1. R
etail has always been in the direct path of
unforeseen forces—weather, the economy
or changes in the internal or external busi-
ness climate can have an immediate and
even permanent impact on a company’s
bottom line. Even chains with big bankrolls and delib-
erate, solid corporate strategies cannot stem the tide
of chance.
By its own admission, Amsterdam-based Royal
Ahold is in the right place at the right time. Following
a period of internal challenges, the $40 billion-plus
grocery retailer has spent the past four years realigning
its business and freeing up cash through divestiture of
non-core and underperforming operations.
Now, it is laying the groundwork for future growth
withabroadsuiteofOracleRetailapplicationsthatwas
unavailabletolargeretailersjustfiveyearsago,saysDave
McNally,Ahold’sglobalCIO.Atatimewhensupermar-
ket retailing is becoming increasingly sophisticated, the
OracleapplicationswillallowAholdUSAtore-engineer
its competitive branding and pricing positions.
“We are building and changing and realizing the
goals we set,” says McNally, who relocated to Ahold’s
Quincy, MA-based U.S. headquarters to concentrate
on the Oracle program. “I wouldn’t say everything is
fine—we have a lot of work to do. While what we have
done over the past year is very significant, it is impor-
tant that we seize the opportunity to fundamentally
change the business. We understand very clearly what
we’re going to improve and when we’re going to see
those improvements. We are building for the future.
It’s a very exciting thing.”
Four years ago, Ahold was in a very different place.
It was being investigated for accounting irregularities
and was even in danger of losing its “Royal” designa-
tion. Bestowed by the Queen upon a limited number
of companies, this is something McNally says Ahold
“values greatly.”
Ahold’s top-to-bottom overhaul has included sell-
ingoffits$19-billionU.S.foodserviceoperationinJuly
2007 and appointing new executives in many parts of
the organization. John Rishton became president and
CEO in November. McNally, who had been CIO
of the foodservice business, was named to his
current post in September 2005.
“After the problems we had in 2003, we went
through a time we refer to as our ‘Road to
Recovery’,”saysMcNally.“We’vecompletedour
turnaround.Wehaveagreatmanagementteam
and a shared vision. In mid-2007, we achieved
an investment grade rating and divested of
non-core holdings. We’ve been building work-
ing capital and are trying to be very clear with
the market and about our growth strategy.”
Royal Ahold’s recovery work was done by its
own hand. But the timing of the availability of
OracleRetailsystemscouldverywellstemfrom
the divine grace inherent to the Dutch House
of Orange-Nassau. Ahold, like many large re-
tailers, has historically relied on cumbersome
legacy systems.
“Things came together for Ahold with per-
fect timing,” says Sheel Kishore, vice president
of IT strategy and communications. “I’ve been
in situations where the business was aligned
but you couldn’t find the right technology. Or,
the technology was available but you couldn’t
get the business aligned. We clearly needed a
future foundation. Oracle’s level of maturity
moved from a collection of packages to some-
thing that is better integrated, has a consistent
look and feel and is more of an enterprise prod-
14 FEBRUARY 2008 WWW.RISNEWS.COM
uct. In other industries, these types of systems have
been available for 10 to 15 years.”
The key benefit of Oracle Retail is that it will
afford visibility across an entire set of business oper-
ations. “This will form the basis of how we execute
merchandise planning activities, forecast and man-
age demand,” adds Kishore. “Then, we execute
against these to ensure that we get the right prod-
ucts, at the right price, at the right time and in the
right quantities to the store. In this way, we improve
customer service and satisfaction.” He notes that the
Oracle program currently encompasses planning,
merchandising and in-store initiatives. It does not
cover back-office functions.
The agreement with Oracle was signed in the fall
of 2007. Oracle’s products will support Ahold USA’s
value repositioning program across more than 700
East Coast stores. Areas of focus include merchandis-
ing, supply chain, store operations, planning and
analysis. Implementation will be carried out over the
next three years, says McNally. In the United States,
Ahold operates three supermarket chains that serve
the Northeastern and Mid-Atlantic markets: Stop &
Shop, Giant-Carlisle and Giant-Landover. It also
operates Peapod, an online food delivery service.
The Right
Timing
The Right
Timing
Completion of Royal Ahold’s
corporate overhaul is in sync
with encroaching competition
and ERP accessibility.
COVER STORY ROYAL AHOLD
TECH TOOL BOX
BY DEBBY GARBATO
• DATABASE/DATA-WAREHOUSE:
ORACLE, DB2,
MICRO-STRATEGIES
• FINANCIAL/ HR:
HYPERION, CYBORG,
AND IN-HOUSE SYSTEMS
• BUSINESS ANALYTICS/
INTELLIGENCE: SAS
• CRM/LOYALTY: EME, MARKET
EXPERT AND COREMA
• SUPPLY CHAIN PLANNING,
EXECUTION, MANAGEMENT,
SOURCING, AND LOGISTICS:
VOCOLLECT, H.K. SYSTEMS,
RETAILIX, INFOR, ANUGISTICS
• MERCHANDISING:
ORACLE/RETEK,
DEMAND-TEC, CONNECT 3
• POS: IBM AND FUJITSU • WORKFORCE:
RED PRAIRIE, LMS
HARDWARE
SOFTWARE
• BACKBONE NETWORK:
CISCO
• SERVER BACKBONE:
WINTEL, UNIX/AIX
SERVERS AND IBM ZOS
• IN-STORE SERVERS:
AIX/ORACLE-BASED
PLATFORM
OTHER
• IT CONSULTING/
OUTSOURCING:
EDS, FUJITSU, AGILISYS
• MOBILITY DEVICES:
PALM TREO, BLACKBERRY,
MC50/SYMBOL, INTERMEC.
14.coverstory_v6 1/21/08 3:44 PM Page 1

2. ON THE MONEY
As noted in the January 2008 RIS “Influentials” story,
McNally is a “businessperson who knows a lot about
technology.” For Ahold, this makes the Oracle Retail
installation a single but crucial part of Rishton’s
“Strategy for Profitable Growth.” The strategy, which
outlines financial targets, includes a retail net sales
growth goal of five percent, an overall sustainable
operating margin of five percent and reduction of cor-
porate center costs by 50 percent by the end of 2008.
As of the third quarter of 2007, Ahold’s underlying
operating margins in the U.S. were four percent (for
both Stop & Shop and Giant-Landover) and 3.9
percent for Giant-Carlisle. A fourth chain, Buffalo,
NY-based Tops Markets, was sold last year.
The retailer plans to create two continental plat-
forms for its European and U.S. businesses. Each will
have its own COO and technology leadership, says
McNally. At the same time, it plans to leverage knowl-
edge and expertise across continents.
Ahold USA’s technology is behind that of Ahold’s
European operation. “Europe had adopted a best of
breed approach,” says McNally. “They were two years
ahead. We want to upgrade Europe as well. But their
existing systems initiatives have been supporting crit-
WWW.RISNEWS.COM FEBRUARY 2008 15
Ahold USA’s domestic competition is coming from all fronts—U.S. retailers, European chains
and from a market in which fuel and food prices continue to escalate.
Florida and Louisiana hurricanes and subsequent crop devastation have led to dramatic price
increases in citrus products. Farmers’ interest in supplying ethanol producers has impacted the price
of feed corn and, subsequently, meat and milk. Soy and grain-based products have experienced price
increases as well. In January, oil hit $100 per gallon. In addition to affecting consumer spending,
escalating fuel prices impact the cost of producing and transporting food. This, notes Dave McNally,
Royal Ahold’s global CIO, makes price optimization tools particularly valuable.
On the competitive front, Brussels, Belgium-based Delhaize Corp., along with Wegman’s and Florida-
based Publix, has been rolling out new, diversified formats to cater to myriad demographics and
geographies. Tesco, a high profile British operator, launched a series of small footprint West Coast
stores last fall.
On the value side, Wal-Mart has continued to expand its Supercenters. On the upscale end, Whole
Foods has been growing by leaps and bounds. This has prompted traditional “mid market” operators
like Safeway, A&P and Ahold USA to create more sophisticated, fresh-oriented formats that cater to
“yuppie” customers.
All of the afore-mentioned competitors have historically made extensive use of detailed customer
data and advanced technologies. Tesco, for one, spent five years researching the U.S. market.
Wal-Mart, Supervalu and Brookshire are among those that have made major investments in enterprise
resource planning systems from a single provider like SAP or Oracle. -D.GARBATO
Competitive Forces
“Key strategies for profitable growth
emphasize building our brands.”
“Key strategies for profitable growth
emphasize building our brands.”
14.coverstory_v6 1/21/08 12:15 PM Page 2

3. ical aspects of the business transformation.”
Leveraging, building and fine-tuning of U.S. store
brands are key parts of the growth plan. This involves
improving price positioning, strengthening customer
insight capabilities and making add-on/fill-in acqui-
sitions. By the end of 2009, the company wants to
achieve a cost savings of 500 million Euro.
The result will be a company that is more compet-
itive and responsive to customer needs. For example,
Ahold USA’s stores have well-developed private label
businesses—-even in areas like pet products that other
supermarkets would never delve into to the same ex-
tent. But McNally believes private label could be bet-
ter pinpointed at specific customer segments.
“Using technology like retail data warehouse, busi-
nessintelligenceandotheranalyticaltools,wecangain
those customer insights. We want to move beyond
looking at market segments to characterizing cus-
tomers. With better insights, you can develop better
private label products.”
While Ahold has diversified formats and store lay-
outs with creation of large, fresh-oriented stores like
Super Giant and Super Stop & Shop, it can become
even more competitive by better managing pricing,
merchandising and other initiatives.
“Much of the focus, energy, creativity and invest-
ment involve the customer,” says McNally. “We are
in a much more competitive landscape where costs
are rising and European competitors are moving in.
When we look at key strategies for profitable growth,
they emphasize building our brands. This includes
improving price positioning and gaining better
customer insights, along with assortment planning,
buying/promotional management and supply chain
data. You have to be great at all those things and link
them together effectively.”
Ahold USA’s current technology systems are not
fast or flexible enough to meet these demands. Trying
to extract specific data, says Kishore, has been cum-
bersome. “You don’t realize how inflexible your
systems have made your business until, for example,
something as simple as adding new store numbers
turns into a major IT project. You have to change all
these legacy programs because you may have exceeded
the limits for some data field. It is important in this
business climate to be able to adapt and change.
Streamliningprocessesaroundplanning,assessingthe
impact of promotions, advertising and other causal
factors on customer demand, along with adjusting
buying and replenishment activities to these demands,
is very difficult in a legacy environment.”
Oracle Retail will allow Ahold USA to respond to
market conditions, cause-related events and seasonal
opportunities far more adroitly. “We can simulate
some of this before the event actually occurs,” adds
Kishore. “We can see what demand changes occur and
explore the impact of different price and promotion-
al strategies.”
IMPLEMENTATION
Ahold USA plans to implement the planning and fore-
casting portion of the Oracle Retail package by the
middle of 2008. McNally says Ahold is “in the midst”
of deploying those tools. A roadmap for other Oracle
modules will be created by October 2008 and will
define major milestones beyond the planning and
forecasting part of the strategy.
Already, Ahold USA is getting a “quick win” with
some of the optimization tools inherent to the Oracle
package, says McNally. In the near future, though,
McNally says planning and forecasting tools will lay
thefoundationforfurther-reachinginitiatives.Hesays
these tools can “sit on top” of the company’s existing
legacy system.
While Oracle Retail is a comprehensive system, it
still cannot fill all of Ahold USA’s needs. Other soft-
ware will still come into play. “A very high percentage
of our requirements will be filled by Oracle,” says
McNally. “But we don’t expect one vendor to supply
everything we need.” Still, when Royal Ahold begins to
revamp information systems for its European stores,
it will minimize its use of custom systems, he adds.
McNally concedes that implementation of Oracle
will not be a walk in the park. All the data and process-
es in the company’s disparate legacy systems will, in
short, have to be collected and fed into the Oracle soft-
ware. “Information that is stored about product or
pricing,forinstance,mightbeasubsetofwhatisstored
elsewhere,” adds McNally. “Then, there are the com-
plexities of integrating all the systems. But the value
proposition of Oracle involves having a single version
of the truth in one integrated system.”
In the grocery industry, ERP systems are typically
seven-figure investments. It can take years for a re-
tailer to recoup these funds. While McNally did not
discuss cost or the ROI time frame, he did point to
exactly where ROI should be realized.
“The payback should come across the board,
including topline revenue growth, some SG&A cost
reduction and margin enhancement. There should
also be working capital reduction and incremental
improvements in inventory turns as well as in inven-
tory reduction.”
McNally was also asked why he chose to speak at
such length with RIS. “We have a great business, both
here and in Europe. One reason I wanted to talk is that
it’s an exciting time. We have great management, the
company is performing and we have a strategy that we
all believe in and are behind. We are interested in
creating some buzz in the market, getting our name
out and having a more active exchange.”
In a few words, the timing is right. RIS
16 FEBRUARY 2008 WWW.RISNEWS.COM
GIANT-LANDOVER
184 Stores
STATES: MD, VA,
DC, DE
SALES: $16.4 billion
(includes S&S)
GIANT-CARLISLE
143 Stores
STATES: PA, MD,
VA, WV
BANNERS:
Giant, Martins
SALES: $3.8 billion
PEAPOD
Online Grocery Delivery
AREAS SERVED: Chicago, Milwaukee.
• $19 BILLION U.S. FOOD SERVICE,
COLUMBIA, MD
• AHOLD POLSKA SP (POLAND)
• TOPS MARKETS (NY; PA; OH)
• JERONIMO MARTINS RETAIL, PORTUGAL
(49 PERCENT SHAREHOLDER)
RECENT DIVESTITURES (JULY 2007):
C1000
451 Stores
SALES: 3.2 billion Euro
STOP & SHOP
389 Stores
STATES: MA, CT, NY,
NJ, RI, NH, ME
ACROSS THE GLOBE
ICA
SWEDEN:
1,392 Stores
NORWAY: 659 Stores
BALTICS: 208 Stores
SALES: 7.3 billion Euro
COVER STORY ROYAL AHOLD
ALBERT HYPERNOVA
CZECH REPUBLIC: 294 Stores
SLOVAKIA: 25 Stores
SALES: 1.4 billion Euro
ALBERT HEIJN
B.V.: 1,722 Stores
BANNERS: Albert
Heijn, Albert Heijn
Express, Etos
(HBC), Gall & Gall
B.V. (wine & spirits)
COUNTRY:
The Netherlands
SALES: 7.1 billion
Euro
EUROPEAN CONTINENTAL PLATFORMU.S. CONTINENTAL PLATFORM
ACROSS THE GLOBE
14.coverstory_v6 1/21/08 12:18 PM Page 3