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10 Questions

with Johan Boeijenga
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September 5th, 2007 issue

VLADIMÍR WEISS/THE PRAGUE POST
Ahold Czech Republic CEO Johan Boeijenga talks about the country's lack of supermarket brand loyalty.
THE BOEIJENGA FILE

Job title: CEO, Ahold Czech Republic
Nationality: Dutch
Former position: Executive vice president, supply chain, Albert Heijn
Family: Married, three children

Ahold, the Czech branch of the multinational retail company Royal Ahold, announced Aug. 29 that it would renovate and rename its 56 Hypernova megastores after its larger Albert supermarket chain. After announcing the move, Johan Boeijenga, CEO of Ahold Czech Republic, talks to The Prague Post about the company’s reasoning, the glut of grocery store owners on the market and the country’s lack of brand loyalty.
➊ Your parent company announced a major restructuring of operations last November. Do your recently announced changes stem from this review?
Royal Ahold wants to focus on its strength, which is being the first- or second-largest food retailer in each market we operate in. This had consequences for Central Europe. We saw in Poland that we weren’t No. 1 or No. 2 and it would take a while to move up. Based on that, we sold the Polish division. And now we’ve begun the process of selling our Slovak branch. Our focus in Central Europe is now the Czech market.
➋ What does this focus entail?
Our goal is that, by 2012, we’ll have a market share of 25 percent. We’re now close to 19 percent. To reach this, we want to sell more to our current customers and attract new customers. As part of this, last week we launched a huge price campaign saying that we have a fair price, a price that won’t irritate — there’s no need to look anywhere else. Also, we plan to open 40 new stores by 2012.
➌ We’ve seen several grocery chains pull out of the country in the past year. What’s the current state of the market?
There are a lot of supermarket chains — we call them “banners” — in the country. Further consolidation will take place. The number of banners is not sustainable and international players won’t accept a minor position.
When we did surveys, we found that in the domestic market there is nearly no brand loyalty — it shifts and shifts. At the same time, we’re seeing customer demand change incredibly fast — four or five times faster than in Western Europe. We had to react to that and the opportunity we have to become a brand. When there’s nearly no brand loyalty, that’s the moment to make your stand.
➍ And renaming all of your Hypernova stores will help in this?
First, we made the decision not to open stores larger than 5,000 square meters (53,820 square feet). That’s still a “hyper” size from our point of view; it allows you to sell an assortment of nonfoods as well as dry and fresh foods. Then we saw that we could be one brand with different formats: small, regular and hyper. And that one brand should be Albert.
Many people mix up re-branding and remodeling. Re-branding has to do with logos and the way you communicate. We could choose to re-brand Hypernova and keep its format in place. But we wanted to take Hypernova’s strengths and put that into Albert. We’re not just remodeling the hypers. We’re doing all the stores.
➎ What implications will your space cap have for your 13 large Hypernovas, which vary between 7,000 and 10,000 square meters in size?
What we’re going to do is look at these large Hypernovas and take them on a case-by-case situation. We have contracts with landlords and we respect these. We believe we can show our landlords that based on changes in the market that we can create a win-win situation. Our move to 5,000 square meters won’t mean the end of these large Hypernovas.
➏ Does Ahold have any models it’s following for unifying the two chains?
We went through this process in the Baltics. We had two brands, a supermarket and hyper. And it was a success. We worked with our landlords and tenants and sometimes gave space back based on the remodeling. And we invested in the stores, not just squeezing the total square meters with a wall and that’s it. We put in place the format the customers wanted, and sales went up.
➐ You mentioned rapid changes in consumer demand. What changes are you seeing?
The spending power of the country is increasing and people are demanding higher quality levels. The Czechs are traveling and seeing what’s happening in other parts of the world. They want a greater range of products — ready-to-eat foods, for example. We have a new assortment of these, though they won’t be sold in all our supermarkets yet, because we have to bring them to the market at the right time.
➑ As the market continues to consolidate, will we see the same kind of evolution as in the United States and Western Europe, where traditional food stores have dwindled?
That natural evolution will take place here. It’s based on changes in the market and what consumers expect from shops. But these shops will have the opportunity to become specialty stores, especially in fresh foods. They won’t just disappear. There’s still a place for them.
➒ You’ve mentioned how Albert can be “best in fresh.” Can we expect to see a greater variety of fruit and vegetables?
Fresh food isn’t just fruit and vegetables. We’re already above par with our bakery products. They generate strong traffic. We can still make huge steps in fruits and vegetables and will do this — not only in product range but also by teaching customers about the quality of our fresh food. We can excel in this, since we control our distribution centers and have quality control over our whole supply chain.
➓ The government recently announced a program to promote awareness of organic food. Are you seeing much acceptance of organics at your stores?
They’re rare in the Czech Republic. The share of organic products has increased significantly in the last two years — sales grew 30 percent to 40 percent in our stores — but generally it’s still low. But the trend is positive. Consumers now focus on the general quality and price of food, but more and more, they care about the product’s nutrition facts and how it’s been produced.
Want your top manager to answer our 10 Questions? Send a message to Paul Voosen at pvoosen@praguepost.com


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