Supply Scan

News and trends from across the food supply chain.

Ahold Splits U.S. Foodservice Into Two Separate Units
Ahold announced that it will reorganize its embattled U.S. Foodservice division into two separate units, each focusing on a specific customer segment.

One division will focus on broadline foodservice distribution, which has made up 87 percent of U.S. Foodservice's net sales.

It will continue to supply food, equipment and related supplies to independent restaurants, healthcare providers, hospitality customers, government entities, educational institutions and other foodservice customers. It includes 67 distribution centers in 36 states and employs about 25,000 people.

The other division will focus on multi-unit chain restaurant accounts, primarily in the quick-service and casual theme restaurant segments. That division will be given its own brand identity. It currently includes 11 distribution centers in 10 states and employs about 2,100 people.

Along with the reorganization, Ahold announced four initiatives to drive growth of its broadline business, which last year totaled $12.4 billion. They include:

  • Accelerating private brands penetration. In 2005, the company's 60 private labels accounted for about 26 percent of total net sales;
  • Investing in the sales organization;
  • Strengthening targeted brand geographies; and
  • Rolling out a comprehensive operational excellence program.

Over the next three years, the company is targeting an annual broadline net sales growth of at least 5 percent and operating margins of at least 3 percent. Ahold also plans to make significant investments in systems and infrastructure improvements, reduce total U.S. Foodservice administrative costs by $100 million and consolidate one of its Chicago-area distribution centers.

The company is also looking at expanding third-party distribution partnerships to develop its regional inbound network and reduce inbound logistics costs, and is looking to possibly acquire some companies to give it a presence in some parts of the country.

"U.S. Foodservice represents a significant part of Ahold's business and value," says Ahold CEO Anders Moberg. "Our management team has accomplished a major organizational overhaul at U.S. Foodservice during the past two years, integrating the past acquisitions, strengthening the operations, improving internal controls, enhancing corporate governance and restoring employee pride. U.S. Foodservice's financial performance is recovering, and the plan we are presenting today details the strong opportunities for pursuing profitable growth and creating a more valuable and transparent business for Ahold shareholders."

U.S. Foodservice had been embroiled in an accounting scandal which resulted in federal charges for 16 vendors accused of helping the food distributor overstate earnings by more than $800 million between 2000 and 2003, receiving large monetary bonuses in return. The suppliers have been charged with filing false audit confirmation letters for the company.

So far, 15 of them have pleaded guilty to criminal charges in the case. The latest, Robert Henuset, a sales manager at Crowley Foods in Yardley, PA, pleaded guilty Nov. 28 in federal court in New York to conspiracy charges.

In July 2004 prosecutors charged former U.S. Foodservice Chief Financial Officer Michael Resnick and former marketing head Mark Kaiser with securities fraud, conspiracy and fil;ing falsified documents with the U.S. Securities and Exchange Commission (SEC). The pair has denied any wrongdoing.

Ahold also agreed in late November to pay $1.1 billion to shareholders to settle a separate civil lawsuit in the United States related to its accounting practices.

EDI Helps Meet Bioterrorism Regs
The Grocery Manufacturers Association (GMA), based in Washington, says that commonly-used Electronic Data Interchange (EDI) will allow manufacturers and others to meet the record-keeping requirements specified in the Public Health Security and Bioterrorism Preparedness and Response Act (Bioterrorism Act) of 2002, which went into effect Dec. 9.

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