Goals:

• To establish long-term employment relationships as a dependable and professional employer.
• To maintain employees’ pride in Sligro Food Group through intensive communication and by allowing them to share in the group’s success.
• To create a safe and pleasant working environment in which employees from different backgrounds can all feel at home.
• To promote cooperation and partnership as a means of achieving synergy gains for Sligro Food Group.
• To ensure that important elements of our organisational culture, including commitment, cost leadership, teamwork, job satisfaction, pride in one’s work, entrepreneurship and a problem-solving approach, are promoted and maintained.
• To remain committed to an informal organisation where short lines of communication and reporting help to achieve fast and smart solutions to operational problems.
• To preserve customer focus and customer friendliness as the default working mode of all employees.
• To help employees perform better by providing structured and challenging opportunities for training and management development.

The labour market changed substantially in 2009, even though the rise in unemployment was much lower than many research institutes had predicted. For us, this easing of the labour market has been a blessing, because the tight market of the past few years had not made it easy to meet our staffing requirements in full. Even in today’s market, however, it can still be hard to find the right people. Thanks to our reputation as a professional and reliable employer offering a range of challenging jobs, we were able during the year to recruit a good number of well trained and experienced staff.

The demographic trends point to a return to labour market shortages in the coming years, at a time when many people are more or less permanently dependent on benefits, implying that the Dutch labour market and social security system are not working as well as they might. For example, far from achieving that objective, the many measures introduced to protect employees are working counter to their interests. What is beyond doubt is that these measures are holding back economic growth. Meanwhile, we have seen spectacular growth in both public-sector employment and the government’s financial deficit. It is only a question of time before drastic action has to be taken to correct this situation.

At Sligro Food Group, we always try to anticipate reorganisations and, if redundancies are unavoidable, we try our best to do find employees new jobs. We are almost always able to offer employees similar jobs elsewhere in the organisation. The closure of the convenience food production facility in Ter Apel and the transfer of the activities to Amsterdam and Eindhoven was unavoidable. It involved the loss of 32 jobs in a part of the Netherlands where relatively few of our activities are located. Under the social plan we negotiated with the trade unions, the majority of the employees involved accepted other jobs within the group and special arrangements were made to cover longer commuting times. Alternative jobs outside the group were found for a small number. The closure process was completed without any major problems in September, due in no small measure to the commitment of the employees concerned, to whom we take this opportunity to express our gratitude and respect.

We sold a number of supermarkets in 2009. In all cases, the transfer included the employees. We have agreed procedures with the Works Council for dealing with such situations and standard instructions have been formulated to ensure that the process runs smoothly. The Human Resources department remains responsible until the employees formally enter the new owner’s employ.

Another project with a relatively far-reaching social impact is the concentration of all our delivery activities in the Amsterdam region at a very large single location, which in due course will yield substantial efficiency gains. This integration exercise, which has now been started, involves over 450 employees, all of whom will start working at a different location in 2010. We expect to be able to complete this operation in a socially responsible way, based on the principle of employees moving from job to job. The structure of our current workforce is also relatively flexible and includes temporary staff and many Euroflex staff. The total project, including a further reassignment of activities within the group, will take close to two years to complete.

Sligro Food Group’s workforce consists of some 30 nationalities, all of whom work well together. The multi-cultural nature of our organisation is something we take for granted. While we offer scope for people to express their individuality, we do not allow this to shape our organisation. Sligro Food Group believes that it should preserve its reputation among its staff of a demanding employer with clear limits and rules. This also applies to how we work together and treat one another. Sligro Food Group attaches great value to and takes great pride in its unique organisational culture. Our culture and the related values and standards are strong forces that bring people together, instil pride in the company and give them a sense of belonging. For that reason, we feel it is important for people to cherish their origins and their differences, within the constraints set by our perceptions of how people should treat one another and our rules. Praying is fine, but in the employee’s own time. Celebrating Ramadan is fine, as long as the employee gets to work on time and does his or her job properly. We also feel it is important for people to be able to talk with one another and to speak to everyone in Dutch.

We have set up a working group called the ‘Multi-Cultural Sligro Community’ which meets regularly to discuss any issues that have arisen and the action to be taken. The working group also devises fun events that present a challenge. In 2009, we organised Iftar meals at two venues during Ramadan. The meals were preceded by a talk on Islam and the meaning of Ramadan and a debate with employees and invited guests. These two most enjoyable occasions were characterised by respect for and curiosity about the beliefs and practices of a particular group of employees. This approach to multi-culturalism proved both enjoyable and challenging. Our practices relating to food and drink are pre-eminently cultural aspects. As well as generating considerable publicity in the regional media, these events were also examples of our ‘inclusivity policy’. People come from different backgrounds and we believe that we should respect that diversity and our employees should subscribe to Sligro Food Group’s standards and values. It also fits well with our many years’ experience of acquiring other businesses: integrating cultures – while preserving our own business culture – is part of our job.

The Human Resources department has been reinforced in recent years and each activity now has its own Head of Human Resources, who reports to the Group Director of Human Resources. This reflects our policy decision to operate as a single organisation rather than as a series of businesses. Food retail, foodservice, central logistics, the production companies and the head office now all have their own Head of Human Resources, assisted by specialists recruited to deal with compensation and benefits and health and safety.

Human Resources has been making preparations to acquire an E-HRM system during 2010. This will provide a more solid base for processes and procedures and, as well as improving efficiency, will help improve overall management of the organisation and the quality of our management information. Human Resources will then be able to focus more specifically on the procedures and systems and so have more time to assist line managers in dealing with absenteeism, performance appraisal and management development.

We started using new software in our recruitment and selection activities in 2009 and, as a result, we are now increasingly less reliant on printed media and we are recruiting more via the internet. We are now able to complete the extensive administration involved in recruitment and selection more quickly and efficiently. The number of potential employees in our database is also growing all the time, as is the importance of ensuring effective communications with the labour market. We understand the need to present ourselves in a way that gets us noticed, certainly in the electronic media, and our specific aim in this respect is to present ourselves as a reliable, professional employer.

There is a relationship between the success of a business and the levels of satisfaction among its employees. If we are to actively use this in managing our business, it is important to measure levels of satisfaction with some regularity. In 2009, we once again commissioned a leading research agency to conduct a survey of what Sligro Food Group employees think about working for the group. Because this was the third such survey, we have been able to monitor developments over time. The results of this survey have been analysed in-depth, both generally and at the level of individual locations and departments.

Overall, the Sligro Food Group satisfaction score turned out at 7.4, a modest improvement on the score of 7.2 recorded by the previous survey. Compared with the benchmark of peer businesses, we also scored slightly higher than the benchmark satisfaction rating of 7.3 for the retail sector. This score is the ‘final score’ for general satisfaction, indicating that employees are more satisfied across the board. It may be that, as a stable employer, we have been helped a little by the economic circumstances.

It is important to ‘zoom in’ at operating company, location and department level, which is why the underlying results were analysed in-depth at these levels. We found that internal communication could be better and that there was room for improvement in leadership style in some areas. These issues will be given full attention in the coming period and, because the information is available at location level, this can be done in a targeted manner. The plan of attack that has been devised has now been rolled out, supported by presentations and discussions at business unit level. This will enable us to resolve any bottlenecks in a focused manner and give due credit in those areas where we scored particularly well.

The positive picture presented by our own employee satisfaction survey has been confirmed by the annual survey by the journal ‘Incompany’ to find the top 200 companies. We emerged as the best food retailer and the third among all retailers.

Sligro Food Group has appointed a special Safety, Health, Welfare and Environment committee to deal with issues in these areas. The committee, which has a diverse membership representing all relevant disciplines, implements action of various kinds to promote safety at work, from practical measures such as checks on the integrity of shelving to monitoring trends in sickness absence and safety standards at the various locations. Consistent with Sligro Food Group’s preference for a professional approach, a health and safety coordinator has been appointed who is responsible for coordinating and implementing all matters of health and safety policy, with the aim of raising all these activities to a higher level. A policy plan has been formulated to address these issues step-by-step, starting with building a strong basis. The first steps – updating risk analyses, implementing an effective accident management and recording procedure and listing all individuals involved in health and safety policy – have been completed. We believe it is important that staff regard safe working every day as the basic default position. This aspect is given ample attention in our induction programmes and basic training courses. Supermarkets were a target for criminals again in 2009 and staff were unfortunately witness to robberies at two EMTÉ stores. Incidents of this kind have a significant effect on the people involved and we make every effort to support them, providing intensive after-care and personal mentors to help them through the recovery process. Criminal action can never be entirely excluded, but good security procedures and close monitoring do have a preventive effect and help to reduce the risk. Because the risk is heightened by the belief that supermarkets hold a large amount of cash that is easily accessible, the supermarket sector, united in the Dutch Food Retail Association (CBL), launched a programme in 2009 to encourage PIN-based payment at the checkout.

Sligro’s distinctive approach to professionalisation
For many years, Sligro Food Group has taken its own individual approach to professionalisation. In the case of the specialist training courses in particular, the method adopted to enhance professionalism is turn ‘ordinary work’ into a specialism. Coaching also plays an integral role is this approach to training and working. Staff learn in their own working environment, supported by specially trained (internal) coaches. This places the training on a practical footing and enables new knowledge and skills to be applied immediately. The tailor-made training courses are linked to regular vocational (MBO) courses and staff can obtain nationally recognised qualifications by this route. Good examples are our professional basic training courses for logistics staff in distribution and delivery centres, internal sales staff at deliver-service bases and sales staff in the wholesale outlets.

Consolidation courses
The professionalisation process does not end with the award of a certificate or diploma. To maintain and continue to raise the standard of professional expertise, consolidation courses are organised on the shop floor. These courses, which are a permanent part of our training programmes, are organised for internal and field staff, logistics personnel and staff at the production companies. For example, as part of the annual Professional Wholesale Staff consolidation course, a task (on a different theme each year) is set for all qualified staff at the cash-and-carry outlets. No fewer than 815 staff members took the course in 2009. In this way, the level of professionalism can be maintained and ‘lifetime learning and development’ is becoming an integral part of our organisation’s culture, enabling our staff to advance within the company and increasing their social utility.

New training courses
The number of employees taking at least one training course increased again in 2009, to 2,750. Continuous learning and development, or ‘lifetime learning’, is an integral part of competence development for Sligro Food Group staff. A number of new courses were started in 2009. Since early last year, there has been a new course for employees who prepare food for staff or customers, to help them apply hygienic working procedures more effectively. The course, which focuses on knowledge of food safety and instilling good food safety practices, takes a highly pragmatic approach to the subject. Last year also saw the start of the Customer-Driven Sales training course for sales staff at our Fresh Partners, which fits closely with their working practices and offers scope for differentiation. Staff are able to put what they learn into practice immediately in their own working environment, on the basis of a personal action plan that enables them to pursue their personal goals at their own level and provides constant opportunities for improvement. Another important development in 2009 was the ‘Our EMTÉ House’ concept. All supermarket managers participated in several workshops to help them put the ‘Our EMTÉ House’ concept into practice in their day-to-day work. In conjunction with the special secondary education (SVO) programme, a group of 16 students who had taken the professional fruit and vegetable course started work at EMTÉ supermarkets, 11 staff registered for the Sales Assistant course and another group of trainee in-store butchers embarked on their course. Seven candidates were awarded the much-prized AD (Small Business & Retail Management) diploma at Higher Secondary (HBO) level at the Avans College. Induction courses developed for all basic jobs within at EMTÉ supermarkets and have been have up on a large scale. The team at the Middelburg Magistraat EMTÉ supermarket won the Training Company of the Year title in the supermarket category, a prestigious prize awarded by the SVO training agency, the professional training organisation for the fresh food sector. Three groups of Sligro Food Group logistics staff started MBO stage 2 or MBO stage 3 courses at several locations in 2009. As well as the enhanced employability that comes with a nationally recognised MBO diploma, undertaking the courses as a group has had a highly beneficial effect on the entire local working environment. The courses not only enabled the employees to broaden their professional expertise, but also helped them to look beyond their own specific function.

As well as the training courses organised for groups of employees, high priority was also given to meeting individual training needs with a view to facilitating career progression. Over 120 staff members took courses of this kind, ranging from HBO logistics, business management and Netherlands Institute of Marketing programmes to specialist ICT courses.

Internships
Reflecting Sligro Food Group’s success in profiling itself in a highly positive light among the student population, many students again applied for internships at our company in 2009. Some 85 HBO and university graduates and almost 400 with senior secondary vocational education (MBO), preparatory secondary vocational education (VMBO) and practical vocational education qualifications joined us as interns or graduate trainees. Sligro’s ICT department is a ‘Partner in Education’ of Fontys ICT College in Eindhoven.

We were dissatisfied with the figures for sickness absence in 2009, particularly in the first quarter. Although this poor performance did not persist, the improvement was not sufficient to prevent the sickness absence rate for the full year rising by 0.3 percentage points to 4.3%, which meant that we did not achieve our 3.5% target. Because we always aim to match the best and noting that several departments and operational activities did achieve the target, we decided to keep the target at 3.5% in 2010.

We devoted considerable extra attention in 2009 to reducing absenteeism in our production companies, where the levels have traditionally been higher. These efforts included arranging a special training course on this subject for line managers. This helped us to achieve a significant reduction in sickness absence in these departments in 2009.

The 25 employees who make up Sligro Food Group’s Works Council were all elected in May 2008 and their terms of office will all expire in 2011. Both the company and the Works Council expressly prefer there to be only one Works Council, because it means that potential conflicts between the business units can be more easily resolved and it facilitates uniform application of policy. In consultations between the Works Council and the Executive Board, we focus on what we have in common, not on what separates us. We believe that, in terms of its composition, the Works Council should accurately represent both the group’s employees and its activities, which we achieve by defining electoral groups.

Consultations with the Works Council in 2009 were, as always, constructive. The closure of our Ter Apel production unit and the consequences for staff of our plans in the Amsterdam region are difficult issues for a Works Council. We were therefore pleased to see that our Works Council has not sought to avoid its responsibilities and is prepared to take medium-term interests into account when taking difficult short-term decisions. We should like to take this opportunity to thank the Works Council for the constructive and professional way it operated in 2009.

All Sligro Food Group employees are covered by the collective labour agreement for the food wholesale sector, with the exception of the EMTÉ staff who are covered by the collective labour agreement for large food retailers. The agreement for the food wholesale sector expired on 1 July 2009 and the agreement for large food retailers ran until 1 April 2010. Salaries under the former were not increased in 2009, while the latter agreement provided an increase of 3.5%.

The average number of staff changed only slightly in 2009, one effect of our policy of ‘sailing against the wind’ which meant that no significant change was needed to match the scale of our business activities. Although we do our best to meet our staffing requirements from our own workforce, it has proved impossible in recent years to meet all our requirements from this source. We consequently – sometimes more than we would ideally wish – had to call on Euroflex and other temporary staff. The total spent on these staff in 2009 was €2.5 million less than in 2008, which equates to around 70 jobs.

Various factors are having an adverse impact on our labour productivity in terms of sales per FTE. Inflation has been replaced by deflation and, in the unfavourable market conditions, the average value of each delivery to our Foodservice customers is declining (in other words, more work has to be done to achieve the same level of sales). The average spend is also under pressure from promotions that result in customers shopping around from wholesaler to wholesaler. Despite these effects, however, we were able to substantially improve productivity, specifically at EMTÉ, our distribution centres and Foodservice delivery locations. We expect to see only minor changes in the size of our workforce in 2010 compared with 2009.

Most of our employees who are covered by the Collective Labour Agreement for the Food Wholesale sector participate in the Sligro Food Group pension fund. Although the pension fund’s financial position had previously been strong, stock market developments in 2008 led to a reserves shortfall, in common with many other pension funds. We have since submitted a recovery plan to the regulators and, although this has not resulted in our having to implement any special measures, the pension fund board has decided gradually to increase contributions to the sector level so as to hasten a return to a satisfactory level of reserves. The fact that pension fund participants’ salaries did not increase in 2009 meant that pensions did not have to be indexed from 1 January 2010 and so currently only the indexation as at 1 January 2009 has been missed.

The funding ratio at year-end 2009 came out at 107.5%, which means that the pension fund still has a reserves shortfall. The projected funding ratio under the recovery plan was 106.6% and the regulatory guidelines require a ratio of 116%. The funding ratio in 2009 was adversely affected by the rising life expectancy trend.

Our goal is to enable all our employees to be shareholders in the company. Preserving our ‘Sligro culture’ and our identity and maintaining the motivation, loyalty and, above all, the involvement of our staff will continue to be a critical success factor in the future. Staff involvement has always been a key element in our business culture, because we started as a family company with a highly developed team spirit. After the flotation in 1989, we continued to invest heavily in maintaining that sense of involvement that is so characteristic of our company. We also search constantly for new ways of reinforcing that involvement and embedding it in our business culture. Being a shareholder plays an important role here.

The effect of employee participation
Working for your own company is simply better than working for someone else. Employee participation instils a sense of co-ownership and shared responsibility, which are instrumental in delivering good results. Research by various institutes and universities in the United States and Europe into the effects of employee share ownership has consistently shown that companies which facilitate employee participation grow faster and achieve better performance. This evidence underpins our vision and our belief in the positive effect of employee participation – on both Sligro Food Group and its employees!

It is not just about holding shares. If they have the money, anyone can buy shares in any quoted company, but in that case their involvement does not go further than the share price and does not extend to the company itself, because they have no influence over its performance. When the share price rises to the required level, the shares are sold and involvement ceases.

At Sligro Food Group, we seek to encourage long-term ownership of shares in our company and link growth in that ownership to our performance, whether joint (in the form of the contribution made by all employee’s to our company’s profit) or individual (in the form of an employee’s contribution to a low level of sickness absence). In both cases, share ownership is the result of employee performance.

Profit sharing

As part of the employee participation programme, Sligro Food Group has operated a profit-sharing scheme for its employees for many years under the name ‘Samen gewerkt, samen gewonnen’ (literally, ‘Work together, profit together’) based on the group’s profit as a percentage of sales. The total payout in 2009 was €3.0 million (2008: €2.8 million) before the employer’s deductions. As usual, this amount will be converted into Sligro Food Group shares in order to provide an extra incentive for our employee participation programme. In total, our employees (excluding the Executive Board) now hold 1,275,000 shares, with a value at year-end 2009 of around €30 million.

The World Health Organisation declared the outbreak of a new strain of influenza A, also referred to as ‘swine flu’, to be a pandemic in 2009. Although no exact predictions could be made, this pandemic was expected to reach a peak in the autumn of 2009 and result in substantial numbers of people becoming ill. The Minister designated food distribution as a ‘vital sector’ and required companies in the sector to prepare continuity plans.

We have identified what the consequences for the continuity of our production and services would be if large numbers of our employees were to fall ill. The working group conducting this study consisted of managers and other employees involved in decision-making drawn from all our basic business processes. The working group identified the critical operating processes and assessed the risks involved and their consequences, based on the guidelines and information we received from the Ministry of the Interior and the National Institute for Public Health and the Environment (RIVM).

Although it is now clear that the swine flu scenario is likely to be less dramatic than initially predicted, the effort we invested in this work has not been in vain. We now have a continuity plan in place which will ensure that we can respond effectively to future events affecting levels of illness-related absenteeism. This plan is based on a series of phases of sickness absence, which are incorporated in all the Sligro Food Group formats’ continuity plans. At the start of each phase, the pandemic team will specify the measures to be implemented according to the continuity plan and, after agreeing them with the Executive Board, will be responsible for coordination.