The problems encountered by Ahold last year left the highly competitive Dutch supermarket sector wide open. Albert Heijn's rivals worked hard and fast to gain ground, and a fascinating battle of wills is still in full swing, as CAD-News and Catherine Sleep report.

The three national players who dominate 80% of the Dutch multiple retail sector are in no mood for compromise. Ahold is clinging on to market leadership with its two fascias, Albert Heijn and Schuitema, while SuperUnie is hot on its heels and Laurus is in not-too-distant third place. Since last autumn, these three rivals have been engaged in a hostile battle launched by Albert Heijn in a bid to regain the 4% market share and market leadership it forfeited in the summer. After three months of vicious 5-10% price cuts, the jewel in struggling retail giant Ahold's crown is almost back on top: Albert Heijn is once again market leader and enjoying a 25% share of the market.

"The situation is not dramatic because in fact prices have simply receded to their level prior to the introduction of the euro," suggests Robert Flipse, agricultural representative at the French embassy in the Hague. "But if they continue to fall, which looks likely to be the case at least until the coming summer, some retailers are going to find life hard, notably Laurus, which is finding this upsurge in competition very tough."

Laurus in freefall

Two years ago Laurus was the second largest player in the Dutch multiple retail sector, with a market share of almost 22%. Since then the company has gone into freefall and its market share is currently just 17%. Its downfall was a strategic gaffe which went by the name of Operation Konmar. In 2001 Laurus decided to bring together its three formats Edah, Super de Boer and Konmar under the single brand of Konmar and gradually to expand all its outlets to the 2500m2 format of the Konmar stores. However, "You cannot hope to give a new image and a full supermarket stock list overnight to outlets of just 800m2," explains Flipse. Moreover, while Konmar was well established in the Hague and the surrounding area, the format was practically unknown in the rest of the country.

To escape having to file for bankruptcy, a move which looked imminent, Laurus embarked on a financial restructuring campaign. The first step was the sale of a 37.8% share in its capital to French retailer Casino, which also has an option to up its stake to 51% in 2008. "Casino will almost certainly exercise this option, and it's definitely what Laurus wants, as the Dutch group needs Casino's support," predicts Flipse.

Keen corner shoppers

The failure of the Konmar format is indicative of the sensitive needs of the convenience store-focused Dutch retail market. Dutch shoppers are very attached to their corner shop and tend to call in twice or three times a week, spending in the region of €20 (US$24) per visit. They have little interest in out-of-town megamarts. As yet the Netherlands boasts not a single hypermarket, the few attempts to establish one having all ended in failure.

That said, the average sales area of Dutch supermarkets (currently 80m2) has been growing since the beginning of the 1990s and today almost all new store openings boast a sales area of 2000m2 or 2500m2, along the lines of the XL format launched by Albert Heijn two years ago. For all that, not even one fiftieth of the Netherlands' 7500 supermarkets are of that size, and the surface area expansion has more to do with the doubling of the number of SKUs available in stores than with a change in consumer shopping habits. At the end of the 1980s, supermarkets of 500m2 generally carried just six or seven thousand product lines.

Aldi, Lidl gaining ground, Superunie poised for success

Although talk of a dramatic breakthrough would be exaggerated, German hard discounters Aldi and Lidl have both made progress in the Netherlands. Although it has had a presence there since 1975, Aldi has recently benefited from a subdued Dutch economy to improve its market share to 9%. Equally, after a rocky start to its Dutch operations five years ago, Lidl has grown its share to 3% by acquiring from Laurus a stake in the domestic discounter Basismarkt in 2001. This has given the German group a marginal lift that analysts regard as temporary.

This is where Superunie emerges to rock the boat. The purchasing cooperative which comprises 18 regional groups has gained market share in record time and currently dominates some 24% of the retail market, just one percentage point behind the market leader Albert Heijn. Superunie overtook Laurus to take second place in the retail sector and at one point even outstripped Albert Heijn for a period of several months. This rapid growth, which has since stabilised, is attributable to a number of acquisitions, most recently that of the Sperwer group in 2002, which meant it gained 4% market share in one fell swoop.

Growth by acquisition paramount

"The market is both small and dense. A newcomer's only opportunity to gain ground is by acquiring existing entities, as Casino has done," comments André Normand, deputy director of the French economic mission to the Netherlands.

In this ever changing landscape, one certainty remains for the time being, namely the global leadership of Albert Heijn. "The chain has always been at the forefront. It was Albert Heijn that first started stocking cheese and then wine on its shelves, and it's always been the supermarket which spearheaded trends that the rest of the market simply followed," recalls Flipse. "It's just that the company has tended to lose sight a little of its customers during times of economic growth, and of course it has suffered from the negative image of Ahold in recent times. But Albert Heijn is still the market leader in every sense of the word."

It remains to be seen how long this will be the case...

The Dutch retail sector

The major Dutch players

  1. Albert Heijn (an Ahold subsidiary): 706 outlets, €5.703bn turnover
  2. Superunie: 1800 outlets, €6.8bn turnover
  3. Laurus: 732 outlets, of which 264 Edah, 105 Konmar and 363 Super de Boer, €5.476bn turnover
  4. Schuitema (an Ahold subsidiary): 450 outlets, €2.871bn turnover

Presence in major cities:

  • Amsterdam: 50 Albert Heijn (Ahold), 5 Edah (Laurus), 5 Spar (Superunie)
  • Rotterdam: 12 Edah (Laurus), 9 Super de Boer (Laurus)

The Dutch market

After a 0.75% downturn in GDP in 2003, the Dutch forecasting office expects 2004 to see a modest return to growth in the region of 1%. This upturn will be linked closely to an anticipated 5.5% growth in exports, which contributes more than half of Dutch GDP.

With a population of just 16.1 million, the Dutch market is very susceptible to competition, which tends to drive down prices. 2004 has already got off to a difficult start: while the Netherlands is one of the keenest defenders of the Stability Pact, it faces the danger of racking up a 3.25% public deficit in its GDP. Unemployment stood at 5.5% in 2003 but is also expected to increase this year to as high as 7%.

Catherine Sleep translated this article from the French with permission from its authors, French retail news service CAD.