Delhaize Belgium to close 14 stores and fire 2,500 staff

Supermarket chain Delhaize has announced a restructuring plan involving the closure of 14 stores nationwide and 2,500 redundancies – one in six of the workforce.

Yesterday staff at about 40 stores stopped work in a spontaneous reaction to the news. The company said it was committed to co-operating with its social partners to avoid forced layoffs, but unions have promised a long and hard fight.

Delhaize Belgium employs more than 15,000 people in 854 stores, including affiliates, and generated sales of €5.1 billion in 2013, with a market share of 25.5%.

Management blamed the need for cuts on increasing salary costs, made more serious by the economic environment and growing competition. “In order to secure its future, Delhaize Belgium needs to accelerate the implementation of its commercial strategy through an additional investment of €450 million during the 2015-2017 period,” the company said in a statement.

The list of stores includes one in Brussels – Verhaeren in Schaarbeek. The measures do not affect Delhaize affiliates AD Delhaize, Proxy Delhaize, Shop & Go, Delhaize Luxembourg, Red Market, Tom & Co and Caddy Home.

“We fully recognise the social and emotional impact these measures have on our employees and their families,” commented Denis Knoops, CEO of Delhaize Belgium, who has been in the job for only two weeks after his predecessor, Pierre-Olivier Beckers, resigned unexpectedly. “We are nevertheless convinced that the identified steps are absolutely necessary to guarantee the future of Delhaize Belgium. We have been present on the Belgian market for almost 150 years and are determined to remain so for the long term.”

Flemish minister-president Kris Peeters held a meeting yesterday with Delhaize management, at the company’s request. “My thoughts go out to the people who will now be living in uncertainty,” Peeters said afterwards and called for the talks which will now take place under the Renault law between all of the social partners to be given a chance to succeed, in an attempt to keep compulsory redundancies to a minimum.

Trickle-down effect
The government will do everything in its power to help those affected by layoffs to find new jobs, said Peeters, while the governments now in the process of being formed would have to take further steps to tackle the problem of salary costs. The government of Flanders, he said, would  also closely follow the impact of the measures on Delhaize’s suppliers, many of them local farmers.

Delhaize employees who keep their jobs will feel the effects of the plan, however. The measures, the company says, will also include “further optimisation of the store organisation and back-office processes and an adjustment of the salary and working conditions of all associates to better align with the pay scale of its competitors.” In other words, agreements regarding staff benefits will be rescinded and new terms and conditions imposed.

Delhaize manages 138 supermarkets itself, with the rest, mainly smaller stores in the affiliate chains, run by subcontractors and franchisees. One in 10 of those is to close and the rest to become more competitive. Since 2010, the large stores, faced with growing competition from hard price-cutters like Aldi and Lidl, have seen their profits drop by 78%.

To some extent, Delhaize supermarkets are also the victim of their own competition, as shoppers in Belgium are increasingly moving away from the weekly trip to the supermarket, preferring to visit their local shops more often, some of which are Delhaize affiliates.

The company, however, identifies the cost of salaries and benefits as its main problem. According to Delhaize, they pay between 15% and 30% more than its competitors. An example: Delhaize staff have the right to a 15-minute break for every four hours worked – amounting to 2.5 hours in a 36-hour week paid but not worked. Delhaize staff also receive service raises until the end of their careers, with the company’s staff estimated to cost 33% more per hour than the equivalent in Albert Heijn, 22% more than Carrefour and 16% more than Colruyt.

Industrial actions were expected to continue today. “We will support all spontaneous actions by people who needed to express their anger, but the real struggle for us will come only later,” said union representative Jan De Weghe.

photo: Staff gather outside of a Delhaize in Brussels after news that the supermarket chain will let 2,500 staff go
© Francois Lenoir / REUTERS