Ahold – or Royal Ahold as it is regally known – ruled triumphally over Dutch investor relations awards for many years under the IR reign of Stuart Brown. Six times in the last decade its IR was rated the best in Holland. Last November, Brown moved into a more operational role in the US side of the international supermarket empire, but analysts now crown his successor Huibert Wurfbain with similar accolades.
Now straddling three centuries, the multinational grocery store was given its regal title by the Dutch royal family in The Hague for its centenary in 1987. Wurfbain is not too upset that his IR team includes only himself, VP for IR, newly recruited American Shelley Pettigrew and a secretary. After all, despite operations and investors across the globe, Ahold’s lean and mean headquarters at Zaandam in the Netherlands has only 100 staff to control its E33.5 bn global empire.
In return there is immediate access. As part of the office for financial and fiscal affairs, Wurfbain has speedy access to CFO Michael Meurs and CEO Cees van der Hoeven. Until a year ago Wurfbain was on the other side of the trenches, as an analyst. His crossing over was inadvertent, if fortuitous. In 1998, he asked a native English-speaking friend in Ahold to check his resume before he sent off his application for an MBA course. Stuart Brown, the then IRO, was looking for a replacement and decided after reading Wurfbain’s resume that it fitted the impending vacancy perfectly. Wurfbain lost an MBA but Ahold gained an IRO and for a year he worked in tandem as heir apparent with Brown.
The compact headquarters staffing at Ahold ensures that the data flow is rapid. Tracking results from thousands of stores in 19 countries for investors should be difficult, but in fact Wurfbain finds it relatively easy. ‘The financial side is not the hardest. We can talk to the group controllers here in Zaandam, who are usually on the phone with our companies on a daily basis or more, and fly back and forth all the time.’
In addition Wurfbain has a strong network within the local companies to tell him what is going on. Even so, he stresses that in the retail business, the best way to get an idea of what is happening is to visit them and the stores.
And of course information flows both ways. ‘The sell-side have comments because that’s what they’re for,’ notes Wurfbain. ‘I try to write a memo or filter it through to management putting in my opinion as well, but not too much. It’s important that the board of directors knows what’s happening in the streets. With the frequent one-on-ones they have with investors, management often gets a lively feel for what is going on.’
It is not mere politeness, Wurfbain adds: ‘If they know what the concerns of the Street are they can address them. They do so because our investors are very important to our growth strategy, which is primarily organic growth but with a lot of it acquisition based.’ The growth is 50/50 equity/debt financed, ‘So we need our shareholders to back us in that strategy. A live line to our investors is of the greatest importance.’
That means he needs to tend lines to the Netherlands, UK, US, Canada, France, Germany, Switzerland, Italy, Spain and a growing number of holders in Scandinavia. Despite a far-spread retailing domain, you don’t need to have an Ahold chain in your home country to invest. Indeed, the UK, for example, has many shareholders, but no stores.
Tailored approach
The company’s commercial success is based on tailoring itself to its regional markets, and it trades under local names. Any IR advantage from a corporate brand identity would be more than offset by the loss of goodwill from local customers, who usually don’t realize that with every purchase from their favorite local chain they are, in fact, paying tribute to Royal Ahold in the Netherlands. To gain experience in new markets, Ahold often goes into 50-50 joint ventures with food retailers, such as its recent move into Norway and Sweden with ICA.
‘It takes years and years to build a brand with consumers,’ explains Wurfbain. ‘So the companies we buy – Stop & Shop, Giant Inc, Bompreco, Disco and ICA – all have very good brand recognition with customers. It just wouldn’t make sense to take those names off the roof and put ours on top. We are a chain of 36 very independent supermarket chains worldwide. In Brazil, we are very Brazilian, in the Netherlands, we are very Dutch and in America, we are truly American. We try to be as close to the customers as possible.’
Ahold is listed in Amsterdam, New York and Zurich, and it is thinking of Stockholm to follow its major acquisition in Sweden. Since it attracts London-based money anyway, the company sees no reason to list so close to home, but it helps to have the ADR in New York which accounts for about 8 percent of the stock. Even so, Wurfbain points out, increasingly adventurous American investors own as much again in common stock.
In the IR business, going Dutch may as well mean going undercover because of the anonymity of the holders. With the help of IR agency Taylor Rafferty, Ahold is compiling a survey that identifies about 90 percent of its holders. But it can hardly be seen as a real time feed since it is compiled on an annual basis. Still, according to Wurfbain, Taylor Rafferty has a very good feel for where the holdings lie.
The survey accounts for mainly institutional holders. For the 25 percent of stock held by retail investors in the Netherlands, Wurfbain mostly only knows the names of the banks that hold it on their behalf, and how many there are of them. It does save money, since the annual report is published in the press rather than being sent to all of them. In a bid to reconcile IR and anonymity, Ahold and ten other companies have set up a proxy company, which acts as a third party conduit for information to the shareholders. The proxy company holds shareholder addresses without divulging them to its client companies.
Already less than half the company is held in the Netherlands and as it expands globally, making acquisitions with a mixture of stock and debt, the percentage of Dutch shareholders is inexorably decreasing. Even so, just as Albert Heijn, the Dutch branch, dominates the retail consumer market, Ahold dominates the retail investment side, accounting for over half of all individual share holdings in the Netherlands.
Still hungry
Groceries were not exactly the boom stocks of 1999: Gouda.com is not one to win the hearts of Nasdaq high fliers. Wurfbain is philosophical. ‘There was a sentiment in the market that US food retailing was not doing too well, although the numbers weren’t as weak as the stock performance suggested.’ He counters with the fundamentals of the company, quite confident that investors may discover solid, nearly crash-proof earnings in the end.
‘Investors should bear in mind that food is a growth industry,’ maintains Wurfbain. ‘Even now, over 50 percent of the world population doesn’t have access to a supermarket. The founder’s grandson Albert Heijn always said, We have to fix the roof while the sun still shines. So we’re investing our excess cash flow from the mature markets of the Netherlands and the USA into the future growth markets in Central Europe, Latin America and Asia.’
‘And that strategy works. With a portfolio as diverse as ours, in 19 countries, it is definitely more than just selling staples. In fact we are currently doubling every five years, growing the bottom line a lot faster than the top line,’ Wurfbain concludes.
His preferred method of rallying the holders to Ahold’s success story, and its target of 15 percent annual growth, is face-to-face meetings. ‘I just like to go out and repeat that story time after time. I try to give it as consistently as possible. You have to, because the new people have to understand the story. I try to do that one by one, just touring the main financial centers in Europe and in the US.’
Taking them shopping
Normally, on the visits to investors the CEO and CFO will be the stars, but in the US the president and CFO of Ahold US share the billing. In between they take the mavens to the mountain, with site visits to stores and facilities for analysts and investors. Last year, for example, there were sell-side trips to the various chains in the US as well as expeditions to Brazil and Argentina. ‘You have to see a store to grasp whether it is good or bad,’ he explains.
Ahold reinforces the one-on-ones with conference calls, by giving access to management, and also by making its conference calls available over the net. The web pages are comprehensive and bravely include historical stock charts as well as a comprehensive selection of investor relations material.
However, once again the personal touch is important, and Ahold wins analysts’ plaudits for the speed and depth of its responses to calls. Wurfbain modestly agrees. ‘We try to respond as swiftly as we possibly can. Even if the question is irrelevant, we try to respond quite professionally to that. If we can’t give out any information, we tell them why.’
Although food retailing is quite a stable industry, which is, of course, one of its attractions to many investors, it is not immune to crises. In December, the FTC blocked Ahold’s acquisition of the major New York chain, Pathmark. It happened almost without warning, so the analysts had to take it out of their models, change their targets and so on – all the things that they hate doing. ‘It hits on your price,’ Wurfbain concedes. ‘We did what we could as swiftly as possible, to inform the market and we worked hard to take out any gossip stories, to give people access to the facts rather than the rumors.’
Targeting for new issues puts a high priority on longer-term holders and Wurfbain’s message to potential investors is strong. ‘People have to be interested in growth. We’re very predictable in that sense. If we promise 15 percent growth, you can be very sure that either we deliver or we over-deliver. We’ve never failed on any promise. The bottom line is that people are happy with you when you deliver what you tell them. And we do deliver, time and time again.’
