Dutch grocery giant buys FreshDirect

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The two companies announced the deal on Wednesday, but did not disclose the terms of the transaction. The deal is expected to close next year. FreshDirect will retain its name and continue to operate out of New York City, where it was launched in 2002.

Ahold Delhaize (ADRNY), born in 2016 from the merger of Ahold and Delhaize Group, is one of the largest grocery operators in the United States. He said FreshDirect would help him reach new customers and drive sales in the lucrative New York market. FreshDirect said having access to the size and scale of the Dutch company would allow it to grow.

“Ahold is determined to get bigger to compete with heavyweights like Amazone (AMZN) and Walmart (WMT)“Wrote Jon Springer, editor of Winsight Grocery Business, an industry publication,” FreshDirect gets a parent with real purchasing power and the means to expand further into the East Coast markets.

The deal comes at a time when the pandemic has reshaped the grocery industry.

Major grocers such as Kroger (KR), Albertsons, Publix and others have seen booming sales in stores and online, with consumers eating more food at home with restaurants closed and many hesitant to go out to dinner.

Ahold’s U.S. sales at stores open for at least a year were up 12.4%, excluding gasoline, in its most recent quarter compared to the same period last year, the company said earlier this this month. Online sales increased 114.7%. The company said the growth was “largely due to the COVID-19 outbreak”.

Online grocery shopping had been slower to grow in the United States than purchasing electronics, clothing and other goods, but the coronavirus has sparked a surge in new customers, with shoppers seeking to limit their trips to physical stores.

“Covid was kind of a wake-up call for us,” Natalie Knight, Ahold’s chief financial officer, told the Wall Street Journal in August.

Traditional grocers and online delivery services have struggled to keep pace with demand, resulting in canceled orders and long delays for customers.

FreshDirect was unable to handle the flood of orders from existing customers and buyers when the pandemic first hit, CEO David McInerney told CNN Business in an interview last month.

“The barriers to online grocery shopping were completely removed” in March, he said. “We couldn’t stand” the high demand. The company’s systems were overwhelmed as people bought two to three times as much per order than they usually did, buying for a longer period than usual, and placing orders for friends and relatives.

Fresh Direct forecast a busy winter with rising coronavirus cases. He got holiday items, such as canned pumpkin, baking supplies, and spices earlier than usual this year, and is storing larger amounts of them in warehouses.

“We’re expecting a really busy winter, and there are going to be a lot of new customers getting used to buying groceries online,” McInerney said last month. “The colder weather will only push this forward. “

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