Koninklijke Ahold Delhaize N.V. (AD) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Annual General Meeting of Shareholders of Ahold Delhaize. I'm Peter Agnefjäll, Chair of the Supervisory Board, and I will chair the meeting today. Thank you very much for being with us. With me in our studio are the CEO, Frans Muller; the CFO, Natalie Knight; the Company Secretary, Jorn Palm, and a notary, Martin van Olffen from the law firm, De Brauw Blackstone Westbroek. Through a live virtual connection with Canada, we have the chair of the Remuneration Committee, Bill McEwan, present to address the meeting. Lastly, we have the external auditor, PricewaterhouseCoopers Accountants, present. And on behalf of Pwc, Shana Laurie de Hernandez, will give a presentation and answer any question with respect to the audit and audit report. The pandemic continues to impact our everyday lives and has also affected the organization of this meeting. With regret, we have to organize the meeting in a virtual manner, which limits the value of the dialogue that we would normally have during the meeting. We are aware of this and sincerely hope to be able to organize next year's meeting in a format that will allow for more face-to-face interaction that we all desire. During the meeting, we will look back at 2020 as the company successfully addressed the challenges posed by COVID-19, and I'm proud of all the efforts taken by the company to protect our customers, our associates through the year and of the role the company has played in securing food supplies for customers and communities despite all challenges posed by the pandemic. In his speech, Frans will expand on the enormous task and challenges the company faced in 2020. And we would also like to take a moment to reflect on all the people and businesses that suffered from the pandemic, the people who became sick, who lost relatives and loved ones and of businesses and organizations that suffered from the economic effects of the measures taken to fight the pandemic. We're humbled by the fact that we could play a vital role in continuing the food supplies, and we are proud that we were able to help customers and associates and the society at large with our significant investments in COVID care. On a more personal note, I'm pleased with the efforts and the role that we have played in helping our neighbors, customers and our suppliers through this difficult time. This meeting will also be used to say farewell to a number of people. As per the end of the meeting, Dominique Leroy and Ben Noteboom will retire from the Supervisory Board. And I will also like to come back on the retirement of Jan Hommen towards the end of the meeting. And at the same time, we will cover the nominations of Jan Zijderveld and Bala Subramanian as new members to the Supervisory Board. Lastly, Frans will say a few words regarding the farewell of Abbe Luersman, who departed from the Executive Committee after a distinctive career with the company. Unfortunately, not everybody can be here today, but we'll show pictures of the nominees when we go over their appointments. Before I hand over to Frans, I need to go over some formalities. This meeting will be mainly held in English. Only Frans will address you in Dutch. The speeches will be concurrently translated into English and to Dutch. As announced before, shareholders who have asked questions ahead of the meeting will have the opportunity to ask follow-up questions during this meeting through the chat function from which they have received access ahead of the meeting. Questions may be asked either in Dutch or in English. I also note that all statutory requirements have been complied with to hold this Annual General Meeting of Shareholders, and the notarial record will be made of the proceedings of this meeting. And for that purpose, an audio recording shall be made. This meeting will be video webcasted live on our company website and will remain accessible via aholddelhaize.com. Before we proceed with the voting items of the agenda, Martin van Olffen will inform us on how many shareholders have voted through a power of attorney in advance of the meeting and the number of voting rights that will be represented at the meeting. We will now turn to the agenda of this meeting, and we will start with agenda item 2 to 6. First, Frans will talk about the financial year 2020; followed by Natalie, who will present the financial results, the policy on additions and reserves and dividends as well as the dividend proposal for 2020. I will then hand over to Shana Laurie de Hernandez. And lastly, I will invite Bill to present the remuneration report. After the presentations, we will cover the questions regarding agenda items 2 through 6 that have been asked ahead of the meeting. In the event you have asked the questions prior to this meeting, you may then post follow-up questions via the chat functions. After we have addressed the questions, we will present the voting results per agenda item. And I think that's it for now. And with that, I hand over the word to Frans.

[Interpreted] Thank you very much, Peter. I shall now continue in Dutch. I would like to welcome you all to this Annual Shareholders' Meeting. None of us could have imagined last year that we would also be holding a virtual meeting this year, but we are hopeful that we can get together again next year. Just like you, many of our Supervisory Board and Board of Directors are present only virtually. We will do everything we can to make this meeting run smoothly and to have a constructive session with you. I would like to thank you for your understanding in this and for your great commitment to our company. As I look back on 2020 with you, the coronavirus has, of course, had a huge impact on us all and on all those local neighborhoods close to one of our 7,000 stores. Our people there see the suffering that corona causes every day, the impact on our customers, both online and in the stores themselves, who in great uncertainty do their daily shopping and wish to do so safely. Every week, 54 million customers in America, the Netherlands, Belgium, Luxembourg, Serbia, Romania, Greece and the Czech Republic as well as Indonesia, know that they can count on our stores and brands to do so and the impact on our associates, now 414,000 in total. The associates who loads pallets at the distribution center, the young man behind the cash register, both uncertain about the safety of their work, especially in the beginning of the pandemic. The supermarket manager, who has to make sure every day that it doesn't get too crowded in the store. And the driver, who delivers the groceries during the home deliveries and who can no longer offer delivery to the kitchen service, unfortunately not even to the elderly, who appreciate it so much. Now these associates show their commitment each and every day. They make sure every day that our stores are stocked, safe and clean, and that is not too busy. And they count on the understanding of customers in doing so. Not only was the coronavirus a major influence on their work, but in America and other countries also, the social tensions after the death of George Floyd were noticeable. Our brands and banners are at the heart of society in all the neighborhoods where we do our work. And this injustice was strongly felt by many. And associates at all of our brands were doing their exceptional work in exceptional circumstances, and I cannot thank them often enough for that. Again, I thank them for their commitment. We are at the heart of society. Associates have first-line contact with customers. They go the extra mile. In America, they're called heroes, and I believe that is rightly so. The coronavirus has demanded many lives and that, unfortunately, is true for a number of associates in our company as well. The loss of a colleague touches everyone. My thoughts go out to the deceased, to their families, their colleagues and others who love them. And from this place, I would also like to wish all of those who are currently affected by corona a lot of strength in their recovery. The coronavirus has also had a major impact on our logistics. I'd like to take you back to the now iconic images of the empty shelves. Panic buying from customers who just didn't know what they were getting into with corona: rice, macaroni, beans, cleaning supplies. The toilet paper issue, later followed by baking products, such as flour and eggs, especially in the first weeks, this all had a great impact on our supply and logistics chain. We adjusted at lightning speed. We did what was best for both associates and customers. We were able to comply and fulfill that vital role that we play in society. A stable food supply is a primary necessity of life for everyone. And under these circumstances, together with the thousands of large and smaller suppliers, we successfully met this challenge. Now these unprecedented circumstances have also had an impact on our revenue and results. Natalie Knight, for whom 2020 was the first year as CFO of Ahold Delhaize, will tell you more about this later. Our net sales increased by 14.2% at identical exchange rates. More and more customers knew how to find us. Our market share grew in 2020. Net online consumer sales grew by 67.4% to EUR 7.6 billion. This meant that we achieved our target of EUR 7 billion online sales, a full year ahead of schedule. I'd like to zoom in briefly on our online platform player, bol.com. There, too, we had EUR 4.3 billion consumer sales a full year ahead of plan, and we far exceeded our goal of EUR 3.5 billion. The expansion into French-speaking Belgium was a milestone for bol.com as well. Moreover, we sell the goods of more than 45,000 partners via that platform. Working periods in the Netherlands and Belgium found bol.com to be the best place to shop for home office equipment for their children, for sports equipment, toys, handyman items and for local stores via [ shopintheneighborhood.bol.com ] in the Netherlands. The acquisition of the New York-based FreshDirect was a strong start to this year. This is an online player specialized in high-quality fresh food. They have a large fan base, who have their groceries home delivered through FreshDirect. Another milestone was the acquisition of 62 stores of Southeastern Grocers in America by our local brand called Food Lion. And this year, the Dutch family-owned company, DEEN, reached agreement with us to transfer 39 stores to Albert Heijn. These investments bring growth, a growth that we wish to continue both organically and through targeted merger and acquisition activities. We are and will remain alert to opportunities that fit our strategy and create value for our stakeholders. In 2021 as well, we wish to maintain our leading market share positions. Our strong position has enabled us to continue to invest in 2020, totaling EUR 2.6 billion, of which EUR 600 million alone is spent in the Netherlands. This has enabled us to award contracts, both to large companies and to many small- and medium-sized enterprises. For example, construction companies, painters, plumbers, logistics and IT companies. And for example, for the construction of the new Home Shop Centers for Albert Heijn, 2 of them, so that we can meet the large online demand for home delivery of groceries. At the same time, we were able to create 4,000 additional jobs. And we've also made investments in electric trucks to reduce our CO2 emissions. Many stores have been remodeled, providing more square footage for even fresher and healthier offerings, something our customers clearly demanded. I mentioned all these investments because I think it's important to see the positive spin-off from larger companies like Ahold Delhaize, and to make that more visible to illustrate how this interwovenness with other companies leads to a lot of direct and indirect employment. Like in the Netherlands, with our more than 1,000 suppliers, but also with the 100,000 people who work for one of our great brands: bol.com, Albert Heijn, Gall & Gall and Atos. And in Belgium, there are another 32,000: Ahold Delhaize, bol.com and Albert Heijn. Now if you've remained healthy during a crisis, the question arises, what else can you do and mean for your customers and others? For the Executive Committee at Ahold Delhaize and for me personally, it was immediately clear that we were the ones who could use our core values of caring and wanting to support others in this respect. Integrity, humor and teamwork are in our DNA, next to the core value of courage and wanting to support. If I look at 2020, if I look at the local communities and our associates and what we did for them, it makes me proud. We've used our strong position to support all of these people in neighborhoods and made EUR 680 million in corona-related donations. Because we believe that for a company of our size, we should also live up to our responsibilities. It also meant additional rewards for hundreds of thousands of associates at Albert Heijn, Alfa Beta, Hannaford, Delhaize, Stop & Shop and the 13 other brands where we work so hard together. It meant that 45,000 additional people found jobs with our company. It meant that in America, associates of our local brands received 2 weeks extra pay in case of illness. This is quite common in the Netherlands. But for the 240,000 associates and their families at our American brands, this was a real comfort. Without financial consequences, they were able to remain at home if they themselves or one of their family members fell ill. It also meant highest safety standards for our associates and customers. We were the first in the industry to introduce the now familiar plexiglass screens at the cash registers. In Europe alone, we used 9 million mouthguards for associates, 10 million liters of disinfectant to clean stores and 70 kilometers of plexiglass screens for checkouts. We were also able to make an additional EUR 21 million in charitable donations to help families, vulnerable people and health care workers. Let me give you a few examples. Donations to food banks, donations to the Red Cross, to vaccination programs in the U.S.A., to children's hospitals, to additional education for teenagers, to tens of millions of free meals for people and families in need through the Food Lion programs as well. Moreover, we made pledges totaling EUR 1.4 billion to invest in U.S. pension funds. This will provide more security for our associates, and it reduces financial risks for our company. I am proud of the fact that we were able to do more in 2020 for the communities in which we work and live. For 2021, we've announced an additional EUR 10 million in charitable donations. This week, for example, Atos is going to launch a campaign to prevent cardiovascular disease in women by measuring their blood pressure, further research into which we will financially support. 2020 was a year of extreme uncertainty with daily questions such as how to ensure that associates can work safely and customers can shop safely. Will the borders remain open for the import of food and goods? How will the pandemic affect our people physically and mentally? Only with a joint effort of all associates and all local suppliers as well as partners of Ahold Delhaize, we were able to provide the best possible answers to these questions. It is clear that we are not infallible. Quick adjustments sometimes results in empty shelves. And sometimes, wrong choices lead to results that could have been improved from the start. I am proud of how we were able to fulfill our role in the local neighborhoods and communities, how we indeed been able to supply a safe and stable food supply at those moments that mattered most. And especially during this crisis, we've taken even more steps in the area of sustainability and health. A few examples: in Belgium, the new SuperPlus loyalty card rewards healthy choices with extra discounts; the GIANT Company launched a discount program, with a Flashfood app to reduce food waste; over time doubled its vegan range and was once again voted the most sustainable supermarket by customers in the Netherlands. All the buildings at bol.com switched to sustainable energy. And of course, at Ahold Delhaize, we set ambitious goals. We are going to reduce food waste by 50% before 2030. Next year, we want 51% of our own-brand sales to be healthy. We are going to increase the chain transparency of products such as bananas, potatoes, fish and meat. And we keep an eye on biodiversity and climate. We have set ourselves science-based climate targets for a reduction of 50% of CO2 emissions in all of our own operations, even before 2030, and to be net zero in emissions before 2050. Now the brand-new Ahold Delhaize Coffee Company and roasting facility has a smaller climate impact than before, because the greenest energy ultimately is the energy you do not use. We also support the Task Force on Climate-Related Financial Disclosures, also known under the acronym, TCFD. In 2020, we conducted our first global analysis of climate-related risks, in line with their recommendations. Our commitment to sustainability is seen. Ahold Delhaize, again, was recognized as a world leader by the Dow Jones Sustainability World Index based on our #1 position in the Americas and Europe and our #2 position worldwide in the S&P Corporate Sustainability Assessment. In the area of digital and e-commerce, major steps were made in 2020. We've greatly expanded our online capacity with additional DCs, Home Shop Centers and, most recently, an additional micro-fulfillment center in America so that we can serve customers online as well as off-line anywhere in the way they want. Now 87% of American households in our markets have access to same-day pickup and delivery. We continue to grow there as well. In the Netherlands, Albert Heijn launched, as you will know, a new online delivery service with AH Compact, especially for small households and free delivery above EUR 35. This year, all our brands are offering a strong loyalty program for their customers. Last year, these were launched at Albert in the Czech Republic and Super Indo in Indonesia. Many existing loyalty programs have been expanded, including, amongst others, Stop & Shop, Delhaize, Albert Heijn and Alfa Beta. We're also focusing strongly on algorithms for personalization. For example, an algorithm that recommends extra products based on shopping behavior. So if you order pizza dough, grated cheese is automatically recommended. Simple and very practical. We could not and did not stand still. In 2020, we took the right steps to make our company stronger for the future. We are in an excellent position to continue growing both through our brands' organic growth and through nonorganic growth. We are on track. And the new strategic framework, Leading Together, as introduced in 2018, has been further refined. Our focus is on strengthening growth through our omnichannel approach; encouraging a healthy and sustainable lifestyle; encouraging the right culture and diversity to recruit talent and retain talent; and strengthening the efficiency of our operation, among other things, with strong cost programs. All of this is supported by continued investment in technology. We successfully launched our new HR system, for example, for Dutch employees, something that we will also bring to America. We were also able to serve the growing online shopping needs of our American customers with our self-developed PRISM e-commerce solution. Another important component is artificial intelligence, or AI. We are putting AI better on the map in the Netherlands through Kickstart AI, and we're doing this together with 5 leading Dutch companies. With our AIRLabs, we work with universities on practical AI solutions. Besides strategy, our newly adopted vision determines the course of our company, to create the leading local food shopping experience. And our brands do this together with local suppliers and partners. This enables us to serve customers and their changing needs in the best possible way. Those wishes are for healthier living and eating and more home cooking, for more attention to making sustainable choices, having groceries delivered to homes more often and more quickly, choosing local products from bol.com and Albert Heijn. We can only fulfill these wishes with the support of our 414,000 associates who stand behind us, associates whose satisfaction has risen to 81% according to our annual employee survey. Associates who can be themselves were given the space to make the best of themselves. In America, all our brands received the perfect score on the Human Rights Campaign's Corporate Equality Index. This is also anchored in our goals. We strive to be 100% gender-balanced, 100% reflective of local markets and, of course, 100% inclusive. We started 2021 from a position of strength that offers room for further growth. And the outlook for this year is still uncertain though due to the pandemic. And therefore, in 2021, we will continue to do everything we can to support our employees, customers and local communities. Ladies and gentlemen, I realize that every day longer in this pandemic is just one day too many. This is true for our people, for local neighborhoods and for fellow business owners, entrepreneurs who are struggling because their stores are closed. I grant everyone some kind of outlook that brings us back to what used to be normal with open restaurants, open stores and a functioning society. That is the best for everyone. A moment to thank my colleague and our Chief Human Resources Officer, Abbe Luersman, who has served the company for the past 7 years. We have experienced Abbe's commitment to always do what's right for our company, associates and the communities we serve, and we all have enjoyed working with her. She will be rejoining our family in the United States after being 13 years in Europe. And I thank her for her contributions, and I wish her and her family all the best for the future. Thank you all for your attention. And now I'll give the floor back to our Chairman, Peter.

Thank you, Frans. And I suggest we move on, and I will hand over to Natalie.

Hello, ladies and gentlemen. I'm pleased to give you a review of our financial performance in 2020, along with our 2021 outlook today. So let's start with a few highlights from 2020. For the full year, sales grew 14% at constant exchange rates to EUR 74.7 billion. These revenues were positively impacted by high levels of demand due to COVID-19 and, to a lesser extent, by the occurrence of a 53rd retail week. Net consumer online sales increased 67% at constant currency rates to EUR 7.6 billion. That was composed of 105% growth in the U.S. and 57% growth in Europe. This was driven by strong demand from both new and existing customers and made possible by our significantly increased online capacities. As an example, we expanded our U.S. Click and Collect locations by over 60% in 2020 and ended the year with over 1,100 locations. Elevated sales in 2020 helped to drive a 60 basis point expansion in group underlying margins of 4.8%. And we leveraged these operating costs despite spending EUR 680 million on efforts to support customers, associates and the communities with COVID-19 relief care. Our strong performance in 2020 resulted in free cash flow of EUR 2.2 billion, and we're proposing an increase of 18% in our annual dividend for 2020 to EUR 0.90 per share. That's up from EUR 0.76 per share in 2019. Now you see our IFRS figures. Our IFRS group operating income is EUR 2.2 billion versus our underlying group operating income of EUR 3.6 billion. The delta between these results was driven largely by the EUR 1.4 billion we committed toward reducing our U.S. multi-employer pension exposure in order to secure pension benefits for our associates as well as reduce future financial risk for our business. I'll come back to this in a few moments. The next slide shows our performance by segment. In the U.S., net sales grew by 16% at constant rates to EUR 45.5 billion, supported by double-digit growth across all our banners in the region. U.S. underlying operating margin was 5.4%. This is up 110 basis points and was largely driven by strong sales leverage due to COVID-19. In Europe, net sales increased 12% at constant rates to EUR 29.3 billion. And we had particularly strong performance in the Benelux, where our Albert Heijn, Delhaize and bol.com banners all grew market share during the year. The 2020 European underlying operating margin was 4.5%. This represents a 10 basis point decline year-over-year due to significant COVID-19 expenses as well as our EUR 45 million of higher pension expenses in the Netherlands. As mentioned earlier, in 2020, we took major actions to derisk and withdraw from U.S. multi-employer plans. As a result, we were able to reduce our net deficit in this area by approximately 90% in 1 year. In doing so, we committed to contribute over EUR 1.4 billion to improve the security and pension benefits for our associates and reduce future financial risk for Giant Food and Stop & Shop. Of this amount, we contributed over EUR 600 million in cash in 2020. Separately, we also paid out an additional EUR 122 million to the Netherlands pension plan based on an existing agreement to improve the funding position. Moving on to free cash flow. Here, we delivered EUR 2.2 billion in 2020, significantly exceeding our initial guidance of at least EUR 1.5 billion. This was net of cash contributions made to reduce our U.S. multi-employer plan risks as well as a sizable step-up in our omnichannel investments. You now see a summary of our financial targets for 2020, our achievement against them as well as our new targets for 2021. We show this because we hold ourselves accountable when we set targets, and we believe in being very transparent about them. In 2020, we exceeded nearly all of our targets, and our 2021 guidance reflects that we really remain committed to the financial discipline and the operational excellence, which you have come to expect from Ahold Delhaize. Now the next couple of charts illustrate many of the key metrics which sustain our financial performance, namely the elevation of our healthy and sustainable goals, the cultivation of our talent and our commitment to continuously increase operational excellence. Again, here, you see that we present how we've performed against our 2020 targets and also provide our new ambitions for 2021. Let me discuss now our 2021 financial outlook, which we have also communicated during our Q4 2020 earnings report in more detail. As you know, COVID-19 continues to drive a significant amount of uncertainty for our business. And this is an important factor in all of our guidance for 2021. We faced very challenging sales growth comparisons from 2020 and have just entered the period with the toughest comparisons. As a result, we expect a sales deleverage as we lap those strong results driven by higher demand associated with COVID-19. To a lesser extent, this year, we'll also miss the occurrence of the 53rd retail week. Nevertheless, we expect our comp sales trajectory to be better on a 2-year basis in '21 compared to our historical performance pre COVID-19. I'd also like to mention that while it doesn't affect comp store sales, our recent acquisitions of FreshDirect as well as the stores from Southeastern Grocers and DEEN Supermarkets later this year, will also increase the overall sales of our group. On the cost side, expenses related to COVID-19 will continue in 2021, albeit at a much lower level than what we experienced in 2020. We, therefore, expect our underlying operating income this year to be at least 4%. This target reflects our ongoing commitment to drive cost savings, which are expected to be in excess of EUR 750 million this year, which is higher than our previously communicated target of EUR 600 million. With respect to underlying EPS, we expect to grow this key metric in the mid- to high single-digit range relative to 2019. Free cash flow is expected to be approximately EUR 1.6 billion. This figure includes a net capital expenditure of EUR 2.2 billion. In 2021, we plan to increase our dividend year-on-year within the parameters of our 40% to 50% payout ratio on underlying earnings. Our balance sheet continues to be very strong, and we remain on track with our previously announced EUR 1 billion share repurchase program for this year. I'd also like to highlight our ESG financing initiatives. As you recall, we successfully closed a EUR 1 billion sustainability-linked revolving credit facility in late 2020. And we've recently followed this up last month with our inaugural sustainability-linked bond amounting to EUR 600 million with a term of 9 years. The bond is linked to the achievement of 2 key sustainability performance targets in 2025: the reduction of our absolute scope 1 and scope 2 CO2 emissions by 29% from the 2018 baseline; as well as the reduction of food waste by 32% from a 2016 baseline. These targets are in line with our broader goals to reduce both food and waste targets by 2030 at 50% from their previous levels. We believe this aligns with our values as a company and our strategy to really elevate healthy and sustainable topics across the business. Speaking of our values, I'd also like to touch on our 2020 annual report, which was published last month. This theme is about how we are leading together through change, and it really strongly reflects our commitments to the communities we serve and other stakeholders during this pandemic. You will likely notice many improvements in this year's version of our annual report, including a detailed discussion of how we responded to COVID-19 to meet customer needs and protect associate well-being. We also increased transparency by providing more disclosure on our strategic growth drivers and provided more transparency on our tax strategy and tax contributions. We've increased our disclosure on risk, including an assessment of the potential net risk severity and changes in risk trend categorization. We've also further integrated ESG topics into our overall risk assessment. We've included our first global climate change analysis in line with the TCFD recommendations of climate-related risks, including all of those that are identified potential material impacts to our business. If you haven't had a chance to read it yet, I really urge you to do so. As you can tell, it's something we were quite proud of. Lastly, I'd like to share with you some important dates for 2021. Notably, April 29, when our final 2020 dividend payment will be made. Additionally, please note that our Q1 results will be published on May 12. With that, I'd like to say thank you very much for your attention, and let me hand it back to our Chairman. Peter?

Thank you, Natalie. I now give the floor to Shana Laurie de Hernandez to give the auditor's report.

Thank you, Peter. Good afternoon. I hope that you and your families are healthy in what remains uncertain times. Thank you for the opportunity to discuss our audit with you. This is an important moment for me as you are one of the most important user groups of our audit report. You have had the opportunity to submit questions in advance. I have addressed the questions raised from the VEB specifically as part of my comments. We have issued 2 opinions, one on the financial statements and the second on nonfinancial information. I will speak to both. First, we issued an unqualified opinion on Ahold Delhaize's 2020 annual accounts as included on Page 239 of the annual report. You can read our extended audit opinion on your own. And therefore, I would like to use this opportunity today to help you to be comfortable that we have performed a robust and independent audit. We understand that society and you expect a high-quality audit, and I believe we have delivered on that expectation. Each and every one of our more than 80 team members worldwide understands this expectation and our responsibility to you. Due to COVID-19, I was unable to visit any of the local operations in person. Instead, I have personally attended several video calls with local management and with our local PwC teams. In addition, I've spent time working with each of our specialists from valuations, treasury, tax, IT, pensions and sustainability. With respect to COVID-19, we have assessed whether it was an additional fraud risk factor, and ultimately concluded that it was not. Amongst our considerations, there were no changes to management incentives, and there were only minor changes to the control environment which were mainly operational in nature. The COVID-19 pandemic has not changed our audit procedures in relation to the recognition of vendor allowance income. We did consider the impact of COVID-19, the risk being that suppliers would renegotiate contracts. We addressed this risk by confirming vendor allowance balances directly with suppliers. Lastly, given the importance of COVID-19 cost reporting, although we didn't perform detailed testing, we did perform reasonableness checks. As well as interacting with the financial reporting group, my team and I meet regularly with risk and controls and with internal audit. During the year, we have had robust discussions with the Audit Committee. There is active engagement, and our insights are respected and taken seriously. Our audit was performed using an overall materiality of EUR 150 million and was based on profit before tax, with a coverage of more than 80%. Our key audit matters are outlined in our audit opinion and are consistent with those in 2019, except for the first year adoption of IFRS 16, which was no longer necessary. In addition to the key audit matters, which are areas that warrant your attention, we identify a number of significant risks in our audit, which we believe -- for which we perform additional audit procedures over and above what we do for normal risks. Specifically, in the addition to the key audit matters, I wish to highlight that we identified significant risks for the risk of management override of controls and fraud and revenue recognition related to inappropriate manual transactions outside of the point-of-sale system. To give you a flavor of the types of procedures we performed, and I should add that this is not comprehensive, we tested manual journal entries, reviewed remuneration packages for incentives and engaged our forensic experts to identify potential fraud risks when designing our audit approach. As part of the financial audit, we reviewed the annual report for consistency with the financial statements. Although we perform analytical procedures to assess reasonableness, we do not perform the same depth of audit procedures on the nonfinancial information. I mentioned 2 opinions. In addition to the opinion on the financial statements, we issued an unqualified limited assurance report on the nonfinancial information in the 2020 annual report. This concludes my comments. We value the relationship with you as shareholders. We have a constructive, open and professional relationship with Ahold Delhaize's Supervisory Board and Management Board. On behalf of PwC, thank you.

Thank you, Shana. And with that, I hand over to the chair of the Remuneration Committee, Bill McEwan.

Thank you, Peter, and good afternoon, everyone. As both the Chairman and the CEO have already expressed, 2020 was an unprecedented year in which the COVID-19 pandemic affected our lives in ways previously unimaginable. At the same time, our organization continued to serve a critical role in society. Against this backdrop of a year of fear and uncertainty, but also a great courage and kindness and resilience, I would like to provide context for and an outline of the remuneration determinations for the Management Board in 2020. The remuneration of the members of the Management Board was determined by the Supervisory Board in accordance with the remuneration policy for the Management Board as adopted by the 2019 General Meeting of Shareholders and our executive remuneration principles and procedures as adopted by the 2020 General Meeting of Shareholders. The 3 principal components of Management Board compensation were: an individual-based salary, a short-term annual cash incentive and a long-term share-based incentive. Our annual report illustrates the base salary and incentive award payouts for all current Ahold Delhaize's Management Board members. On base salaries. In January of 2020, the base salaries of Frans Muller and Kevin Holt were increased by 1.6%, well within the parameters of the remuneration policy and in line with the overall movement of the salaries for executives in Europe and the United States. The base salary for Wouter Kolk was increased by 10.6%. When recommending salary adjustments for members of the Management Board, the Remuneration Committee carefully considers market movement, individual and company performance as well as the remuneration of similar positions at companies in our benchmarking peer group. In the case of Mr. Kolk, the Remuneration Committee determined and sought to fully understand and align how he should be positioned against that peer group in the market. This required a more significant increase than from Mr. Muller and Mr. Holt. On the short-term incentive cash plan, the target payout of the annual cash-based incentive plan was 100% of the base salary for each Management Board member. Tied to performance and on a graduated basis, the range of percentage payout was as low as 0% based on achievement less than a minimum threshold of performance to as high as 150% based on exceptional performance. Our company's strong performance in 2020 was reflected in the overall company performance multiplier, with payout limited to 150% of the at-target value in accordance with the payout cap included in our remuneration policy. Throughout the year, the Remuneration Committee very carefully evaluated the impact of the pandemic [indiscernible] of the members of the Management Board and carefully considered what would be an appropriate approach in these exceptional circumstances. While other scenarios were discussed, we concluded on a pay-per-plan approach, given management's exceptional achievement and the balancing of the interest of all stakeholders throughout the year, while maintaining a strong focus on long-term value creation. Management had to overcome significant challenges to make sure our operations could continue to serve their local communities. These included disruptions in our supply chain, high associate absenteeism rates and the need to swiftly implement protective measures and hire additional staff. All in all, an exceptional performance from management that the committee and the full Board believe warranted a pay-per-plan approach as outlined. On the long-term incentive. The third principal component of the Management Board compensation is the long-term performance share-based program. Each year, performance shares of the company are granted. The number of shares that may vest at the end of the 3-year period is dependent on overall company performance against specific predetermined goals. This year, the award granted in 2018 vest. The overall company performance multiplier for this award was 117% versus the target of 100%. In accordance with the Dutch Corporate Governance Code, the members of the Management Board are required to retain their shares in the -- of the 2018 award for 5 years after the grant date. The performance multipliers, the short-term and long-term incentives are illustrated on the slide shown, with comparisons over the last 5 years. As outlined in our remuneration policy, the total compensation of our Management Board members is positioned at or around the median of the peer group we've selected for benchmarking as set out in our remuneration policy. Illustrated on the slide shown are the pay ratios of the group CEO, CFO and our regional CEOs compared to the average remuneration for all Delhaize -- Ahold Delhaize associates. To ensure full consistency and transparency, we calculated the pay ratio based on the numbers published in our consolidated financial statements, with no further adjustments applied. As a large part of the remuneration of the Management Board is linked to the business performance of the company, the ratio between the total remuneration of the Management Board and the members of the -- average members of the associates across the organization is, to a large extent, influenced by the overall business performance of the company. Therefore, in years of strong performance such as 2020, the ratio within the company will almost always be higher than in years of below or at-target performance. Pay ratios are also difficult to compare across industries as they are impacted by the different mix of functions from one industry to the other, but even within the same industry. Comparing pay ratios is challenging due to the different market conditions, such as the mix of higher- and lower-paying countries. To put Ahold Delhaize's pay ratios in perspective, the slide also illustrates the pay ratio of our CEO compared to the payout ratio of other CEOs in our selected peer group. Again, for comparison purposes, the ratios have been calculated using the same methodology as used for Ahold Delhaize's pay ratio. Looking to 2021. For 2021, we have set challenging performance conditions but take into consideration the enduring economic uncertainty associated with the pandemic. By establishing wider performance into deals, we have reduced the potential and likelihood for windfall gains. We have tied 20% of the achievable cash bonus for management -- for the Management Board to the ambitious targets for healthier eating and the reduction of food waste and carbon emissions. This will be in addition to the 15% of our long-term share-based program that was already tied to sustainability targets. Consequently, a substantial part of our executive pay is now linked to transparent ESG's performance initiatives. New healthy foods and sustainability targets replaced the previous target for net consumer online sales growth of the strategic imperative in the cash-based incentive. The exclusion of online sales growth as an incentive target does not, in any way, imply a change in our focus on driving omnichannel growth. The company will continue to drive e-commerce revenue and profitability growth by a seamless omnichannel engagement. As always, the Remuneration Committee will continue to monitor business conditions through the year. During 2021, we intend to conduct a full review of our executive remuneration policies and disclosures, taking into consideration the feedback we have received and will continue to seek and receive from our stakeholders. One of the key aspects that the committee will address is the balance between safeguarding our commercial position and the call for greater transparency in our remuneration disclosures. We expect to be able to share the outcomes of our review with selected stakeholders near the end of 2021 or in early 2022. This concludes my explanatory remarks, and I hand back to the Chairman, but with thanks for your continued interest and support in Ahold Delhaize.

Thank you, Bill. We have now finished the explanation of the agenda items 2 through 6, and I would like to go through the questions we have received ahead of the meeting. So Frans, may I ask you to take the first set of questions?

Yes. Thank you very much, Peter. Our first set of questions is coming from the video. We started off with a series of ESG-related inquiries, ranging from our work on sustainability and human rights, diversity and inclusion. And let me start with the first question. In regards to sustainability, VBDO asks if we are on track to achieve our 2025 goals for 100% of our own-brand plastic packaging being reusable, recyclable or compostable and 25% of our own-brand plastic being made from post-consumer recycled content. VBDO also requests an update on our current standing in these 2 areas. And these questions are asked in the light of the fact that we are in the process of collecting accurate packaging data for 40% of our total business. And the answer is like the following: yes, we are -- we will finalize this year the data collection for the remaining 40% of our business. And we can report both the total tonnes of own-brand plastic product packaging as well as the percentage of recyclability, reusability or compostability of those plastics. And in the meantime, of course, our brands are continuing to reduce packaging as well as using more recyclable, reusable and compostable product packaging. And for example, as an example, to give you some color, Delhaize removed the plastic wrap around the concentrated tomato cans. We all recognize the product. And also removed unnecessary plastic lids from yogurts, desserts and sour cream products. And of course, another example in the fruits and vegetable area, Albert Heijn and Delhaize, both in the Netherlands and in Belgium, changed the traditional blue mushroom packaging into a transparent packaging, making the packaging 100% recyclable. Small examples, but given the quantities, they will have a big impact. The second answer is -- the second question is in keeping with our targets around plastics in the previous question, VBDO asks if we could consider splitting these targets into further buckets for preventing, reusing, recycling and disposing plastic waste. And they also ask if we can report on these metrics on the annual base. At the moment, we do not have plans to split those targets in those buckets. But our ambition is, of course, to make sure that less and less plastics which we is use not ending in trash, in the environment and/or the oceans. And -- but we believe that our current targets we put very publicly in front of you are, in a sufficient way, guiding our teams and our businesses to do the right thing. And when we have all the data available, we will report our progress, of course, in our annual report like also Shana indicated today in our extended ESG nonfinancials. We will consider splitting the collected data then also in recyclable, reusable and compostable, as we have already outlined in our targets. The second question I got is along the human rights. And VBDO asks if we can commit to report regularly, in fixed intervals, the progress we are making in terms of managing the salient human rights issues, including quantitative and qualitative data and case studies for all the 12 salient issues. We produced last year, in June, our inaugural Human Rights Report. We were very proud about the report, but also about the transparency there. And we highlighted those 12 salient issues. And we will focus on the 6 ones in our total road map. And in terms of data, we choose to include mostly qualitative content in the report. And we will report on our environmental, social governance, ESG performance in the annual report, but also continue to include those data in a quantitative way talking about the salient issues in the respective sections of our annual report. So we'll come back to you. We have them now very measurable. In regards to diversity and inclusion, VBDO has 2 questions. The first, if we can set -- if we can commit to set intermediate targets and reports on the progress of our 100-100-100 ambition. You remember, 100 for gender balance, 100 for being a true representative for our environments and our neighborhoods where we work and 100% inclusive. And the second thing they asked is, if we can start disclosing information concerning equal remuneration for next year for different layers of the organization. We established our 100-100-100 ambition in 2020, and those ambitions are widely adopted in our company. And of course, we deal with them with our brands in the various countries to give their specific outlines under their specific circumstances so they can report on those, but also given local markets and local laws. We will report on those progress -- on their progress each year in our report. And with respect to your second question on equal remuneration, as described in the 2020 Human Rights Report, Ahold Delhaize and its brands have adopted a number of overarching principles to guide fair compensation. And the brands of Ahold Delhaize continue to set compensation and benefits in line with job level and local market practices, but also considering those with societal and market dynamics as well as economic condition. Gender pay equity is an important topic to us. And we provide guidance and advice to the brands to pay on pay equity studies to get themselves properly informed what this means to implement. And at the end of 2020, 10 of our brands had already completed these studies, putting actions in place and, if where necessary, make also that they come in line with local market practice. We expect the brands to make continued progress on this topic in 2021. So we -- you'll hear from us at our next AGM on the progress we have made. The next set of questions is coming from VEB. We have a number of questions on our U.S. operations, Ahold Delhaize USA. And they asked, the first question is, given the level of competition faced by ADUSA in the Carolinas at our Food Lion brand, the Carolinas, in the southern part of the East Coast, just north of Florida, and how they performed, the Food Lion brand against the large discounters? VEB goes on to ask a more broader question about the operating margins in this competitive environment. And note also that our margins are higher than the publicly listed U.S. peers, which is, in most of the cases, correct. And the VEB inquires what competitive pressures do these margin disparities provide? How do we explain this? Regarding the first question, although the competition in the region you talked about in the southern part, so in the Carolinas, but also in Georgia and Tennessee, we have performed very well, although the competition is also strong. We have, with Food Lion, our fastest-growing brand in the U.S. And the folks at Food Lion are very proud that they posted 33 consecutive quarters of positive comp sales. This market is still very fragmented in the Carolinas, and we have a very strong market share there. And so it's not a zero-sum game. If discounters would gain, is not a zero-sum game that others like us would lose. There are many parties in the market, a number of big competitors and smaller competitors. Food Lion has been able to gain considerable share in 2020 against the peers. And they have done this with a strong assortment on fresh, excellent store and execution, excellent store location, executions, store remodeling activities, online offerings and great and competitive prices. And you heard me talk at the introduction, we are proudly adding 62 more stores coming from Southeast Grocers, mainly in South Carolina. So a lot more to come on competitiveness for Food Lion, and we are very, very confident that the brand will do well. Turning to the second question, pertaining our ADUSA margins and competitive pressures on our business. We have #1 and 2 positions everywhere on the East Coast, and the areas for Stop & Shop and ADUSA are no difference there. And we are -- that means that we are already very competitive in our markets, and consumers value us in those markets and giving us also in almost all the European -- all the U.S. markets and gain in market share. We have a very good cost discipline and very productive. And this will, therefore, result in strong margins. There's also a question from VEB on the Stop & Shop remodeling program. And like we mentioned in earlier quarters, with Stop & Shop, we have a very big brand with a lot of strength and great locations in Massachusetts, New England and the New York area. And we started the remodeling program to improve sales, growth rates, but also profitability for the banner. And due to the impacts of COVID, the 2020 year was a little bit slower with the remodeling program. And we rolled out a little bit more than 30 remodelings in 2020. But for 2021, we are again targeting for a much better number, and we will accelerate to more than 60 stores in 2021, which would bring our cumulative remodeling package by the end of 2021 to 135 stores in a network of 400 stores in total. We're happy with the sales uplift. They are in line with our pro forma, and we're also very happy with the customer reactions to our stores. So we're on the good track there, and the remodelings are capital expenditure, but it's also investing in digital, in the shopping experience, in efficiency for customers and also partly impress. We have a lot of experience in revitalizing our brands, and you might remember a very successful remodelings of Food Lion. And those learnings we also bring into the Stop & Shop experience. And that's why the team are working together to get that done. And also there, we are confident also for 2021 that we are on the right track. Then the next question is coming from Mrs. van Duursen and Mrs. Huis in 't Veld and they have a number of questions, very good questions, by the way, on sustainability, but also on the promotional strategy at Albert Heijn. Mrs. van Duursen inquires if the organic meat could be featured in our bonus programs more. She's also asking about ambitions for star flesh ratings on our meat offerings to come back to that star flesh sounds a little bit funny in Dutch. But this question is also shared by Mrs. Huis in 't Veld, so I'll try to answer both of their questions in one go. At Albert Heijn, we have a long-standing history and reputation on the responsibility we take for animal welfare. And of course, this has led to a number of improvements in our total assortments. In our assortments, we have several categories of meats and that can be poultry, that can be pork, that can be beef with the so-called Beter Leven keurmerk, or in English translation, Better Life certificates. And we are selling more and more of those meat types in the Beter Leven keurmerk categories. And furthermore, and if you look at that, the -- furthermore, as the larger supermarket, we also sell the most of organic and free-range meat in the Netherlands. To give you a number, we have roughly 35% market share in the Netherlands, but we have been 60% market share in organic meat products, so way above our fair share. And if you compare our, let's say, Beter Leven keurmerk products in, for example, pork and beef, that we also have more than 50% market share of our fair share of 35%. So you can count on Albert Heijn when we talk about organic and when we talk about the better quality on animal welfare for our meat products. And furthermore, we also talked earlier about the vegan assortment at Albert Heijn. But if you talk about the special offers of organic, we have also, by far, the strongest and the widest range of products. The next question from Mrs. van Duursen is also shared by Mrs. Huis in 't Veld, and both inquiry about the effectiveness of our buy 1, get 1 for free, the een plus een promotions at Albert Heijn and whether or not these programs drive more waste on the part of the consumers who may be purchasing more what they really actually can consume. Well, you can imagine that we are far away from having the intention to create waste by our promotional actions, but our customers love our 1.1 promotions, with a very strong and very popular and highly valued by our customers. These offers do not only, of course, have fresh product, but also a lot of dry goods, dry groceries in the promotions. And a lot of customers can save there for money and also can store these dry products for a longer time. For fresh products, waste is, of course, not the goal of these actions. And we are highly focused on reducing it. And through our sites and social media, we try to give customers many tips and tricks to reduce food waste at home because, as we know, roughly 20% of the total food waste is at least at our homes. So there's a big opportunity for all of us to educate ourselves and to see how we can help in our kitchen and at our households. The next question from Mr. van Duursen asked about a recent article on April 6 about Ahold Delhaize and Albert Heijn, speculating that they may no longer want to do business with a supplier because it shares ownership with a retail competitor. Also, she believes new conditions imposed on suppliers, which exclude pandemics as force majeure, for delayed deliveries is unfair due the difficulties they are experiencing during the COVID pandemic. And in addition, she notes that many suppliers and companies that rent properties from Ahold are having a very difficult time due to the corona-limiting measures. She asked if we can discuss which claims are correct in the article and what action are we going to take on them. First of all, thank you very much to ask us about those claims instead of, let's say, interpreting -- interpretation from the newspapers. Let me try to break down those questions into answers. First of all, it's clear that not all those article claims give an actual picture, and that's what we also said in the same article. In the Netherlands, but in our total network alone, we work with more than 1,000 suppliers only in the Dutch market. And those consist of larger, but also medium-sized suppliers. These relationships, both for branded and for private label, own-brand products, are very important to us and not only in the dry section, but also in the fresh and ultra fresh section. And those suppliers and the partnerships there are crucial for us to bring you, as a customer, the right assortment. And if we then talk about the specific supplier, which is mentioned in the article, and I think you might refer to the company, Aroma, which is a company in spices, what's claimed in the article is fully incorrect. And we have also stated that in the article. We have no such agreements nor conversations with that specific supplier. This is not how we work. We are 130 years in business, and we have very good and compliant code of conduct in trading. And the second thing is we love to have a variety of suppliers on our shelves. And it's in the end, the category manager, who makes those decisions what's best for our customers in dry groceries. The second thing is the item on providing guarantees for deliveries in times of COVID. And let me give you a little bit of background. During the huge spike of COVID, we saw those empty shells. And I think you have seen the pictures also in my presentation. And we try to learn from this, and we try to learn from this what can we -- how can we work with suppliers in a better way in the total supply chain to make sure -- and it's not only in the Dutch market, but in all the markets where we operate, that we can counter those spikes in demand. And that's why we had the conversation with our suppliers and not only in the Dutch market, but in all the markets where we operate. And we try to find ways to do this. And in the interest of customers, delivery certainty is important and the quality of merchandise is also important. And yes, we also talk with suppliers about the best prices we can make available for our customers. So also here, we try to come to a good conversation. I just would like to make it very clear that when we talk to suppliers about delivery guarantees like you talked about, that we had conversations with mainly the international large A-brand suppliers. These conversations we did not have with farmers, with growers or with the companies we work on a strategic base in our closed fresh supply chain. Those partners know us very well, and both can count on each other. So the other thing is what is effect is that, in 2020, we did not enforce any of those clauses in those contracts on delivery guarantees because we all had to deal with COVID. And the same is for 2021, where we also did not use any of those clauses in the contracts on delivery guarantees, but we work together to make the best out of this. The third thing is about companies that rent properties from Albert Heijn. And there, we're not talking about many real estate objects. We don't have a lot of real estate locations. But we found with those tenants the solutions in the meantime, and those solutions were ongoing at the publication of the article. Let me wrap up here by saying that Ahold Delhaize and its brands, its 19 brands, always adhere to the proper conduct of its business. And we want to fulfill our vital role in society, and we would like to do the best for our associates, but also for you as our customers and also for our suppliers. And that's what we are committed to do every day,, to have that collaboration working well. Then lastly, Mrs. Huis in 't Veld would like to see that Ahold Delhaize is focusing more on sustainability and asks what we as Ahold do to highlight our initiatives to our shareholders. Well, this is in the heart of our DNA. This is in the heart of our ambition to be a durable, sustainable company. And also during my presentation, I think I shared a lot of things with you. It's very important to us that we do these kind of things, but we also talk about it. And let me just share a few things with you. You might be aware of our media like Allerhande, the magazine. You might be aware of our website. We talk a lot about sustainability there. You -- we have a lot of publications in the main Dutch newspapers, where we talk about Koe, Natuur en Boer and where we try to explain how in a sustainable way, we work with our farmers, with our growers, but also how we work like on elements like plant-based carbon emissions, plastic packaging and things like biodiversity. And maybe you also have seen last weekend more on biodiversity, things like at [Foreign Language] where we try to bring 2 plants together, which work together in a biodiverse way on cross-pollination and these kind of things. Because also for us and for the environment, the bees are also important. The other thing is what I mentioned is that, if you look at sustainability, we got a lot of recognition in our Dow Jones Sustainability Index. I mentioned this before, but also in the S&P Corporate Index as well. So talking about sustainability is important, reaching our sustainability targets is even more important. And also in the Dutch market with Albert Heijn, I think we have a very good example of heritage, DNA, but also strong commitment and ambition. Then I think this concludes my portion of the first Q&A. Mr. Chairman, back to you.

Thank you, Frans. For the questions related to the financial aspects of the company, I would like to invite Natalie to address these.

Thanks, Peter. The first finance questions come from APG and MN and are related to the tender procedure associated with our upcoming rotation of the audit firm in 2023. APG and MN ask if we can confirm that all audit firms with the public interest entity license have been invited to participate in our tender process. And the answer to that one is yes. I can confirm that a request was made to participate in the audit tender process, and it was issued to all PIE entities with a license in the Netherlands. Next, APG and MN, they've asked us to elaborate on the governance of the tender process and some of the most important selection criteria. So with respect to governance, we've established an audit tender Selection Committee with 4 members. It's the Chairman of our Audit and Finance Committee; myself as group CFO; our Head of Internal Audit; and our Chief Accounting Officer. The process consists of multiple interviews with Ahold Delhaize executive, commercial, financial and IT experts. We'll be completing that process and then really taking that audit tender from the Selection Committee, making a recommendation to the Board of -- the Management Board, the Audit and Finance Committee of Ahold Delhaize. And then that group will, in turn, take that and discuss that recommendation with the full Supervisory Board. We'll make final selection, and the recommendation will be listed for approval in our 2022 AGM. So regarding the selection criteria, that was the second part. Really, the things that are most important to us are these: first, that the new auditor that we would work with has the capability and competence that's needed as a firm, especially as it relates to the lead partner and key staff members. We're looking for an audit company with really the track record of audits and relationships with other AEX-listed companies. We are expecting a service proposition and value-added deliverables, which include things like the integrated audit approach to accounting, IT and ESG. We're also looking at the general impression of the firm performance, and always important are reasonable fees. So the last question from APG and MN on finance issues asks about when do we expect to announce the outcome of this tender process. And that's something that we will expect a formal appointment of the new auditor to be part of the 2022 AGM. So it's a little bit in the future. The next set of questions comes from VEB, and these are more directed into, I'll say, an operational nature, really diving into some of the topics related to cost savings, margin structure, online penetration and our free cash flow. So when it comes to the first question on cost savings, the VEB asks what are the main drivers of the EUR 750 million of Save for Our Customers savings that were -- are projected in 2021? And this was pretty easy. When we look at Save for Our Customer, we're always thinking about 4 big categories of savings. The first one is cost of goods sold, so how much of is it really costing us to get our products as we are looking at those and sourcing them. Second is around logistics and distribution. Then we look at store efficiencies. And lastly, what are the other overhead expenses that we can go after? The biggest area of these savings is always cost of goods sold because that is a key piece of our P&L. And really, our savings here come from fact-based negotiations and real collaborations with our vendors. Some of our big initiatives in this area include savings in goods not for resale as well as our increasing leverage in our buying scale, particularly in our own brand of products. I'd also like to add, because I think ESG is really so core to many things we do, it's also part of how we save money. When we look at reducing plastics, food waste and our carbon footprint, these are all things that not only help us with our ESG goals, but also help us financially. So the second operational question from VEB related to margins. And here, the question was really asking to see what the potential is to improve our underlying operating margins in the future compared to the 2021 margin guidance of at least 4%. Now I mentioned in my speech that the 2021 group underlying margin guidance is at least 4%, and it really reflects a return to more normalized levels with our kind of pre-COVID historical performance. Going forward, we remain committed to delivering strong margins across our business. That being said, I think one of the things that's very important at our company is that we believe it's always important to balance both profitability with the necessary investments to build a sustainable business going forward. And I believe, when you look at 2020, our big push to increase omnichannel offerings and capacities was a great example of how we were able to get the recipe right on this type of approach. The last question here, I think, was the -- how the VEB -- from the VEB was relating to the rapid growth of our online business and the implications for margins. And here, the question was really asking what actions are we at Ahold Delhaize taking to prevent growing online sales from being significantly dilutive to our group margins? And related to this, VEB also asked, what were the key takeaways from the Supervisory Board deep-dive session we had in November on omnichannel that I facilitated? So let me start by saying that I believe we have a really strong track record of maintaining a healthy margin structure over time, especially if you look at the last few years as our online penetration has materially increased. This comes from that Save for Our Customer program, where we are dedicated day in and day out to find cost savings in our business and really make that a significant role in offsetting online margin dilution. If you look at 2019 to 2021 cumulatively, we saved EUR 2.3 billion. And I think that number is going to go up over time. I'd also like to mention that our margins are really for our online business, and they've improved meaningfully in 2020, driven primarily by our increasing scale and also our experience. We're now very focused on finding ways to reduce the cost of serve and how do we grow our margin revenue streams, such as media monetization. These are going to be important levers for us to improving the profitability going forward. We're also using new technologies to help us lower cost. This is all part of the big picture. And with respect to the takeaways from the deep dive that we had with the Supervisory Board in the fall, let me just add some of the things that we concluded because I think this was a great conversation where the management and the Supervisory Boards were able to have a really good conversation about what are those items that are going to drive our future performance going forward. So first, we looked and we said, e-comm penetration rates, we know they've accelerated dramatically due to COVID-19. But we also agreed that we believe these trends are sticky. They're here to stay and double-digit increases can be expected again this year and significant growth going forward. We also discussed that really, a true omnichannel strategy is what we need going forward. And that means we've got to win in brick-and-mortar, but also e-comm. And finding a seamless real connection between those 2 is going to be essential to our business going forward. We discussed the biggest cost drivers in terms of e-comm profitability, and the 2 big ones are fulfillment efficiency and last-mile delivery cost. And we look at how these are progressing and what are the key areas we're going to need to do to help maintain a healthy margin going forward. The Supervisory Board was really encouraging and wanted us to work at sharing best practices across our banners because there are some differences there and also experiment with new models to elevate omnichannel experience with our customers. So lastly, and there was one more from VEB, and that is on our forecasted 2021 free cash flow of EUR 1.6 billion. And the question here was really, well, that's below the nearly EUR 2 billion you need to return shareholders in dividends and share repurchases in '21. When you look at this going forward, do we expect free cash flow to cover the dividends and share repurchases in the near future? To this one, I'd just like to note that 2021 is really negatively impacted by a working capital unwind, which is largely driven by the timing related to COVID-19 impacts. So if you look at our guidance of the EUR 1.6 billion for 2021, we're really on pace to what we had set out as a 3-year target of delivering EUR 5.6 billion in free cash flow between 2019 and 2021. That means we're delivering EUR 1.9 billion annually, fully sufficient to cover all of our annual dividend and the EUR 1 billion share buyback. And it's also important to note the development includes really in these COVID times, even though things are uncertain, it makes me a little cautious in terms of what would we predict about everything going forward. But what I would say is we've been very clear and that the cash flows -- everything that we've said about our cash flows beyond 2021, it's important to iterate that our priorities for the cash are really around, first, making sure that our capital expenditures stay in that range of about 3% of sales, while we are able then to sustainably grow our dividend. If there's an excess cash after these 2 items, we would always consider returning this to shareholders. So the last question I have is one coming from Eric Diamant, one of our individual shareholders who's asking about the U.S. multi-employer pension plans. And this is a tricky one. We definitely -- I tried to cover that in my presentation, but it is, I think, one of the most difficult things when you look at our results this year. And specifically, Mr. Diamant is asking what were the origins of our pension withdrawal expenses absorbed into our -- why were they absorbed in the IFRS financials during 2020. Further asking also for an explanation of those impacts in terms of what it looked like in 2021 and if we should expect similar pension withdrawals in the future periods. So let me start here with respect to the origins of our '20 -- our U.S. pension withdrawals in 2020. I'd like to note that we were -- these are really tied to several U.S. multi-employer pension plans, which carried significant risk of insolvency due to underperformance in plan assets, driven in part by unfavorable changes in interest rates, among other factors. This isn't something specific to Ahold Delhaize. This is something you see across the industry. But we really decided, therefore, we were able to do in 2020, given the position that we were in due to additional cash flows from COVID-19, to commit approximately EUR 1.4 billion in 2020 to withdraw and settle from several of our U.S. multi-employer pension plans and transition these plans to improve the security of benefits for our associates and lower the financial risk profile for our brands. With respect to the P&L impacts, we took a EUR 1.4 billion charge in the pension withdrawal, and this relates to the plans that you can see impacted the 2020 IFRS net income number. It's not in the underlying income number, but in the reported IFRS one. And that's the impact of those U.S. multi-employer plan withdrawals and settlements. Therefore, we don't expect any further charges related to these going forward in the P&L. Moreover, the total ongoing annual contributions for newly created plans will not have any material impact on our incremental -- on our P&L either because these are essentially replacing contributions that we've been making for previous plans in the past. Finally, with the potential for future pension charges. Now this is one that's always going to be dependent on external macroeconomic conditions and a variety of other factors that we don't control. But it's important to note that there is a possibility for additional charges related to pensions in other countries we operate. But this year, we made a huge reduction in those plans through the actions that we took in 2020. We're pleased to have withdrawn and settled, as I mentioned, the largest plans in the U.S., and that represented 90% of our U.S. multi-employer pension net deficit. So that concludes my portion of the Q&A as it relates to the finance questions. And with that, I'll pass it back to you, Peter.

Thank you, Natalie. And that brings us to the questions with respect to remuneration, for which I would defer to Bill McEwan in Canada.

Thank you, Peter. Throughout the year, the Remuneration Committee closely monitor developments in the global, regional and local labor markets before making recommendations to the Supervisory Board, as I said before, related to Management Board remuneration. We also engaged with our stakeholders to discuss the feedback we received during and after the 2020 General Meetings of Shareholders regarding our remuneration disclosures and are appropriate -- as were appropriate to our disclosures going forward with respect to our key management personnel. Leading up to this general meeting, several parties inquired about the considerations of the Supervisory Board in determinating the 2020 incentive payouts as well as the target-setting for 2021 incentives. Parties also requested additional information on the decision to change the strategic imperative in the annual cash-based incentive plan from net consumer online sales to ESG-related metrics. In addition, parties requested increased transparency about the targets and intervals underlying our incentive programs. I believe I have addressed these topics in my explanatory remarks. We also received a set of questions from APG and MN that I'll attempt to address at this time. Specifically, APG and MN asked whether the Remuneration Committee has already set the 2021 targets for the annual cash incentive and what the company's 2021 scenario is. As I said before, 2021 is a very complex budgeting year. And we can see every possible scenario ranging from enduring pandemic challenges to somewhat back to normal situation in the course of the year. The topic of 2021 target-setting was discussed multiple times during the year, much more than usual. Following a thorough process, carefully considering input from internal and external resources and taking stock of all factors, we have set a challenging performance set of conditions for 2021 that give consideration to the enduring economic uncertainty. The bandwidth of the 2021 intervals has been increased to accommodate for the higher macroeconomic uncertainty and volatility as a result of the pandemic. This also reduces the potential and likelihood of windfall gains. We will continue to monitor business conditions throughout the year and update our plans accordingly. Secondly, APG and MN also asked whether the Remuneration Committee would be willing to consider providing more transparency about the target-setting and outcomes in the next remuneration report. The Remuneration Committee intends to conduct a full review over the course of 2021 of our executive remuneration policies and disclosures, taking into consideration the feedback we have received and will continue to receive and seek from our stakeholders. One of the topics that the committee will address is the balance between safeguarding our commercial position and the call for greater transparency in our remuneration disclosures. With that, I'll turn it back to you, Peter, trusting that, that adequately answers the questions of our stakeholders.

Thank you, Bill. That concludes the questions we received ahead of the meeting. I will now check whether we received any follow-up questions. And I can see we have received 2 follow-up questions. And I suggest, Frans, if you could address them.

Yes. Thank you, Peter. I've got a follow-up question here from the VEB. And the question is the following: what is the main cause of Ahold Delhaize overall higher profitability -- can I go ahead? Yes? So the question is, what is the main cause of Ahold Delhaize overall higher profitability in the U.S. compared to competitors? For example, does this have to do with the higher density of the Ahold Delhaize activities? Or does it have to -- and how easy is it for -- I just had to look at the screen. Yes, and how easy is it for other competitors to enter the market? So those are the questions from VEB on the profitability part, and enter the market in those regions where Ahold Delhaize is active. It's not too easy to answer this question on a macro level. I think it's true that we have strong profitability in our U.S. business, but I think the businesses are very local. And the East Coast is, for example, a very different business from the West Coast. So to have a lump-sum type of comparison, I think, it's not fair. What we try to focus on, and I can give you a few things, what we do to be a good company until we have a good return is that we have a few elements where we follow the same type of strategy or philosophy, if you will. We believe in local brands, which are closely connected to the communities. We believe in omnichannel brands where we combine stores with our omnichannel service. We believe that those brands where we have relatively high market shares, #1 and 2 positions, together with the strength of the brand itself that, that is a very vital and strong combination. And apart from that, I think we do a very decent job in execution, and I know that we have very strong teams, very strong teams also locally connected to the communities. You might know that we launched a few actions in the last couple of years. We go now to self-distributing supply chain on the East Coast to connect all our brands in the most efficient way. We heavily invested in digital and technology through our Peapod Digital Labs and our Retail Business Services. And we also increased the strength of our private labels. So those are a few of those actions we take and staying competitive. And like Natalie said, also protecting and growing our margins is hard work, and you have to do a lot of things at the same time. But I think we are very well positioned. And indeed, the locations we have and the density we have, being #1 and 2 in those local markets, are -- is indeed an important phenomenon. If I then, Peter, if I may, to the second question, also from VEB. It says here, in relation to Stop & Shop, aren't remodelings in time also expected to improve returns and profitability of these grocery stores? Like I mentioned before, Stop & Shop is a very strong brand in our company with super locations in the New York and New England markets. And in 2019, we let you know that we were not happy yet with the performance of Stop & Shop and that we would like to invest in the brand because the brand has great locations, strong people and strong teams. But we were not completely happy with the performance and the shopping experience coming from the stores and as well as the price positioning. And that's exactly what the remodeling program of Stop & Shop is going to do. And like I mentioned, with 135 stores, we are in line with our pro forma. So we see that those sales uplifts are coming according to plan. And the second thing, of course, it's also sales uplifts and investments in digital and also our cost programs in the U.S., of course, it should also bring increased profitability as well. The first 2 batches of those stores, well, were a little bit experiment. You see how customers react when you remodel and when you invest in price and when you invest in fresh and digital and shopping experience and efficiency in the store itself. But we learned a lot after the first 40 stores. And I think we have now a good momentum to remodel 60 stores this year with all the learnings included. So yes, not only sales uplift, but we also expect to increase profitability. Those were the 2 questions I had on my screen.

Okay. Thank you, Frans, and thanks again for all your questions. Before we proceed with presenting the voting results, I would like to ask our notary to make the necessary statements about the number of votes that have been cast. Martin?

Thank you, Peter. At this meeting, 4,970 individual shareholders are represented. And together, they represent 668,032,919 common shares with the same number of votes. This means that 64.6% of the issued and outstanding common shares are represented.

Thank you very much, Martin. We start with agenda item 4, the proposal to adopt the 2020 financial statements. And if we can get the voting results up. As you can see on the slide, 100% of the votes were cast in favor of agenda item 4. So I conclude that the proposal has been adopted. Thank you. We continue with agenda item 5, the proposal to determine the dividend over the financial year 2020. As discussed earlier, a dividend of EUR 0.90 per common share is proposed. And as you can see on the slide, 98.85% of the votes were cast in favor of agenda item 5. So I conclude that the proposal has been adopted. Thank you. We continue with agenda item 6, the remuneration report. And you are kindly reminded that this concerns an advisory vote. And as you can see on the screen, 80.38% of the votes cast advised positively on our remuneration report. Thank you for that positive advice, although we recognize that there is some work to be done to improve the voting results on this topic going forward. Before we move on to the agenda item 7 to 15, I will check if we have received any follow-up questions. That seems not to be the case, so then we continue with agenda item 7, the proposal to discharge the members of the Management Board in office in 2020 from all liability in relation to the exercise of their duties in the financial year 2020. And as you can see on the slide, 98.84% of the votes were cast in favor of agenda item 7, so I conclude that the proposal has been adopted. Thank you again. We continue with agenda item 8, the proposal to discharge the members of the Supervisory Board in office in 2020 from all liability in relation to the exercises of duties in the financial year 2020. And as you can see on the slide, 89.99% of the votes were cast in favor of agenda item 8, so I conclude that the proposal has been adopted. Thank you. We move on to agenda item 9, the proposal to appoint Jan Zijderveld as a member of the Supervisory Board for the term beginning immediately after the end of this meeting and ending on the day of the Annual General Meeting of Shareholders to be held in 2025. I can add that the Supervisory Board recommends the appointment of Jan given his extensive international experience, consumer insights in a broad range of products and valuable knowledge in the global retail space. And I would add that, for a more extensive information on Jan's background, I kindly refer to the agenda and the explanatory notes of this meeting. And as you can see on the slide, 98.58% of the votes were cast in favor of agenda item 9, so I conclude that the proposal has been adopted. Thank you very much. And congratulations, Jan, with your appointment to the Supervisory Board. We now move on to agenda item 10, the proposal to appoint Bala Subramanian as a member of the Supervisory Board for a term beginning immediately after the end of this meeting and ending on the day of the Annual General Meeting of Shareholders to be held in 2025. Also here, the Supervisory Board recommends the appointment of Bala given his extensive experience in transforming large companies towards omnichannel and digital businesses. And for a more extensive information on Bala's background, I kindly refer to the agenda and explanatory notes of this meeting. And as you can see on the result on the screen, 98.07% of the votes were cast in favor of agenda item 10, so I conclude that the proposal has been adopted. Thank you very much. And also to you, Bala, congratulations with your appointment, and warm welcome to the Supervisory Board. We continue with agenda item 11, the proposal to reappoint PricewaterhouseCoopers Accountants N.V. as external auditor for financial year 2021. And as you can see on the screen, 99.98% of the votes were cast in favor of agenda item 11, so I conclude that the proposal has been adopted. Thank you. So we continue with agenda item 12, the proposal to authorize the Management Board for a period of 18 months from this -- from the date of this Annual General Meeting until and including October 14, 2022, to issue common shares or grant rights to acquire common shares subject to approval of the Supervisory Board and to a maximum of 10% of the issued share capital. And as you can see, 98.23% of the votes were cast in favor of agenda item 12, so I conclude that the proposal has been adopted. Thank you very much. Three more points to go. We continue with agenda item 13, the proposal to authorize the Management Board for a period of 18 months from the date of this Annual General Meeting until and including October 14, 2022, to restrict or exclude, subject to approval of the Supervisory Board, preemptive rights in relation to the issue of common shares or the granting of rights to acquire common shares. And as you can see on the slide, 97.32% of the votes were cast in favor of agenda item 13, so I conclude that the proposal has been adopted. Thank you. We continue with agenda item 14, the proposal to authorize the Management Board for a period of 18 months from the date of this Annual General Meeting until and including October 14, 2022, to acquire common shares in the company, subject to approval of the Supervisory Board and subject to the terms that has been further described in the explanatory notes to the agenda. And as you can see, 97.73% of the votes were cast in favor of agenda item 14, so I conclude that the proposal has been adopted. Thank you again. I think that's the last voting item, agenda item 15, the proposal to cancel any or all common shares in the share capital of the company currently held or repurchased by the company, resulting in a reduction of the company's issued common shares. And as you can see, 99.99% of the votes were cast in favor of agenda item 15, so I conclude that the proposal has been adopted. Thank you. So ladies and gentlemen, before we close the meeting, I would like to thank both Dominique Leroy and Ben Noteboom, who will leave the Supervisory Board after this meeting. And I would also like to address Jan Hommen, who left the Supervisory Board at the end of last year. Dominique served on the Supervisory Board for 6 years and will be greatly missed. We will greatly miss her passionate and constructive contributions during the many meetings in which she has participated. Ben served on the Supervisory Board for 12 years, and Ben's expertise and knowledge of the company has been extremely helpful and will be greatly missed. Lastly, I would like to thank Jan Hommen, who ultimately was responsible as a Chair of the Supervisory Board for the governance of the company during its 2020 year. Jan has been instrumental for the company through both his 2 terms, and we will for sure miss his wealth of experience, his tremendous efforts and passion in helping making the company better every day.

And I think with that, I would like to check if we have any final questions left. And there seem to be some more questions coming in, and let me see. I think it is for Frans.

Yes, Peter. Thank you very much. I got a follow-up question from Mrs. van Duursen. The question it says, Muller spoke about the introduction of Albert Heijn AH Compact. At this point in time, it's only available in a few cities. When will it become available in the entire country? I think your information -- I know that your information is 100% right, Mrs. van Duursen. It's available in 6 cities at the moment, and we are on the virtue of rolling this out further. And we rolled this out further because so far, it has been very successful. It exactly serves smaller households with a more concise assortment and a smaller minimum order value and the delivery is free of charge. And we really address those smaller and single households like we had in mind. And so almost no cannibalization on our normal full-fledged online products. So we're very happy and very satisfied with the rollout. You might know that we started in the city of Haarlem as the first city to test and to roll out. And we were adding every month a number of cities, but there's no specific date when we have the full expansion in the country, nor is there not a decision taken to have the entire country connected. And then the other follow-up question is that although you thanked me for answering the questions, you also are very precisely that I forgot to answer one of those, which is, if organic meat could be in the bonus on offer, the bonus more as well, and you propose that we could promote this more organic meat, and that also organic meat in the promotion, of course, is therefore also price-wise, even more attractive. Well, indeed, organic meats are on promotions on a regular basis. And I spoke this morning to Marit van Egmond, our CEO of Albert Heijn. And she said to me that there is a plan, and it's already now on a higher frequency in our bonus scheme, both organic meat, but also elements like plant-based meats, which, of course, not the same. So we see that labels with a Beter Leven keurmerk BO and organic meat but also plant-based meat products replacing animal proteins. You will see those promotions more than in the past, and you will see more of those products also coming to the bonus scheme. So thank you very much for your question. I hope this time I answered this right.

Okay. Thank you, Frans. And that seems to be the last question. I just would like to remind you that all questions and answers covered in this meeting will be published on our website in due course. We look forward to continuing the dialogue with you throughout the year. Dear shareholders, thank you for attending and participating in this meeting. I now declare the meeting closed. I wish you a pleasant afternoon, good health and safety for you and your dear ones. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]