Food Lion 2012 Annual Report Download - page 61

DELHAIZE GROUP ANNUAL REPORT ‘12 // 59
these competitors. To the extent
Delhaize Group reduces prices
or increases expenses to support
sales in the face of competition, net
income and cash generated from
operations could be affected.
Operational Risks
Risk Related to Events
of Exceptional Nature
Delhaize Group’s operations, assets
and staff can be exposed to risks
related to events of an exceptional
nature such as, but not limited to,
severe weather, natural disasters,
terrorist attacks, hostage taking,
political unrest, fire, power outages,
information technology failures,
food poisoning, health epidemics
and accidents. Such events could
have a significant effect on the
Group’s relationships with its cus-
tomers and on its financial condi-
tion, results of operations and cash
flows. The Group is continuously
evaluating and addressing possi-
ble threats linked to external events
and has business continuity plans
and crisis procedures in place. The
effectiveness of these plans in limit-
ing financial losses will vary accord-
ing to the nature and severity of any
exceptional event.
Risk Related to Social Actions
At the end of 2012, Delhaize Group
had union representation in its oper-
ations in Belgium, the Grand-Duchy
of Luxembourg, Romania, Greece
and Serbia. In its U.S. operations,
the Group had union representation
in one of its eleven distribution cent-
ers, for which a collective bargaining
agreement with the union is in effect
until February 2015.
Delhaize Group’s operations and
results could be negatively affected
by social actions initiated by trade
unions or other parts of its work-
force, in which event the Group can-
not ensure that it would be able to
adequately meet the needs of its
customers.
Risk Related to Information
Technology Systems
Delhaize Group’s operations are
dependent on IT systems for many
functions and processes. These sys-
tems have been developed and are
maintained by internal experts or
external suppliers. Failure of these
systems could possibly cause dis-
ruptions in Delhaize Group’s opera-
tions, affecting sales and profit-
ability. Delhaize Group has business
continuity plans in place to take the
necessary measures to reduce the
negative impact from IT failures on
its operations.
If third parties or our associates are
able to penetrate our network secu-
rity or otherwise misappropriate our
customers’ personal information
or credit or debit card information,
or if we give third parties or our
associates’ improper access to our
customers’ personal information or
credit card information, we would
be subject to liability. This liability
could, for instance, include claims
related to unauthorized purchases
with credit card information; identity
theft or other similar fraud-related
claims and administrative fines. Any
such liability for misappropriation
of this information could decrease
our profitability. Our security meas-
ures are designed to protect against
security breaches, but our failure
to prevent such security breaches
could subject us to liability, dam-
age our reputation and diminish the
value of our brand names.
Risk related to the Achievement
of Cost Savings, which may
Reduce, Delay or otherwise
Hinder our Ability to Implement
our New Game Plan
Effective February 1, 2010, the sup-
port functions for Food Lion, Bloom,
Harveys, Bottom Dollar Food, Han-
naford and Sweetbay began to be
integrated within the U.S. segment
of Delhaize Group, while maintain-
ing the unique go-to-market strat-
egies of each of these banners.
In this new structure, the banner
organizations can benefit from com-
mon U.S. support services for supply
chain, IT, finance, human resources,
organizational change manage-
ment, legal and government rela-
tions, communications, strategy
and research, and corporate devel-
opment. The goal of these com-
mon support services is to create
greater efficiencies and scale, and
the elimination of redundancies, as
well as to become more flexible in
the integration of acquisitions, and
ultimately better serve our banners
and customers. This restructuring is
also expected to simplify our legal,
accounting and tax compliance
requirements. We anticipate that
cost savings achieved through our
U.S. support services restructuring
will help fund our New Game Plan
that was announced in Decem-
ber 2009. A significant component
of our New Game Plan involves,
among other things, our operating
companies’ fine-tuning their pric-
ing strategies to achieve local value
leadership. Our New Game Plan is
intended to accelerate our growth.
However, we cannot provide assur-
ance that we will achieve all cost
savings anticipated through our
U.S. support services restructuring,
or through other related initiatives,
which may reduce, delay or other-
wise hinder our ability to implement
our New Game Plan.
Risk Related to Our Franchised
and Affiliated Stores
Approximately 20% of the stores in
our sales network are franchised or
affiliated. The operators of our affili-
ated and franchised stores operate
their stores as independent third
parties. Although we attempt to
properly select, train and support the
operators of our affiliated and fran-
chised stores, the ultimate success
and quality of any affiliated or fran-
chised store rests with its operator.
If the operators of our affiliated and
franchised stores do not success-