retail news in context, analysis with attitude

The Wall Street Journal has an analysis of a potential merger of Ahold and Delhaize, noting that while it would create a $40 billion supermarket chain that would be the nation's third largest, it won't necessarily make either chain better or more competitive in the long run.

"A tie-up," the story says, "would fortify Ahold’s market share in the Northeast and take it into the South and mid-Atlantic states. Ahold is strong online through Peapod, while Delhaize has been further along with a chain of supermarkets under the Hannaford brand.

"But the pair has relatively little overlap, meaning fewer cost-cutting opportunities. There may be purchasing savings, but the duo would lack Wal-Mart-style buying power. Both also have been slower to react to market trends. Rival Kroger has spruced up stores to compete with Whole Foods while improving pricing and loyalty programs to attract customers looking for value."

A merger "might give short-term relief" to the chain's competitive shortcomings, the story says, but "Ahold and Delhaize need radical overhauls. There are problems size alone can’t solve."
KC's View:
Ahold and Delhaize do have strengths. For Ahold, I think, it is its Peapod online business. For Delhaize, Hannaford is a superior operation that dominates many of its markets. But I do think it is fair to say that for this merger to really work, they have to figure out how to make the combination more than just a sum of its parts. And that won't be easy.