COVID-19: impact and our response
To a large extent, COVID-19 defined 2020 for people and businesses around the world. It presented enormous challenges for Ahold Delhaize, as well as the opportunity to fulfill our pivotal role in society in the best possible way. It also accelerated many trends, for example, the moves towards online shopping and working from home – both trends we have been observing and planning for over the past several years. While these trends moved exceptionally fast in 2020, this thoughtful preparation helped us keep up. Please note that in this section and the rest of the report, we also refer to the COVID-19 pandemic as “COVID-19” or “the pandemic.”
When the pandemic first struck, we reacted quickly. Global, regional and local crisis management protocols were activated to trigger an immediate response and lay the groundwork to support the businesses and protect associates and customers during subsequent waves of the pandemic. Cross-functional teams were put in place at a company-wide, regional and brand level, who worked day and night to monitor the development of the pandemic, oversee activities, engage with relevant functions within the company, connect with local governments, and advise senior management on policy questions, risks and actions to be taken to mitigate the pandemic’s impact and our overall operations. Since Europe was impacted by COVID-19 several weeks before the U.S., we could share insights and practices from Europe to the U.S. and learn from each other. The pandemic response is based on six main elements or principles: safely meeting customer needs, protecting associate well-being; supporting communities; safeguarding supply chains; building on a strong omnichannel offering; and maintaining financial stability (see infographic at far right). We conducted a scenario-planning exercise at Global Support Office level in each of these areas, looking three, six and 12 months ahead to prepare for changing circumstances as the pandemic evolves. This exercise includes current and forward-looking mitigation activities, which we evaluate and update on a regular basis (firstmonthly and now bi-monthly).
Our brands took a large number of actions to respond to the pandemic and ensure they could keep up with customer demand in a way that was safe for their associates and customers, and support their communities. The chart below schematically depicts the approach taken by many brands. Globally, we have invested approximately €680 million into appreciation pay to associates, safety and preventative measures (including sanitation and protective equipment) in stores and distribution centers, and donations to communities.
As an essential business, our local brands’ stores needed to stay open. Their first priority was determining how they could keep associates safe and comfortable coming to work despite the risks. They responded quickly with a multitude of health and safety measures to provide a safe shopping experience for both associates and customers and were among the first in the industry to put in place preventative measures, such as installing plexiglass at their checkouts and dedicating shopping hours for seniors.
One of the first steps our brands took was to provide frontline associates with personal protective equipment, including masks, hand sanitizer and gloves. They performed additional disinfection in all stores and facilities and put in place social distancing protocols, such as stickers on the floor and plexiglass shields at the checkouts – in fact, our brands installed these shields in 2,000 U.S. stores in just one week. They implemented one-way traffic through some of the stores, distribution centers and support offices. They also counted the number of customers in stores at any given time so that they did not exceed mandated occupancy levels. Our brands continued introducing more contactless payment options, including self-scan. As a result of safety precautions, they used more plastic packaging, which is not our preference from a sustainability standpoint but was necessary to meet customers’ needs. Our brands performed regular health assessments and temperature taking, as well as virus tracking in case any associates became ill. For more on how associates were supported, see Protecting associate well-being below.
Several brands have also been testing new technology to keep people safe, such as thermal imaging for temperature checks. Our brands in the Czech Republic, Belgium and the Netherlands have piloted new, highly effective disinfection stations that sanitize a shopper’s hands and also the shopping cart handle in a quick, easy and automatic method.
The rapid growth of online shopping introduced new security concerns, and we worked hard to adapt our information security tools, processes and standards to keep customer data safe. Anxiety around the COVID-19 pandemic has been used in malicious ways, including large numbers of phishing attempts, malware, and malicious domains – trying to leverage public panic through fake offers for masks, vaccines and relief funds. At the height of the pandemic, we captured over 17,000 unique phishing emails per day and have blocked over 85,000 malicious COVID-19 websites to date. In addition to adapting our technology to prevent as many malicious attempts as possible, our brands continued to provide guidance to associates, for example, on how to work from home safely or use video conferencing tools in a more secure way. They also held a virtual information security awareness week to reinforce the key elements of keeping data safe and why information security is everyone’s responsibility. In addition, customers were provided with security tips during the pandemic, focused on phishing, cyber-attacks and usage of e-commerce sites.
In Europe, bol.com held a program to give children a great birthday despite COVID-19 by sending them personalized birthday packages with handwritten messages. Alfa Beta supported the Greek National Health System with a sizeable donation to help fight the COVID-19 pandemic. Our pharmacies in the U.S. have been preparing to distribute the COVID-19 vaccine once it is available to them, through actions such as purchasing additional freezers and personal protective equipment, providing special training and education to associates and developing digital appointment forms and scheduling tools to decrease wait times and maintain social distancing. In January 2021, in collaboration with the U.S. Department of Health and Human Services and the District of Columbia, Giant Food Pharmacies in D.C. were selected to receive an initial supply of a COVID-19 vaccine to be administered to healthcare associates who work in senior group home settings covered under Phase 1a of the vaccine distribution plan. The D.C. Department of Health is determining eligibility and scheduling appointments for those healthcare workers at one of the new immunization clinics set up at Giant Pharmacies. Our brands expanded their workforces to better serve customers, hiring many people from their local communities who had lost their jobs as a result of COVID-19. During the height of the pandemic, more than 45,000 people were hired to help support the surge in demand for customers.
COVID-19 put a stress on the supply chain the likes of which we’ve never experienced, requiring the entire chain to rethink how to collaborate. The close partnerships our businesses have developed with suppliers over the years helped to ensure they could meet customers’ needs together. As restaurants and food service businesses closed and people stocked up on products they were afraid they wouldn’t be able to find later, we saw unprecedented demand for items such as yeast, flour, toilet paper and sanitizing products across almost all our markets. Our brands worked in close partnership with suppliers to ensure they could provide the essential items customers needed, limiting supply on less essential products. With some suppliers distributing less product to ensure they could cover all their retailers, sourcing teams had to also work with alternate and new vendors to ensure the shelves were stocked. Some of the brands even repackaged food service products into normal retail volumes to sell in the stores and online. For example, Albert Heijn repackaged 10-kilogram bags of rice into onekilogram bags. The team at Food Lion quickly pivoted to source chicken products originally destined for restaurants and food service, ordering 25 truckloads per week at the peak. Our brands asked customers to only purchase what they needed, placed purchase limits on certain products and temporarily limited or cancelled promotions to allow stores to operate smoothly and suppliers to ensure product supplies. The pandemic highlighted to us the need for open trading borders, not only in terms of the food supply but also packaging and spare parts, and we had discussions with governments on this topic.
The Not for Resale (NFR) Procurement function was tasked with the difficult challenge of sourcing sanitation and protective equipment to keep associates and stores safe. The teams leveraged our current base of trusted suppliers and also sought new sources to ensure associates had the safety supplies they needed despite fierce competition for these products. In the early days of the pandemic, global demand for sanitation and protective equipment was sometimes 100 times larger than supply; it was impossible for suppliers to be prepared for this unprecedented development. Our NFR teams worked closely with them to ensure they could procure the products our brands needed. For example, when disinfectants became hard to obtain, they approached our own-brand liquor supplier; with minor adjustments to their production line, they were able to produce effective disinfectants. When markets and demand stabilized, prices for safety supplies dropped rapidly and the NFR teams started building safety stocks in preparation for the second COVID-19 wave. NFR in the U.S. initiated and deployed a Supplier Risk Task Force that met each week. They focused on COVID-19-related operational and financial risks related to our top 300 suppliers and worked proactively with these business partners to develop contingencies to mitigate these risks. The pandemic showed the great value of the work sourcing teams have done over the years to mitigate the risks involved in doing business with third parties, including our strong supplier search and due diligence process. It also showed us the important benefit the strong supplier relations they have built provide for the continuity of our business.
Our results and free cash flow were favorably impacted by the COVID-19 pandemic (see Performance review for more information). We further strengthened our liquidity position by accessing the financial markets and refinancing our revolving credit facility. On April 2, 2020, we issued a €500 million bond on the public debt markets. On December 10, 2020, the Company closed a €1 billion, sustainability-linked revolving credit facility refinancing the existing 2015-dated €1 billion facility. This new facility reinforces the alignment of our funding strategy and the commitments laid out in our Healthy and Sustainable strategy. While there was government assistance available to companies in several countries where our brands operate, we did not apply for any government assistance. We did not experience material asset impairments as a result of COVID-19. We did not receive nor grant material rent concessions. See Note 33 of the consolidated financial statements for more information.
As circumstances shifted, we remained – and still remain – flexible in order to keep up with changes happening around us and prepare for an uncertain future. For example, our brands performed a stress test on absenteeism to assess the level of potential disruption as the pandemic enters the second and third waves. The outcome demonstrated that brands would have severe disruptions and critical actions would need to be taken if the absenteeism rates go above 30% in store, distribution and logistics operations. Our brands put plans in place to prepare for absenteeism, including by hiring new associates or shifting associates to different areas of the business. So far, none of our brands has seen this level of absenteeism. We also assessed our internal controls at the onset of the pandemic to find out which controls had to be delayed in the critical period of the pandemic; since then all assurance activities have resumed. In all we did, our brands took the guidelines of local governments into account to keep associates and communities safe. While the situation kept changing, our brands adapted, but associates were the real heroes in adjusting to constantly shifting and challenging circumstances.