PEAPOD SHOPPING, DELIVERY SERVICE TO POP OPEN IN ITS THIRD MARKET

JOHN KAROLEFSKI

CHICAGO -- Peapod Interactive, the on-line grocery shopping and delivery service, will soon begin operating in Boston, its third U.S. market. In addition, the company based here has lined up the support of Kraft Foods, Bristol-Myers Products and Heinz Co. to help develop the on-line service. Tim Dorgan, president of Peapod, outlined these moves here late last month at an in-store marketing conference sponsored by the Grocery Manufacturers of America. In a separate development, Providence Journal Co. announced it is investing in Peapod. The Providence, R.I.-based firm is the founder and managing partner of the Television Food Network. The investment gives the company the exclusive rights to expand and enhance the Peapod service in its newspaper, the Providence Journal, and in its nine television markets. At the GMA conference, Dorgan said Peapod is close to signing a contract with a Boston-area supermarket chain for grocery delivery in that market. He declined to name the company, but said that all of the area's chains have expressed interest in Peapod. He anticipates service starting late this year or early 1996. Shaw's Supermarkets, East Bridgewater, Mass., and Stop & Shop Cos., Quincy, Mass.,

are the leading chains in the greater Boston marketplace.

Dorgan said Peapod will begin working with Kraft, Bristol-Myers and Heinz in a few weeks.

"With these manufacturers, we will be doing a combination of advertising and new product testing," he said. Dorgan added that he wants more manufacturer involvement to accelerate development and to improve the value of the service to consumers. He listed these areas for manufacturer involvement: promotional tests, advertising, research, merchandising and new product development. The six-year-old company began service in the Chicago marketplace with grocery fulfillment provided by Jewel Food Stores, Melrose Park, Ill. It opened in San Francisco in 1993 with Safeway, Oakland, Calif., supplying the groceries. Under an exclusive agreement, only one supermarket company per trading area works with Peapod. "We think we've got the bugs worked out that will let us greatly accelerate the pace in which we roll out," Dorgan said. In five to seven years, Dorgan said, Peapod hopes to be in 30 markets and serving a million or more households. "How big this channel is going to be is a subject of huge debate," he said. "Bill Gates said [on-line shopping] is going to be a 30% channel. This company was founded on the premise that it would be a 1% channel," he said.

Peapod currently serves about 11,000 households; two-thirds of them are in the Chicago marketplace and the balance in San Francisco. "Each store serves a 3- to 5-mile radius. In a very short period of time, our volume is equivalent to 15% to 20% of that store's total volume," he said. Shoppers using Peapod have access to the entire grocery store. They can shop by aisle, by item, or by a personal list. Company personnel shop and deliver the order to the home where the customer pays the driver. The value of coupons is deducted from the next order. Dorgan said the demographic profile of Peapod users is: 75% female, 60% dual income, 89% college educated and 60% with children.