SAFEWAY AND GROCERYWORKS FORM WEB SITE

PLEASANTON, Calif. -- Safeway here and GroceryWorks.com, Dallas, last week said they would launch a co-branded Web site and Internet shopping in Austin, Texas, as part of their first strategic initiative since a Safeway subsidiary purchased an interest in the Internet grocer this spring.

ership with Peapod, Chicago. Peapod said last week it would pull out of Austin when its contract expired.

Later this fall, Safeway and GroceryWorks will launch a co-branded Web site offering faster navigation, electronic coupons, recipes and other personal preference features.

As previously announced, the companies are also planning a co-branded Safeway.com Web site -- Safeway.com powered by GroceryWorks -- to launch in Phoenix later this fall.

In remarks last week at the Goldman Sachs Global Retailing Conference in New York, Steve Burd, Safeway's president and chief executive officer, said the investment in GroceryWorks will work to drive traffic to Safeway's brick-and-mortar stores and serve as another channel for customer service. Selling goods over the site, he added, can be "just as profitable as the traditional grocery business," because under the agreement, Safeway gets a portion of all the sales done through GroceryWorks.

"We believe we can be the dominant player in this space," said Burd, adding that between 7% and 10% of groceries would be sold over the Internet in seven years.