. This is an excellent example of how consistently implementing a customer-focused strategy wins customer loyalty. During the past decade Alfa Beta has worked vigorously to improve its price perception while at the same time safeguarding its valuable image as a quality food retailer. In 2012, Alfa Beta continued its strategy of offering attractive assortments containing both national and private brands, emphasizing on local products, and investing in price competitiveness, and thus continued to win both the heart and wallet of the challenged Greek customer.
The Maxi-operations benefited in 2012 from further integration efforts with Delhaize Group. Under the umbrella of Delhaize Europe the company succeeded in maintaining cost discipline, making more resources available to invest in sales building initiatives. Additionally, the company recently took the decision to sell the small Albanian operations. gross margin in the SEE & Asia segment decreased by 43 basis points due to the lower gross margin of Maxi. Excluding Maxi, gross margin for the segment increased by 32 basis points as a result of better supplier terms, partly offset by price investments. selling, general and administrative expenses as a percentage of revenues decreased by 15 basis points to 20.3% as a result of higher taxes in Greece due to austerity measures and higher staff costs and rents due to new store openings. Total capital expenditures amounted to €157 million, compared to €185 million in 2011.
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 35
review
Alfa Beta - Greece
Mega Image - Romania
Alfa Beta operates a multi-format store network in Greece combining both company-operated and affiliated stores. Alfa Beta is known for its large assortment, including fresh and organic products and local specialties. In a challenging Greek economic environment, Alfa Beta succeeded in securing this position and strengthened its market share to 21.4%, up from 19.3% in 2011 (Source: AC Nielsen). This was due both to increasing the network by net 17 stores, reaching a total of 268, as well as better-than-competition comparable store sales performance. In addition Alfa Beta continues to look for ways to better connect with its customers: in 2012 it developed a new store concept Alfa Beta Shop & Go. This small (100-120 sqm), convenience-oriented format mainly focuses on immediate-need and daily shopping and will operate in high density neighborhoods in large cities.
Mega Image operates neighborhood supermarkets concentrated in Bucharest with a focus on variety, fresh offering, proximity, and competitive prices. After accelerating its expansion program in 2011, Mega Image shifted into an even higher gear in 2012 by opening 89 new stores, nearly doubling its store network and ending the year with 193 stores. An important lever for this growth was the development and deployment of the Shop & Go format in 2010, enabling Mega Image to respond to the proximity and convenience needs of Romanian customers.
Maxi In 2012 Delhaize Group operated stores under the Mini Maxi, Maxi, Tempo, Piccadilly, Euromax banners across the five countries of Serbia, Bulgaria, Bosnia and Herzegovina, Montenegro, and Albania.
Serbia
“Price Restore” campaign On April 2 2012, Maxi launched a price reduction campaign under the theme “In Maxi prices speak for themselves.” The campaign was announced in an innovative manner, where climbers wearing “price” costumes rappelled down a building in downtown Belgrade to symbolize prices falling. “Everybody kept telling me that I was flying too high and I had to fall. When I fall, everybody is happy and each of my falls is in customers’ interest. When I live low life, everybody else’s living standard rises. Excuse me, but I have to go on and keep on falling,” a Price was quoted. The objective of this campaign is to bring significant savings for customers in Maxi stores. Price reductions have been made on several hundreds of products in all categories reaching in some cases a reduction of up to 30 percent.
36 //
Today, Delhaize Group operates its stores primarilly under the aegis of the Maxi brand and with more than 360 stores, Delhaize Group is the leading food retailer in Serbia. The Maxi and Tempo stores thrive on unique brand awareness, built by offering a broad assortment, including fresh and bakery products, in stores with great locations. In 2012, Maxi continued its integration efforts and further aligned and simplified its formats. Tailoring the offer for customers, management developed the concepts Exclusive Maxi, Urban Maxi and Local Maxi. For MiniMaxi the same exercise was done and resulted in launching of the pilot concept Shop‘n Go, focusing on convenience.
Bulgaria In Bulgaria, Delhaize operates under the Piccadilly brand. Piccadilly is known for its large assortment, strong focus on fresh products and extended opening hours. Last year, important and successful efforts were made to sharpen this quality and convenience image and improve customer satisfaction.
Most Piccadilly stores are located in urban areas, concentrated in Sofia, Varna and Plovdiv. At the end of 2012 Delhaize Group operated 43 stores in Bulgaria, a gross increase of 8 stores compared to the prior year.
Bosnia and Herzegovina Delhaize Group operates a network of 41 stores, making it one of the largest food retailers in Bosnia and Herzegovina. The multi-format network comprises Mini Maxi convenience stores, Maxi supermarkets, Tempo hypermarkets, and Tempo Express discount stores.
Montenegro Delhaize Group offers 3 different store formats to our customers in Montenegro. The Maxi supermarket and the Tempo hypermarket have both a strong focus on fresh products as well as a large assortment. The Mini Maxi convenience stores offer a narrower assortment but include fresh products.
Albania The Albanian network consists of 23 Euromax stores, offering a mix of convenience stores and supermarkets. At the end of 2012, in an effort to further focus resources, Delhaize Group decided to sell the Albanian activities and completed this transaction in February 2013.
Super Indo - Indonesia Most Super Indo stores (51% owned by Delhaize Group) are located in Jakarta, Bandung, Surabaya and Yogyakarta, all densely populated cities on the island of Java, in Indonesia. Super Indo supermarkets offer a wide variety of fresh products with a focus on fresh meat and fish at low prices, both of which are important differentiators in the Indonesian market. In 2012, Super Indo opened 15 new stores primarily in the Central and East Java Regions. The market share of Super Indo came out at 4.2% in the supermarket and hypermarket category (Source: AC Nielsen).
36 859 associates
%p 4f 5 ro g u
o rowth revenue g om coming fr ent gm see&a se
keY figures (as of December 31, 2012) albania
m2
bosnia and herzegovina
bulgaria
23
19
20
2
25
18
170 - 6 000
400
400 - 2 500
4 000 - 10 000
2 200
250
16 000
12 000
19 000
25 000
15 000 - 18 000
3 000 - 6 000
montenegro
m2
Serbia
8
15
1
220
121
10
12
up to 400
400 - 2 500
3 000
up to 400
400 - 2 500
4 000 - 10 000
500 - 2 000
4 000
12 000 - 18 000
24 000
6 600
14 500
31 500
5 000
Greece
m2
indonesia
romania
162
42
27
25
12
132
61
103
1 250
440
500
220
2 370
600
260
1 000
13 300
4 150
6 750
4 250
8 200
5 900
2 000
8 700
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 37
GOVERNANCE
BOARD OF direcTors as of December 31, 2012
5. shari l. ballard (1966)
1. maTs Jansson (1951) Chairman since 2012 Board Member of Danske Bank Former President of ICA Detaljhandel and Deputy CEO and Chairman of the Group Former CEO of Catena/Bilia, Karl Fazor Oy, Axfood Former President and CEO of Axel Johnson AB Former President and CEO of SAS Former Board member of Axfood, Mekonomen, Swedish Match and Hufvudstaden Member of JP Morgan European Advisory Council Degree in Economics and Sociology Elected 2011
2. hugh g. farringTon (1945) Former President and CEO of Hannaford Former Vice Chairman of Delhaize America Former Executive Vice President of Delhaize Group BA in History, MA in Education Elected 2005
1
6
38 //
2
7
President, International - Enterprise Executive Vice President of Best Buy Co., Inc. Bachelors Degree in Social Work Elected 2012
3. william g. mcewan (1956)
6. pierre-oliVier beckers (1960)
Former President and CEO of Sobeys Former Board Member of Empire Company Former President and CEO of the U.S. Atlantic Region of The Great Atlantic and Pacific Tea Company Board Member of The Consumer Goods Forum Elected 2011
President and CEO since 1999 President of the Belgian Olympic and Interfederal Committee Member of the International Olympic Committee Former Co-Chairman of The Consumer Goods Forum Board member and former Vice-Chairman of Food Marketing Institute Board member and former Chairman of CIES Board member of the Consumer Goods Forum Board member of Guberna Vice-Chairman Executive Committee Federation of Belgian Companies Master in Business Administration Elected 1995
4. JacQues de VaucleroY (1961) Member of Management Committee and CEO of the Northern, Central and Eastern Europe Region (NORCEE) of Axa Former Member Executive Board ING Group and CEO of ING Insurance Europe Degree in Law, Master of Business Law Elected 2005
3
8
4
9
5
10
11
7. Jean-pierre hansen (1948)
8. claire h. babrowski (1957)
10. didier smiTs (1962)
Executive Committee member of GDF Suez Chairman of the Energy Policy Committee of GDF Suez Member of the Management Committee of FOREM Former CEO and Chairman of Electrabel Former COO and Vice Chairman of the Executive Committee of Suez Group Chairman of the Board of SNCB Logistics Board member of Electrabel, Electrabel Customers Solutions and CMB Former Vice Chairman of Federation of Enterprises in Belgium Civil Engineer, Philosophy Degree in Engineering, Master in Economics Elected 2011
Board member of Pier 1 Imports and Quiznos Former EVP and COO of Toys’R’Us Former COO and CEO of RadioShack Former Senior EVP and Chief Restaurant Operations Officer of McDonald’s Corp. MBA Elected 2006
Managing Director of Papeteries Aubry Former Manager of Advanced Technics Company Master in Economics and Financial Sciences Elected 1996
9. Jack l. sTahl (1953)
President of Sioen Vice Chairman and former CEO of Recticel Former Chairman of the Board of Spector Photo Group and Telindus Group Board member at Spector Photo Group, Former Chairman of Federation of Belgian Companies Member of the Corporate Governance Commission Civil Engineer Elected 2005
Former President and CEO of Revlon Former President and COO of The Coca-Cola Company Former Group President and CFO of Coca-Cola North America Former Board member at Schering-Plough Board member of Dr. Pepper Snapple Group, Sacks and Coty and CVC Capital Partners Advisory Inc. Board member of nonprofit organization MBA Appointed by the Board in 2008, Elected 2009
11. baron VansTeenkisTe (1947)
EXECUTIVE commiTTee as of December 31, 2012
12. pierre-oliVier beckers (1960)
15. michel eeckhouT (1949)
President and CEO Delhaize Group Belgium’s Bel 20 CEO of the year 2009 Manager of the year 2000 (Trends/ Tendances) Master in Business Administration Joined Delhaize Group in 1983
EVP Delhaize Group (until December 31, 2012) Master in Economics, Executive Master in General Management Joined Delhaize Group in 1978
16. ronald c. hodge (1948)
13. pierre bouchuT (1955)
EVP Delhaize Group and CEO of Delhaize America (until October15, 2012) BS in Business Administration Joined Hannaford in 1980
EVP and CFO Delhaize Group Graduate in Financial Banking Master in Applied Economics Joined Delhaize Group in 2012
17. nicolas hollanders (1962)
14. sTÉfan descheemaeker (1960)
EVP of Human Resources, IT and Sustainability Delhaize Group Master in Law and Notary Law, Post Graduate in Economics Joined Delhaize Group in 2007
EVP and CEO Delhaize Europe Master in Commercial Engineering Joined Delhaize Group in 2009
12
13
17
14
18
15
19
16
20
18. kosTas macheras (1953)
19. roland smiTh (1954)
EVP Delhaize Group and CEO of Southeastern Europe Hellenic Management Association Manager of the year 2008 Joined Alfa Beta in 1997 Retail Manager of the Decade 2011 (2011 Retail Awards in Greece) Graduate in Economics BA, MBA Joined Delhaize Group in 2007
EVP Delhaize Group and CEO of Delhaize America Graduate U.S. Military Academy Joined Delhaize Group In 2012
20. michael r. waller (1953) EVP, General Counsel and General Secretary Delhaize Group BA in Psychology, Juris Doctorate Joined Delhaize America in 2000
The following former directors and executives have been granted an honorary title in gratitude for their contribution to delhaize group: • Honorary Chairman and Chief Executive Officer: Chevalier Beckers, Baron de Vaucleroy • Honorary Chairman and Director: Mr. Frans Vreys, Count Georges Jacobs de Hagen • Honorary Director: Mr. Jacques Boël, Mr. Roger Boin, Baron de Cooman d’Herlinckhove, Mr. William G. Ferguson, Mr. Robert J. Murray • Honorary General Secretary and Member of the Executive Committee: Mr. Jean-Claude Coppieters ‘t Wallant • Honorary Members of the Executive Committee: Mr. Pierre Malevez, Mr. Arthur Goethals, Mr. Renaud Cogels • Honorary Secretary of the Executive Committee: Mr. Pierre Dumont honorary director mr. roger boin passed away at the end of 2012. The board of directors of delhaize group and its management wish to show their respect and pay tribute for his part in helping to build the company.
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 39
INVESTORS
shareholder INFORMATION Delhaize Group shares trade on NySE Euronext Brussels under the symbol DELB. American Depositary Shares (ADS), each representing one ordinary share of Delhaize Group, are traded on the New york Stock Exchange under the symbol DEG. ADSs are evidenced by American Depositary Receipts (ADRs). Information on Delhaize Group’s share price can be found on the websites of Delhaize Group (www.delhaizegroup.com), NySE Euronext Brussels (www.euronext.com) and the New york Stock Exchange (www.nyse.com). Detailed information on trading activity and share prices can also be found in the financial section of many newspapers.
share performance in 2012 (2012 - in €) 60
euroneXT 100
50
40 delhaize group share (delb)
30
20
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On December 31, 2012, the closing price of Delhaize Group’s ADR on the New york Stock Exchange was $40.55, 28.0% lower than the closing price on December 30, 2011 ($56.35). In the same period, the S&P 500 index increased by 13.4%, and the S&P 500 Food and Staples Retailing Index increased by 15.8%. In 2012, the average daily trading volume of Delhaize Group ADRs was 46,789.
(2012 - in $) 70 s&p 500
60
50 delhaize group adr (deg)
equity indices
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30
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On December 31, 2012, the closing price of Delhaize Group’s ordinary share on NySE Euronext Brussels was €30.25, a 30.3% decrease compared to €43.41 a year earlier. During the same period, the Euro Stoxx 50 index increased by 13.8% and the Bel20 index increased by 18.8%. The FTSE Eurofirst 300 Food and Drug Retailers Index decreased by 6.5% in 2012. In 2012, Delhaize Group shares traded on NySE Euronext Brussels at an average closing price of €33.33 and an average daily trading volume of 500,935 shares.
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On December 31, 2012, Delhaize Group’s shares were included in the following major stock indices: BEL20, Euronext 100, Dow Jones Stoxx 600 and the Dow Jones Sustainability Index.
FINANCIAL CALENDAR Press release - 2013 first quarter results and Capital Markets Day
May 8, 2013(1)
Shareholders' record date
On December 31, 2012, the weight of Delhaize Group shares in the BEL20 index was 5.7%. Delhaize Group shares represented the 9th largest constituent in the index. On December 31, 2012, the weight of Delhaize Group in the Euronext 100 index was 0.21%. Delhaize Group represented the 96th largest constituent in the index.
Dividend At the Ordinary Shareholders’ Meeting to be held on May 23, 2013, the Board of Directors will propose the payment of a gross dividend of €1.40 per share, compared to €1.76 the previous year. After deduction of 25% Belgian withholding tax, this will result in a net dividend of €1.05 per share (€1.32 the prior year). The net dividend of €1.05 per share will be payable to owners of ordinary shares against coupon no. 51. The Delhaize Group shares will start trading ex-coupon on May 28, 2013 (opening of the market). The record date (i.e. the date at which shareholders are entitled to the dividend) is May 30, 2013 (closing of the market) and the payment date is May 31, 2013. The payment will be made at the registered office of the Company (rue Osseghemstraat 53, 1080 Brussels, Belgium) as well as all Belgian financial institutions. For shares held through a share account, the bank or broker will automatically handle the dividend payment. The payment of the dividend to the ADR holders will be made through Citibank.
May 1, 2013
Final date for notifying intent to participate in the Ordinary Shareholders’ Meeting
May 17, 2013(1)
Ordinary Shareholders’ Meeting
May 23, 2013
ADR and ordinary share dividend record date
May 30, 2013
Dividend for the financial year 2012 becomes payable to owners of ordinary shares
May 31, 2013
Dividend for the financial year 2012 becomes payable to ADR holders
June 5, 2013 August 8, 2013(1)
Press release - 2013 second quarter results Press release - 2013 third quarter results
November 7, 2013(1)
(1) You are kindly invited to listen to the related conference call. See www.delhaizegroup.com for further details on the conference call and the webcast.
Type of Delhaize Group Shares Delhaize shares can be held in three different forms: dematerialized form, bearer shares or registered shares. Bearer shares are held in printed form. Dematerialized shares are shares that can only be represented by entries into an account in the book of a depositary institution. Registered shares are shares that can only be represented by entries into a shareholder register held by the Company. On request, shareholders may convert their shares into another form at their own expense. The ownership of registered shares can be transferred by informing the Company and returning the certificate of record in the shareholder register to the Company. As from January 1, 2008, bearer shares booked into a securities account have been automatically converted into dematerialized shares. Bearer shares not yet booked in a securities account shall be automatically converted into dematerialized shares as from the time they are booked into a securities account. All remaining bearer shares that shall not have been deposited in a securities account shall be converted at the choice of their holder into dematerialized or registered shares by December 31, 2013.
Information for ADR Holders ADSs (American Depositary Shares), each representing one ordinary share of Delhaize Group, are traded on the New York Stock Exchange under the symbol DEG. ADSs are evidenced by American Depositary Receipts (ADRs). The Delhaize Group ADR program is administrated by: Citibank Shareholder Services P.O. Box 43077 Providence, RI 02940-3077 U.S.A. Toll free telephone number for U.S. callers: 1-877-853-2191 International Call Number: 1-781-575-4555 E-mail: [email protected] Website: www.citi.com/dr Citibank has put in place an International Direct Investment Plan for Delhaize Group, which is a dividend reinvestment and direct purchase plan sponsored and administered by Citibank. The program enables existing holders and first time purchasers the opportunity to make purchases, reinvest dividends, deposit certificates for safekeeping and sell shares. For further information on Citibank’s International Direct Investment Program for Delhaize Group, please visit www.citi. com/dr or contact Citibank Shareholder Services at 1-877-248-4237 (1-877-CITIADR.) DELHAIZE GROUP ANNUAL REVIEW ‘12 // 41
investors
€ 1f g.r4oss0
Taxation of Dividends of Delhaize Group Shares It is assumed that, for the application of domestic Belgian tax legislation and the U.S.-Belgian tax treaty, owners of Delhaize Group ADRs are treated the same as owners of Delhaize Group shares and that the ADRs are treated as Delhaize Group shares. However, it must be noted that this assumption has not been confirmed or verified with the Belgian Tax Authorities. For Belgian income tax purposes, the gross amount of all distributions made by Delhaize Group to its shareholders (other than repayment of paid-up capital in accordance with the Belgian Companies Code) is generally taxed as dividends. Dividends that are attributed or paid on the shares are in principle subject to a 25% Belgian withholding tax. For non-Belgian residents - individuals and corporations - Belgian withholding tax is retained also at the rate of 25% subject to the reductions or exemptions provided by Belgian tax law or by the tax treaty concluded between Belgium and the country of which the nonBelgian beneficiary of the dividend is a resident. Such withholding tax is normally the final tax in Belgium. For dividends paid by Delhaize Group to a U.S. holder of ADRs, beneficial owner of the dividends, who is not holding the shares through a permanent establishment in Belgium and is entitled to claim benefits under the U.S.- Belgian tax treaty, the withholding tax is reduced from 25% to 15%. If the beneficial owner is a company that owns directly at least 10% of the voting stock of Delhaize Group, a reduced with42 //
o are per sh d n e id div in 2012
holding tax rate of 5% is applicable. No withholding tax is however applicable if the beneficial owner of the dividends is i) a company, resident of the U.S. that has owned directly shares representing at least 10% of the capital of Delhaize Group for a 12-month period ending on the date the dividend is declared, or ii) a pension fund, resident of the U.S., provided that the dividends are not derived from carrying on a business by the pension fund or through an associated enterprise.
Although there are exceptions, in general the full 25% Belgian withholding tax must be withheld by Delhaize Group or the paying agent, and the non-Belgian holder of Delhaize Group shares or ADRs may file a claim for reimbursement for amounts withheld in excess of the treaty rate. The reimbursement claim form (Form 276 Div.- Aut.) can be obtained from the AFER – Bureau Central de Taxation, BruxellesEtranger, Tour North Galaxy B7, Boulevard Albert II 33, PO Box 32, B-1030 Brussels, Belgium. (phone: +32 2 576 90 09, fax: +32 2 579 68 42, email: bct.cd.bruxelles.etr@ minfin.fed.be). The form should be completed in duplicate and sent to the relevant Tax Office in the residence country of the non-Belgian holder with the request that one copy be appropriately stamped and returned to the sender. The non-Belgian holder can then obtain reimbursement from the Bureau Central de Taxation, at the same address, upon presentation of the stamped form and a document proving that the dividend has been cashed. The request for reim-
bursement must be filed with the Bureau Central de Taxation within five years from January 1 of the year following the year in which the dividend was declared payable. Prospective holders should consult their tax advisors as to whether they qualify for the reduced withholding tax upon attribution or payment of dividends, and as to the procedural requirements for obtaining the reduced withholding tax immediately upon the attribution or payment of the dividends or through the filing of a claim for reimbursement.
Annual Report This annual report is available in English, French and Dutch. It can be downloaded from Delhaize Group’s website: www.delhaizegroup.com. Delhaize Group is subject to the reporting requirements of the U.S. Securities and Exchange Commission (SEC) governing foreign companies listed in the U.S. An annual report will be filed with the SEC on Form 20-F. The Form 20-F will be available from the SEC’s EDGAR database at www.sec.gov/edgarhp. htm and on the Company’s website.
Consultation of Documents The public documents concerning Delhaize Group can be consulted at the registered office (rue Osseghem/ Osseghemtraat 53, 1080 Brussels Belgium). In the United States, Delhaize Group is subject to the informational requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance with the Exchange Act Delhaize Group files reports and other infor-
mation with the SEC. The reports and other information Delhaize Group files with the SEC can be inspected at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C., U.S. 20549. You may obtain information on the operation of the SEC’s public reference room by calling the SEC at +1 (800) SEC-0330. Also, the SEC maintains a website at www.sec.gov that contains reports and other information that registrants have filed electronically with the SEC.
Delhaize Group makes available free of charge, through the shareholder information section of Delhaize Group’s website (www.delhaizegroup. com), the Company’s reports filed electronically with the SEC pursuant to the Exchange Act as soon as reasonably practicable after the Company electronically files such material with the SEC. Delhaize Group’s reports and other information can also be inspected and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005, U.S.A.
Ordinary Shareholders’ Meeting The next Ordinary Shareholders’ Meeting will take place on Thursday, May 23, 2013. Detailed information about the Ordinary Shareholders’ Meeting will be published in the Belgian newspapers L’Echo and De Tijd, as well as in the Belgian Official Gazette and on the Company website.
INFORMATION DELHAIZE GROUP SHARE 2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
40.78
Share price (in €)
Price: year-end
30.25
43.41
55.27
53.62
44.20
60.20
63.15
55.20
55.95
average (close)
33.33
51.29
57.24
49.26
46.37
67.38
58.14
51.68
44.98
28.15
highest (intraday)
46.91
60.80
67.29
55.00
59.67
75.79
67.00
59.70
59.75
43.99
25.59
40.82
47.69
42.81
32.80
54.5
49.12
45.95
36.61
11.90
Annual return Delhaize Group share(1)
lowest (intraday)
-27.3%
-19.1%
5.3%
23.8%
-26.6%
-4.7%
16.1%
0.7%
39.9%
136.3%
Evolution Belgian All Shares Return index
18.80%
-20.8%
2.7%
31.6%
-47.6%
-1.9%
+26.2%
+28.1%
+38.2%
+16.0%
Dividend (in €)
Gross dividend
1.40
1.76
1.72
1.60
1.48
1.44
1.32
1.20
1.12
1.00
Net dividend
1.05
1.32
1.29
1.20
1.11
1.08
0.99
0.90
0.84
0.75
Dividend return(2)
3.5%
3.0%
2.3%
2.2%
2.5%
1.8%
1.6%
1.6%
1.5%
1.8%
Share price/shareholders' equity(3)
0,58
0.81
1.09
1.22
1.07
1.66
1.73
1.47
1.84
1.36
Share price/basic earnings per share(3)
28,8
9.2
9.6
10.4
9.4
14.3
17.0
14.2
17.5
13.5
Share price/diluted earnings per share(3)
29,1
9.3
9.7
10.6
9.6
14.9
17.8
14.9
18.1
13.5
Annual volume of Delhaize Group shares traded (in millions of €; NYSE Euronext Brussels)(4)
4 188
3 895
5 216
5 633
6 754
8 141
6 548
3 686
3 581
2 021
Annual volume of Delhaize Group shares traded (in millions of shares; NYSE Euronext Brussel)(4)
128.2
74.7
89.3
115.1
146.7
121.9
113.1
71.9
81.1
72.7
101 921
101 892
101 555
100 871
100 583
100 281
96 457
94 705
93 669
92 625
3 083.1
4 423
5 613
5 409
4 446
6 037
6 091
5 228
5 241
3 777
5 144
7 069
7 400
7 472
6 849
8 281
8 726
8 171
7 849
6 805
Ratios
Number of Shares
Number of shares (in thousands; year-end) Market Capitalization
Market capitalization (in millions of €; year-end) Enterprise value(3) (5)
(1) Capital gains recorded during the year, including net dividend and reinvestment. (2) Net dividend divided by share price at year-end. (3) Cannot be calculated for years before 2003, since no IFRS financials are available before 2003. (4) Excluding shares traded on the New York Stock Exchange. (5) Enterprise value = market capitalization + net debt.
DELHAIZE GROUP ANNUAL REVIEW ‘12 // 43
company information
operations
registered office:
united States
company Support office:
P.O. Box 1330, 2110 Executive Drive Salisbury - NC 28145-1330 U.S.A. Tel : +1 704 633 8250 www.foodlion.com www.bottomdollarfood.com
Delhaize Group SA rue Osseghemstraat 53 1080 Brussels Belgium Tel: +32 2 412 21 11 - Fax: +32 2 412 21 94 Delhaize Group Square Marie Curie 40 1070 Brussels Belgium Tel: +32 2 412 22 11 - Fax: +32 2 412 22 22 http://www.delhaizegroup.com Company number: 0402 206 045 Delhaize Brothers and Co. “The Lion” (Delhaize Group) SA is a Belgian company formed in 1867 and converted into a limited company on February 22, 1962.
investors and media For all questions regarding Delhaize Group and its stock, please contact: Delhaize Group Investor Relations Department Square Marie Curie 40 1070 Brussels Belgium Tel.: +32 2 412 21 51 - Fax.: +32 2 412 29 76 Questions can be sent to [email protected]. Information regarding Delhaize Group, including press releases, annual reports and share price can be found in three languages (English, French and Dutch) on Delhaize Group’s website www.delhaizegroup.com.
FOOD LION - BOTTOM DOLLAR FOOD
HANNAFORD
145 Pleasant Hill Road Scarborough – ME 04074 U.S.A. Tel : +1 207 883 2911 - Fax : +1 207 883 7555 www.hannaford.com
SWEETBAY SUPERMARKET
3801 Sugar Palm Drive Tampa – FL 33619 U.S.A. Tel : +1 813 620 1139 - Fax : +1 813 627 9766 www.sweetbaysupermarket.com
belgium, G.D. of luxembourg DELHAIZE BELGIUM
Rue Osseghemstraat 53 - 1080 Brussels Belgium Tel: +32 2 412 21 11 - Fax: +32 2 412 21 94 www.delhaize.be
Serbia, bosnia and herzegovina and montenegro MAXI
Jurija Gagarina 14 - 11070 Belgrade - Serbia Tel: +381 11 715 34 00 - Fax: +381 11 715 39 10 www.maxi.rs
romania
MEGA IMAGE
95 Siret Str. - Sektor 1 - Bucuresti - Romania Tel: +40 21 224 66 77 - Fax: +40 21 224 60 11 www.mega-image.ro
bulgaria
PICCADILLY
Varna 9002, 1A, Bitolia Str. - Bulgaria Tel.: +359 52 66 34 34 - Fax: +359 52 66 34 56 www.piccadilly.bg
indonesia
PT LION SUPER INDO
Menara Bidakara 2, 19th floor Jl Jend. Gatot Soebroto kav 71-73 Jakarta Selatan 12870 - Indonesia Tel.: +62 21 2929 3333 Fax: +62 21 29069441-45 www.superindo.co.id
Greece
ALFA BETA VASSILOPOULOS
81, Spaton Ave. - Gerakas Attica Greece 153 44 Tel: +30 210 66 08 000 Fax: +30 210 66 12 675 www.ab.gr
about the people included in the pictures in this report
Most of the people portrayed in the pictures in this annual report included in the sections “Strategy,” “Review” are our associates or our associates’ family members.
legal version of the annual report
Only the French version of the annual report has legal force. The Dutch and English versions represent translations of the French original. The consistency between the different language versions has been verified by Delhaize Group under its own responsibility.
credits
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Design & production: www.chriscom.be - Photos: Patrick Schneider Photography (U.S.), Pascal Broze - Reporters (Belgium), Jean-Michel Byl (Belgium), Arnaud Ghys (Belgium)
caution concerning forward-looking Statements
All statements that are included or incorporated by reference in this annual review or that are otherwise attributable to Delhaize Group or persons acting on behalf of Delhaize Group, other than statements of historical fact, which address activities, events or developments that Delhaize Group expects or anticipates will or may occur in the future, including, without limitation, statements regarding expected financial performance; expansion and growth of Delhaize Group’s business; anticipated store openings and renovations; future capital expenditures; projected revenue growth or synergies resulting from acquisitions and other transactions; efforts to control or reduce costs, improve buying practices and control shrink; contingent liabilities; future consumer spending; forecasted currency exchange rates or inflation; expected competition; and business strategy, are “forward-looking statements” within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. These forward-looking statements generally can be identified as statements that include phrases such as “believe,” “project,” “target,” “predict,” “estimate,” “forecast,” “strategy,” “may,” “goal,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. Although Delhaize Group believes such statements are based on reasonable assumptions, actual outcomes and results may differ materially from those projected. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Important factors that could cause actual results to differ materially from expectations of Delhaize Group include, but are not limited to, those factors described in the annual report in the chapter entitled ”Risk Factors” on p. 58 and under Item 3 under Part 1 of Delhaize Group’s Annual Report on Form 20-F for the fiscal year ended December 31, 2012, filed with the U.S. Securities and Exchange Commission on April 3, 2012. Delhaize Group undertakes no obligation to update forward-looking statements, whether as a result of new information, future developments or otherwise, and disclaims any obligation to do so.