Ahold Delhaize said yesterday that, in concert with investment group Centerbridge Partners, it is acquiring pure play e-grocer FreshDirect, which is based in New York City and delivers fresh food and prepared meals there and in select markets between Connecticut and Washington, DC.
Terms of the deal were not disclosed. Ahold Delhaize will have 80 percent ownership of FreshDirect, while Centerbridge will own the remaining 20 percent.
According to the announcement, "After the deal closes, FreshDirect will retain its brand name, report to a seven-person board, and continue to independently operate out of its facility in New York City."
In a prepared statement, Ahold Delhaize CEO Frans Muller says, "With its unparalleled quality of fresh food, exceptional brand recognition, and dedicated people, (FreshDirect) has generated remarkable customer loyalty. This acquisition further propels our omni-channel evolution … The deal allows us to reach additional customers in the New York trade area and therefore will add incremental sales to the business. It further enables us to address customers’ growing preference for convenient ways to shop."
From David McInerney, FreshDirect CEO: “We are strong believers that the future of grocery retail involves getting customers the best quality food, exactly when they want it, with the best customer service. We have built FreshDirect into a reliable and recognizable business to serve this purpose. This transaction marks an important milestone in the continued growth of FreshDirect. I believe Ahold Delhaize’s global scale, focus on strong, leading local brands, and ability to utilize cost-of-goods synergies, will allow FreshDirect to achieve its full potential.”
- KC's View:
There is something I don't really understand about this acquisition.
On the face of it, the deal makes sense. In some ways, it reminds me of how, some two decades ago, Ahold acquired Peapod … which I always thought was one of the smartest moves that the grocer made.
But it was also about a year ago that Ahold Delhaize said that they were backing off the use of the Peapod brand, and was abandoning the midwest, which is where the brand started.
Ahold Delhaize says it plans to keep the FreshDirect brand alive, but I'm not sure that the FreshDirect brand name has greater equity than the Peapod brand did. So is this just a temporary strategy, and the company plans to eventually retire the FreshDirect banner? Or is this a different set of circumstances requiring a different decision? Not sure … but I wouldn't bet the over on how long FreshDirect lasts as a brand name.
One other thought, if I may.
There are essentially two kinds of acquisitions. There's the kind in which the acquiring company respects the culture and value proposition of the business it is buying and endeavors to enable it, grow it, and learn from it, while offering appropriate synergies. And, there's the kind in which the acquiring company acts more like a conquerer, believing that it now is going to impose its own operational, functional and cultural imperatives on the business it has bought.
Make no mistake. FreshDirect has had its economic issues, and needs help. But it is a unique business with very little in common with my local Stop & Shop or your local Giant. This can be a very smart move for Ahold Delhaize, but they have to be very smart about how they proceed.