Who Will Inherit the Peas of the Pod?

The pioneering online grocer Peapod, which discontinued service in the Midwest last week, leaves behind hundreds of employees and thousands of longtime customers, and it is putting nearly $100 million in annual online grocery sales—or about 10,000 orders a week—up for grabs in the Chicago, Milwaukee and Indianapolis markets.

For established grocers and services such as Instacart, that’s a rare opportunity to win new sales from a customer base already dedicated to internet shopping. And for customers, it means choosing among options they may previously have eschewed.

Sources contacted by WGB predict the biggest winners in the Peapod turnover will be local grocers with significant market share and e-commerce capabilities—but pressure will be on them to impress.

Chicago’s longtime market share leader Jewel-Osco, which fulfills orders both through dedicated delivery (similar to Peapod) and with same-day delivery partners such as Instacart, is experiencing booming interest, a company spokeswoman told WGB.

“Since launching home delivery in 2017, Jewel-Osco has enjoyed steady adoption of home delivery by customers due to overall satisfaction in delivery time and Just4U deals and rewards,” Jewel-Osco’s Mary Frances Trucco said. “The announcement by Peapod to exit the Midwest market earlier this month has had an immediate, favorable effect on our home delivery service, and we believe those new customers will remain loyal to Jewel-Osco.”

Instacart, with a wide range of banners available on its marketplace, is practically assured to be a beneficiary, though it will disperse the rewards. The company has more than 50 partners across Indiana, Illinois and Wisconsin offering pickup and delivery from more than 1,800 stores, including Aldi, Costco, Jewel-Osco, Kroger, Metro Market, Pete’s Farmers Market, Piggly Wiggly and Sam’s Club. Instacart also has a relatively long history in Chicago, launching there in 2013—its first expansion since it was founded in San Francisco a year before.

Ahold Delhaize USA, which acquired Peapod in 2001 and used its technologies to power e-commerce offerings at its owned retail stores in the East Coast, discontinued Peapod’s Midwest operations on Feb. 18, saying it believed e-commerce would work only in markets where it also operated stores. It was not clear the extent to which Ahold Delhaize attempted to sell the business before announcing the shutdown; a spokeswoman told WGB Ahold Delhaize was considering options to sell assets such as its fleet of trucks and warehouse facilities. Its customer information, she said, “will continue to be handled and stored in accordance with the company’s privacy and security policy.”

Sources said some Peapod insiders were surprised by the sudden decision, adding, however, that they understood Ahold Delhaize’s position. The online grocery shopper is rapidly shifting to on-demand delivery and pickup from stores—some of these offerings now coming without separate fees—while 30-year-old Peapod was primary providing scheduled home deliveries from regional warehouses, with delivery charges on a per-order or subscription basis. And though it had the market largely to itself for years, the influx of competitors and their more more flexible options put pricing and presumably, costs, to the test. “The business model had passed them by,” Bill Bishop, chief architect of Brick Meets Click, Barrington, Ill., told WGB.

“It has become increasingly difficult for pure-play, full-line grocery providers to remain viable. So it makes sense to me that they would want to focus their investments in their other markets,” added Scott DeGraeve, a former Peapod executive who today is chief operating officer of the grocery software firm Locai. “What is somewhat surprising is that they did not sell the business to a Midwest retailer: $100 million in grocery e-commerce is a lot of business, and it would seem at some price this would have been attractive to someone like Jewel or Mariano’s, or even to some smaller retailers in the Chicago market like Caputo's.”

Disappointed Peapoders Go Shopping

Social channels in the wake of the announcement swelled with remarks from disappointed shoppers, many of whom came to rely on Peapod over many snowy Midwest winters, as a valuable aid to older and disabled shoppers, and for many, obviating the need to pursue many of the followers to have grown up in its wake.

I received the email a few days ago and it took me back to when our amazing city lost Border’s Books and Dominick’s. These closings hit me hard. Peapod became a gift to my family for almost a decade. I’m so grateful for ever crossing paths and I’ll be praying for employees😢

— 🌹The IndigoMoon🌹 (@gurl_green) February 18, 2020

From the point of view of some loyal Peapod consumers contacted by WGB, their options don’t look so good. Their remarks indicate the Peapod brand was well-regarded for dependability, service, value and quality—aspects they’re uncertain its competitors possess.

Lisa Poirier, of the Rogers Park neighborhood of Chicago, said she made the switch to Peapod upon adopting an “urban lifestyle” about seven years ago, buying groceries for herself, a disabled partner and their cats. “We started Peapod once we got rid of our car,” she said, “and we’re going to miss it tremendously.”

Poirier said she typically spent less than $200 per order with Peapod once or twice a month—but always left a good tip—saying that she appreciated that the delivery people would lug her items up the stairs of her building, something not every delivery service provides. Now, she says, “We’re in a panic phase.”

Her conundrum underscores the notion that local supermarkets providing delivery won’t necessarily win business on location or even the offering alone.

“There’s a Jewel near our home, but I’ve never been impressed with the condition of that store, especially the produce,” Poirier said. “We’d consider buying from Jewel if we knew it would come from another one of their locations.”

She’s likewise skeptical or dismissive of other options. She said she won’t shop at Amazon on principal. Walmart? “I think there’s one out in Skokie?”

She said she’s shopping at a local produce mart for now and wants to give Mariano’s a try but said she isn’t quite sure if it even delivers (it does). Poirier said she will also keep her options open until she’s convinced one of them gets the experience right.

For B.J. Richards of Forest Park, Ill., Peapod has been “a lifeline.” The 72-year-old, who runs a home day care center and no longer owns a car, had racked up 1,232 orders at Peapod over the past 30 years—literally going back to the dial-up days. “I remember having to order items from a catalog in the beginning, listing an item number for each [product],” she said. “I had to call my order in."

“I loved the convenience of Peapod,” Richards continued. “We always enjoyed the drivers. The kids would get excited when the green truck pulled up. And the selection was excellent.”

Richards said she sees remaining options largely as a collection of compromises. “I will use Instacart when I have to, but it is more expensive, [with] more out-of-stock items, and I often need to use more than one store.” Richards is trying Jewel’s direct delivery, “and so far, I’m happy,” but he is also using Caputo’s to order specialty items.

“I wish Trader Joe’s delivered,” she said.