Delhaize “Le Lion” S.A.

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Delhaize “Le Lion” S.A.

rue Osseghem 53
Molenbeek-St.-Jean
B-1080 Brussels
Belgium
Telephone: ( + 32) 2-412-21-11
Fax: ( + 320) 2-412-21-94
Web site: http://delhaize-le-lion.be

Public Company
Incorporated: 1867
Employees: 152,000
Sales: EUR 18.2 billion ($17.49 billion)(2000)
Stock Exchanges: Euronext Brussels New York
Ticker Symbol: DELB; DEG
NAIC: 445110 Supermarkets and Other Grocery (Except Convenience) Stores

Although based in Belgium, where it is one of that country’s leading supermarket groups, Delhaize “Le Lion” SA is also the United States’ sixth-largest supermarket group through its publicly listed Delhaize America subsidiary. Indeed, Delhaize America accounts for some 75 percent of the company’s sales, which topped EUR 18 billion in 2000. The company operates under various store banners and formats, including nearly 1,200 Food Lion stores in the United States, Belgian banners Delhaize “Le Lion” Supermarket, AD Delhaize, Proxy Delhaize, Delhaize City, and Shop ‘n’ Go, for a sales network of more than 615 stores. The company is also active in eight other international markets, including Greece, through the Alfa-Beta chain; the Czech Republic and Slovakia, through subsidiary Delvita; Romania, through its part-ownership of Mega-Image; and Thailand, Indonesia, and Singapore. The company’s total store holdings reached 2,310 stores at the end of 2000—with plans to open nearly 250 new stores by the end of 2001. Boosting the company’s U.S. presence was the July 2000 completion of its acquisition of Hannaford Bros., a $3.3 billion chain operating in Delhaize’s own core market of the eastern U.S. regions. Following that acquisition, Delhaize moved to acquire full control of Delhaize America, then listed that company separately on the New York Stock Exchange. The parent company is quoted on the Euronext Brussel exchange, while its Alfa-Beta subsidiary is quoted on the Athens market.

Putting Retail Theory into Practice in the Mid-1800s

Commercial sciences professor Jules Delhaize had developed his own theories about food retailing at the middle of the nineteenth century, and in 1867 he convinced his brother, Edouard and their brother-in-law Jules Vieujant, who were also teachers, to join him in putting his theories into practice. Delhaize was convinced that he could revolutionize Belgium’s grocery trade by creating a network of branch stores supplied by a central warehouse, which would enable the company to eliminate the many middlemen involved in the grocery trade and cut down on costs. The company was then able to pass its savings onto its customers. Prices on store items, moreover, were to be clearly marked.

The Frères Delhaize company formed in Charleroi in 1867, adopting Belgium’s lion crest as its own symbol. The company’s name later incorporated its symbol, becoming Delhaize “Le Lion.” The symbol was later to become one of Belgium’s most well-known brands. The Delhaize name also contributed to the success of another of the Delhaize brothers, Adolphe, who founded his own network of stores around the same time. In 1883, the company, which had moved to Brussels soon after its founding, changed headquarters for facilities closer to the city’s Gare de l’Ouest train station. Featuring then state-of-the-art warehousing facilities, as well as a school and fire brigade, the new site also gave the company a rail link, increasing its distribution capacity. At this time too, the company branched out into manufacturing, producing a range of goods under the Delhaize brand name, including chocolates and biscuits, coffee and spirits, and other products.

By the outbreak of World War I, Delhaize had expanded to a network of some 500 stores throughout Belgium. Following the war, the company sent representatives to the United States, where grocers were steadily introducing new innovations in areas such as store designs, displays, and service. The company’s participation in international trade fairs enabled it to import new products for its stores. Yet, apart from expanding its network to include the Belgian Congo, the company continued to focus exclusively on its domestic market. The economic crisis surrounding the Depression Era encouraged the company to add a new store banner, Derby, featuring deep-discount products. Despite the troubled economic climate, Delhaize continued to prosper, expanding its branch network to nearly 750 stores at the outbreak of World War II. In addition, the company’s strong distribution network and its various production facilities enabled it to build a second network of affiliated, yet independent stores.

Introducing Self-Service in the 1950s

Following World War II, the company shut down most of its manufacturing operations to focus its efforts on its retail and distribution activity. The company updated its wine and spirits warehouses, adopting innovations then being made in France. Delhaize grew externally in 1950, when the grocery chain founded by Adolphe Delhaize was merged into that founded by his brothers. That decade was to mark a revolution in the grocery industry, and the Delhaize company was to become one of the leaders in that revolution in Belgium.

The postwar reconstruction years had rapidly given way to a period of extended economic growth, particularly in Belgium, relatively unscathed by the war. The low unemployment levels, rising wages, growing leisure time, as well as technological innovations, both in the stores and in the home combined to encourage the growth of a new grocery format, the supermarket. More and more consumers were adding refrigerators and freezers at home, making it possible to preserve fresh foods for longer periods. The same was true for the stores themselves, which rapidly added fresh fruits and vegetables, meats and fish, and other perishable items. Delhaize had continued to study innovations being in made in the United States, which had pioneered the supermarket concept, and in 1957 the company opened Europe’s first fully self-service supermarket. That supermarket incorporated a number of other features of the American supermarket, such as checkout counters, brightly colored stores, and fluorescent light fixtures.

Delhaize set about converting its network to the new supermarket format, a process that required a new distribution infrastructure, such as cold-storage facilities and the like. In order to finance the company’s transformation, it took a listing on the Brussels stock exchange, changing its name to SA Delhaize Frères et Cie “Le Lion” in 1962. In 1963, the company added chilled warehouse facilities for stocking and handling fresh fruits and vegetables and dairy products. In 1967, the company added its own butchering facilities to supply its new in-store butcher shops.

During the mid-to-late 1960s, the company continued converting its branch network, shutting down a number of its former grocery shops, opening supermarkets, while converting a number of its existing stores to small-format self-service stores. By the middle of the 1970s, the company’s supermarket network had grown to 80 stores. Yet the company now faced the first of a series of so-called “padlock” laws that placed severe limits on the number of hypermarkets and supermarkets allowed to open in Belgium. Similar laws had begun to appear elsewhere in Europe, designed to protect small shopkeepers from being crushed by the small number of rapidly growing supermarket giants. Delhaize began developing other retail formats to circumvent the growth laws, launching its own chain of pharmacies and body care stores under the DI banner.

American Expansion in the 1970s

For its supermarket growth, Delhaize turned to a market where such restrictions were unlikely ever to appear—the United States. In 1974, the company made its first entry into that country, buying a one-third share of North and South Carolina-based Food Town Inc., which owned 22 supermarkets but had run out of cash for further expansion. Two years later, Delhaize acquired a majority share in that company. Food Town was to provide a springboard for the company’s expansion in the United States. By 1983, the company had grown to more than 225 stores. In that year, Food Town changed its name to Food Lion, bringing it closer under Delhaize’s wing.

In 1985, the company, which continued to target expansion in the markets on the eastern coast of the United States, opened its first Cub Foods store in Atlanta. The company later boosted its share of that market with the acquisition of the Food Giant chain. Meanwhile, back home, the company launched a new chain, called AD Delhaize. Rather than being company-owned, the stores affiliated with the new banner remained independent, with Delhaize providing wholesale supply services and management advice.

Delhaize continued to branch out through the end of the 1980s, particularly by launching two new retail formats. The first was Caddy Home, which offered home delivery services. The second was Tom & Co, which took the company beyond supermarkets into a retail pet foods and supplies format. These stores helped expand the company’s holdings in Belgium to more than 400 stores—of which nearly 110 were supermarkets. Meanwhile, the company’s United States’ presence remained its driving force, with over 1,000 supermarkets under Food Lion’s control by the beginning of the 1990s.

Company Perspectives:

Delhaize will anticipate the wishes of its customers and satisfy them by providing them in each of its companies an easy, convenient and integrated shopping experience. Delhaize is a transnational provider of food and daily items, supplies and services, specialist of self-service, preferred for the quality of its products and retail concepts, recognized for achieving its ambitious goals and respected for the competence of its team and its high sense of ethics.

The 1990s saw Delhaize turn to an even wider international arena for its growth. The collapse of the Soviet Union and the subsequent opening up of the former Eastern Bloc countries presented Delhaize with an opportunity to expand into Central Europe. In 1991, the company launched a new subsidiary in the Czech Republic, Delvita, opening its first supermarket that year. The company’s expansion in that country, and neighboring Slovakia, was rapid—by 1992 the company had opened seven Delvita supermarkets.

Delhaize continued to explore new foreign markets, despite the economic downturn of the period. In 1991, the company acquired a majority share in Greece’s Alpha-Beta Vassilopoulos, which operated 15 supermarkets in Athens and surrounding areas. Delhaize next looked to neighbor France, buying a controlling stake in the PG group, which operated supermarkets under the Stoc banner and a network of grocery affiliates under the Marché Plus name. Despite growing PG to 38 supermarkets and 14 affiliates by the end of the decade, Delhaize was forced to withdraw from the bruising competitive climate of the French market, selling out its stake in PG to Carrefour in 2000.

Worldwide Retailer in the 21st Century

The United States, however, continued to provide good fortune for Delhaize. In 1996, the company expanded again, now into the Florida market, with the acquisition of the Kash n’ Karry chain. The following year, Delhaize targeted the other side of the world, setting up shop in Thailand and Indonesia. The company imported the Food Lion brand into Thailand, taking a stake in the new Food Lion Thailand and opening 15 stores—including the acquisition of six Sunny’s stores—by the end of 1999. The following year, the company acquired full control of Food Lion Thailand. In Indonesia the company stores operated under the Super Indo banner, growing to 14 supermarkets by the end of the decade. At the same time, Delhaize moved into a new Asian market, Singapore, with the acquisition of 49 percent of that country’s third-largest supermarket group Shop N Save.

In Central Europe, Delvita established itself as a major retailer in the Czech and Slovakia markets with the acquisition of Interkontakt and its 50 supermarkets. The 2000 acquisition of 51 percent of Romania’s Mega-Image allowed the company to expand its presence in the region. In the United States, meanwhile, the company acquired the 28-store chain of Farmer Jack stores before announcing a far larger acquisition at the end of 1999.

That deal, which was closed in July 2000, called for Delhaize to acquire Hannaford Bros., a $3.3 billion company with 152 stores under the Hannaford and Shop N Save banners operating primarily in the northeastern United States but extending as far south as the Carolinas. At the same time, Delhaize announced its was setting up a new U.S. subsidiary company, Delhaize America, to group its growing U.S. holdings, including its 56 percent stake in Food Lion Inc. Hannaford was to remain a separately operating company under Delhaize America, signaling Delhaize’s willingness to pursue further growth beyond the Food Lion banner, which, despite growing to nearly 1,200 stores, had been unable to extend its brand beyond its own core southeastern region. The Hannaford deal, which boosted the company’s sales to EUR 18 billion by the end of 2000, made it the sixth-largest supermarket group in the United States market.

Key Dates:

1867:: Jules Delhaize sets up grocery branch network with brother Edouard and brother-in-law Jules Vieujant.
1871:: The company moves to Brussels.
1883:: Delhaize opens new state-of-the-art warehouse and headquarters facility.
1930:: The company introduces Derby discount retail format.
1950:: The company merges with grocery chain founded by Adolphe Delhaize.
1957:: The company launches Europe’s first fully self-service supermarket patterned after American supermarket concept.
1962:: The company lists on Brussels stock exchange as SA Delhaize Frères et Cie.
1974:: The company acquires 32 percent stake in Food Town Inc. (USA), with 22 stores in North and South Carolina.
1976:: The company acquires majority control of Food Town Inc., begins rapid expansion in eastern United States, and launches DI health and beauty aid shops in Belgium.
1981:: In Belgium, the company launches AD Delhaize affiliated store chain.
1983:: Food Town renames itself Food Lion Inc., and now boasts 225 supermarkets.
1985:: Delhaize opens first Cub Food store in Atlanta.
1989:: Delhaize launches Caddy-Home, a home delivery service, and Tom & Co, pet foods and supplies stores in Belgium.
1992:: The company acquires Alpha-Beta Vassilopoulos and enters Athens, Greece, market with 15 supermarkets.
1994:: The company acquires majority share in France’s PG chain, with 38 Shopi and 14 Marché Plus stores.
1996:: The company acquires Florida’s Kash n’ Karry chain.
2000:: Delhaize completes takeover of Hannaford; acquires full control of Food Lion Thailand; and acquires 51 percent of Mega-Image (Romania).
2001:: Delhaize America becomes first Belgian company to take a listing on New York Stock Exchange.

At the end of 2000, the company announced its intention to buy up full control of Food Lion Inc., a process completed in 2001. At that time, Delhaize America was floated on the New York stock exchange—the first Belgian company to achieve a listing on the NYSE main board. Despite the United States’ overwhelming position in Delhaize’s balance sheet—accounting for 70 percent of sales and some 85 percent of its cash flow—the company continued to assert itself as a retail leader in its home base. By the end of 2001, the company revealed plans to boost its Belgian presence to more than 650 stores by the year 2006. Supermarket growth, which continued to be tightly controlled by the Belgian government, was to represent only a minor part of that expansion, with just three new supermarkets planned. Instead, the company was banking on the successful rollout of three new small-store formats, the center-city Delhaize City stores; Shop n’ Go, typically located next to filling stations and expected to grow to 50 outlets by 2003, and Proxy Delhaize—formerly known as Superettes Delhaize. With a position as a leader in both the United States and Belgium, and growing networks elsewhere, Delhaize seemed certain to carry on its founders’ pioneering retail vision.

Principal Subsidiaries

Alfa-Beta Vassilopoulos, S.A. (Greece); Aniserco S.A.; Food Lion Thailand Ltd.; Delhome S.A.; Delanthuis S.A.; Delshop S.A.; Delvita A.S. (Czech Republic); Delhaize America, Inc.; P.T. Super Indo J1 (Indonesia); Super Discount Markets, Inc. (U.S.); Shop N Save Pte Ltd (Singapore).

Principal Competitors

Carrefour SA; Metro AG; Albertsons Inc; Koninklijke Ahold Nv; Aldi AG; Pathmark Stores, Inc; RALLYE S.A.; Safeway Inc.; Auchan Group;Arden Group Inc; Eagle Food Ctrs Inc.; Frsh Fresh Brands Inc; Foodarama Supermarkets Inc; Gristedes Sloans Inc; The Kroger Co; Winn Dixie Stores Inc; Wal-Mart Corporation.