Dive Brief:

• Ahold Delhaize announced it plans to double online net sales to $7.8 billion over the next three years, increase its market share and drive comparable sales gains through a mixture of strategic investments and cost-cutting measures. The company will detail the plans in full during its Capital Markets Day today in New York.
• On the spending side, Ahold Delhaize will increase its capital expenditures to 3% of sales, with $2.25 billion allocated for 2019. The company also plans to invest between $100 million and $150 million annually in its Stop & Shop banner, which kicked off a chain refresh with 21 stores in the Hartford, Connecticut, market this fall.
• The grocery conglomerate plans to save just over $2 billion over the next three years through a "Save for Our Customers" cost-cutting program and to generate free cash flow of $2.25 billion between 2019 and 2021. "Our commitment is to self-fund the investments needed to drive growth, as our new cost savings program will allow us to maintain a stable group margin through 2019," Frans Muller, president and CEO of Ahold Delhaize, said in a statement. "This will allow us to invest in our stores, omnichannel offering and technology, while we explore and seize new leadership opportunities in existing and adjacent markets."

Dive Insight:

As competitors like Kroger, Aldi and Walmart have announced transformative new investments in recent months, the pressure has ratcheted up on Ahold Delhaize to defend its position along the East Coast and even get ahead where it can.

"In an industry that's undergoing rapid change, fueled by shifting customer behavior and preferences, we will focus on growth by investing in our stores, omnichannel offering and technological capabilities which will enrich the customer experience and increase efficiencies,” Muller said in a statement.

A lot is riding on the refresh of its Stop & Shop banner, which has deep roots in the northeastern communities it serves but has fallen behind on store experience and online shopping. In Hartford, a collection of food-focused updates ranging from meat smokers to taquerias aim to elevate stores while also serving as a laboratory for future updates. No two stores will look the same as the banner takes a "test and learn" approach to remodeling, Stop & Shop president Mark McGowan recently told Grocery Dive.

The question is whether "test and learn" will move fast enough to keep pace with competitors like Whole Foods and Shop Rite, which have invested in store and price updates. This latest announcement seems to signal that Ahold Delhaize will accelerate its banner investment.

Store updates have been on the rise across the company's retail brands in recent years and should increase under these new investments and its brand-centric corporate structure. Ahold Delhaize has seen a sales lift at its Food Lion stores, the majority of which have been remodeled over the past four years around enhanced store layouts and fresh assortments. Last month, Giant Foods unveiled an urban concept in Philadelphia called Heirloom Market — a concept that could help boost sales in population-dense areas and inform future investments in the small-format stores that have bedeviled large, traditional supermarkets to date.

Ahold Delhaize also has a lot of catching up to do in online shopping. The company offers delivery and store pickup in select markets, and it's seen commendable sales growth in the low double digits the past few financial quarters. But to date it has not effectively leveraged its greatest asset, Peapod, the largest online grocer in the U.S. Analysts interviewed by Grocery Dive say Ahold Delhaize has failed to adequately scale the business and integrate it with its store operations, despite the large basket sizes and high customer satisfaction rates the service produces.  

That may be about to change. Part of Stop & Shop's refresh in Hartford includes utilizing Peapod for store pickup — including opening an automated microfulfillment center, which will open early next year. McGowan said that while the company works with Instacart at some of its locations, "our primary e-commerce lever is Peapod, whether it's home delivery or in-store pickup." Ahold Delhaize has also revamped its incentive structure this year to ensure Peapod and its brick-and-mortar stores are working better together, sources have told Grocery Dive.  

Peapod is currently in 24 markets and has recently added storage facilities in Pennsylvania and Long Island. By the end of 2019, Ahold Delhaize expects to have more than 600 grocery pickup locations online.

These updates come in addition to technology investments the company has made, including a robotics and artificial intelligence lab in The Netherlands. Ahold Delhaize plans to outline these investments and more at its Capital Markets Day today. Grocery Dive is on the scene, so stay tuned for further updates.