Delhaize expands US empire

By Anita Awbi

- Last updated on GMT

Related tags Food lion Supermarket Us

Belgian supermarket chain Delhaize will expand further into the US,
continuing to rely on American supermarket sector buoyancy as the
European retail slump continues.

The relatively unregulated US market now appears a lucrative opportunity to legislation-weary retail giants who are struggling with domestic market saturation, government regulation and thorny European planning laws.

Delhaize is one of many European retailers, such as Ahold, to seriously invest in pan-Atlantic expansion.

IGD's senior business analyst Jonathan Gunz told​: "We valued the US food retail market at $759 billion in 2004 - that's quite a big pie that companies would like a piece of."

"There's a high consumer spend with a developed infrastructure which is an attractive proposition for foreign retailers."

Delhaize opened seven new US stores in the third quarter of 2005 and the new year will bring 25 new Delhaize Food Lion supermarkets to the new market area of South Carolina, and store relaunches in Washington.

And the group's Hannaford division will continue to look for acquisition targets in the North East, with Washington DC becoming a concentration area for its Bloom and Bottom Dollar formats, in a move to consolidate profitable retail centres around the country.

"The catch is that it's a huge market and you've got to have scale to succeed,"​ Gunz explained.

"It's a very regional market and I think if you're going to be successful it will be quite difficult nationwide. It's better to achieve a regional presence like Ahold which focuses on the east coast."

Delhaize's American operation already generates 70 per cent of total profit, returning a third quarter sales jump of 5.1 per cent to $4.2 billion due to good sales at its largest stores, new supermarket openings, and the acquisition of the Victory chain.

These are encouraging results for a company that has seen its domestic sales fall 1.8 per cent due to weak consumer spending.

Overall net profit declined by 1 per cent to €89.7 million last quarter. The group cites increased logistics expenses and a weaker sales performance both in Belgium and Europe-wide as key causes.

And as economic stagnation and low price inflation sets in, Western Europe's share of the total grocery market will fall to 45 per cent from the current 53 per cent, according to IGD figures.

Coupled with difficult European planning legislation and increasing legislative intervention into supermarket operations, the US is appearing more and more lucrative.

"Retailers place a lot of importance on having real estate. Obviously the US has got a large amount of space to develop,"​ said Gunz.

Delhaize Group currently operates in eight countries spanning three continents. At the end of September 2005, its sales network consisted of 2,629 stores.

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