LetterOne Retail: buying and building the next generation of retailers internationally

DIA Group

Three years ago, L1 embarked upon a journey of profound transformation of a food retail operator, which occupies an important position in the neighbourhoods of four countries: DIA Group. The objective was to strengthen the confidence and relationships with key stakeholders, with the customer at the centre of its thinking – a differentiated food retail offer at affordable prices, as well as the proximity of its stores to customers’ homes or via its online offering.

2021 was a year of important progress for DIA. Net sales for the year reached €6.648bn, 3.4% less than in the previous year. Despite the decrease in net sales, Adjusted EBITDA for the year increased to €124.3mn, a demonstration of the success in operational management and cost controls. However, the net result continued to be negative, with a reduction of losses by 30% to €257.3mn.

2021 also featured an important recapitalisation agreement between DIA and its syndicated lenders, combined with a capital increase, providing the company with an increased equity base of €1.028bn and cash infusion of €259mn.

2021 was marked by three global priorities across DIA’s four countries of operation – Spain, Portugal, Brazil and Argentina: (1) a new customer value proposition within a new store concept; (2) a new franchise model and, with it, an alliance with key local entrepreneurs; and (3) the deep revision of its own (private) label offering with a product of the highest quality corresponding to customer needs.

With its new store concept and customer value proposition, DIA has redefined its store: it is a neighbourhood store, comfortable and friendly, with an assortment that addresses key customer needs, including an important focus on fresh products. At this writing, DIA has remodelled more than 1,500 stores in accordance with this new concept in Spain, Argentina and Portugal, delivering a sales uplift of more than 15% compared to 2020. In Brazil, the first test stores have been launched.

In 2020, DIA announced a new franchise model – a win-win partnership with local entrepreneurs. In 2021, this new model was rolled out to existing franchisees in Spain, Portugal and Argentina and was launched in Brazil. It has allowed DIA to begin increasing the number of its franchisees for the first time in three years, with 2,710 franchisees at the end of the year.

Alongside the remodelled store and the new franchise partnership, in 2021 DIA launched 2,000 “Superbrand” products, reflecting DIA’s refreshed own (private) label offering. The “Superbrands” feature a level of quality equal to any national brand product, at affordable prices and with renewed packaging. This strategic initiative has allowed DIA to grow its own label participation by 4 points compared to 2019.

In shifting from a turnaround to a growth journey and in facing common macroeconomic uncertainties, DIA benefits from the strong leadership, which has been developed across the group. DIA Group’s Board of Directors features a majority of experienced independent directors with the relevant strategic skill set to tackle DIA’s strategic challenges. The independent directors are complemented by two shareholder representatives, including the company’s Executive Chairman.

The company’s Management Board features 12 experienced business leaders from four countries, including country CEOs and functional leaders. This group was recently reinforced by the arrival of a Group Strategy and Growth Director and a Corporate Communications Director. DIA’s Board of Directors and Management Board work hand-in-hand in constructing a new culture of proximity, to its customers, stores and franchisees, with reduced hierarchies and with a strong commitment to building the new DIA.

Holland & Barrett

For over 150 years, H&B has been helping people live happier, healthier lives. Over this period, there have been many periods of disruption and change, although few will have brought about the fundamental changes that have been experienced in the last two years under the shadow of the COVID pandemic. H&B is very proud of all its colleagues’ efforts to support existing and new customers during this period. It is also fortunate to have achieved solid financial results despite the many challenges that were faced.

In FY2021, revenue was flat year-on-year at £727mn, reflecting a decline in retail footfall driven by the various COVID-related lockdowns, offset by strong growth in the digital channel. During the year, H&B reduced its retail estate by 18 stores to close the year with 1,060 stores. Adj EBITDA for the year was £191mn, up 5% year-on-year.

The disruption of the past two years has created a renewed focus on the future of the business. H&B has experienced an acceleration in the overall retail market channel shift to digital, which, whilst moderating, is expected to continue. In addition, H&B observes fundamental changes to consumer attitudes to wellness and a greater realisation of the preventative behavioural steps one can take to improve health and longevity.

There is a clear imperative to transform the business to ensure that it remains relevant with existing customers. H&B’s vision is to be the trusted partner for millions of people globally to achieve their personal health and wellness goals. This means it must:

  • move beyond its current products and ensure that it has efficacious solutions (that combine product, advice and services) to meet the specific needs of the individual;
  • seek growth and think globally in what it does; and
  • invest in technology, product and data capabilities to allow ever more personal relationships with its customers.

To enable this transformation, H&B has made significant investment to improve core omnichannel retail operations in its existing markets, investing in store refurbishments and relocations and building technology solutions appropriate for a modern omnichannel business. It expects this to deliver a stronger, more sustainable business in the long term.

In addition, H&B is investing in a renewed focus on developing a portfolio of wellness ventures in which it is building and partnering with technology innovators in wellness. An example of this in 2021 was the acquisition of Live Better With, a digital health start-up focused on menopause and other wellness journeys.

To achieve this ambition, H&B has assembled a strong and balanced management team over the past 12 months, adding a number of important appointments: Chief Business and Science Officer; President of Digital Transformation, responsible for technology, product and data; Global Operations Officer; Chief Commercial Officer; and Customer MD. This team has a combination of omnichannel retail experience, technology expertise and international track record.

The management team benefits from the strong support of its Board of Directors, which features a majority of experienced independent directors with the relevant strategic skill set to realise the strategic vision. The independent directors are complemented by two shareholder representatives, including the company’s Executive Chairman.