Dive Brief:

• Ahold Delhaize is evaluating whether to launch its own instant delivery service in response to the growing number of startups bringing groceries to customers in less than 30 minutes, the grocer's chief executive said during the company's third-quarter earnings call on Wednesday.
• The Dutch retailer saw online sales in the United States rise 52.9% during the third quarter of 2021 compared with the same period last year. Comp store sales excluding gas were up 2.9% compared with Q3 of 2020 and 15.3% over that time frame in 2019.
• Ahold Delhaize has invested heavily in e-commerce in 2021 as it looks to profit from growing interest among online grocery shoppers in speed and convenience.

Dive Insight:

Ahold Delhaize President and CEO Frans Muller made it clear he has been watching closely as instant-delivery services have quickly proliferated across Europe and put down roots in U.S. cities like New York.

"We follow those models very carefully, and we monitor the viability [of adding] such a service to our portfolio ... and we are in that process now," Muller said during the call.

Muller did not indicate whether Ahold Delhaize would elect to develop instant-delivery capabilities on its own or work with an existing company in the space, and declined to say when the retailer might decide whether or not to step into the instant-delivery business.

Muller also did not indicate where it might be looking to establish a service. Ahold Delhaize is competing with instant-delivery competitors in Europe, where startups have rapidly expanded over the past year. In the U.S., where it oversees the FreshDirect e-commerce service, several instant-delivery companies, like Buyk, 1520 and Fridge No More, have kicked off operations in New York City this year.

"It's a relatively small market at the moment. But you see that the time element of our own omnichannel business is also ... much shorter in these times," Muller said.

Ahold Delhaize has recently paid close attention to its online operations in the New York metropolitan area. The grocer has been focusing on using FreshDirect, which it acquired earlier this year, to expand its omnichannel capabilities in the region in conjunction with its Stop & Shop banner.

In October, Stop & Shop added 30-minute delivery in partnership with Instacart, weeks after sister banner The Giant Company began offering the service with Instacart. On Monday, The Giant Company inaugurated a new automated fulfillment center in Philadelphia.

Ahold Delhaize's U.S. e-commerce sales in Q3 were driven in part by the expansion of pickup capacity across its store fleet, Muller said during the earnings call. The retailer added click-and-collect capabilities to 102 locations during the period and is on course to have the digital fulfillment channel in place at 1,400 stores by the end of 2021, up from 1,100 at the start of the year, he said.

"You have seen us over time being very early and innovative with all kinds of omnichannel [types] of formats," Muller said. 

Ahold Delhaize is also making progress in its efforts to improve its supply chain efficiency. The company reported it is now self-distributing 65% of its center store volume in the U.S., as planned, and expects that figure to jump to 85% in 2022. By the end of 2023, Ahold Delhaize intends to manage its center store distribution operations entirely in-house, Muller said.

Ahold Delhaize Chief Financial Officer Natalie Knight said during the call that while the company is seeing upward pressure on wages, its labor costs are generally staying within the range of inflation, which is on the rise. Compensation costs for workers handling supply chain-related functions "are particularly an issue," Knight said.