Ahold Delhaize USA’s Peapod Midwest division to close

Next week, Ahold Delhaize USA plans to shut down the Midwest division of its Peapod online grocery arm, based in Chicago.

The Peapod online-only unit serves customers placing online grocery delivery orders in Illinois, Wisconsin and Indiana. Plans call for the business to close down on Feb. 18, Ahold Delhaize said late yesterday.

With the move, several Peapod locations will be shut, including a distribution center and food preparation facility in Lake Zurich, Ill.; distribution facilities in Chicago, Milwaukee and Indianapolis; and a pickup point in Palatine, Ill.

The facility closings will eliminate 500 jobs. Ahold Delhaize said those associates will be able to apply for jobs at its other business units and will be offered severance and transition support services.

The Peapod Midwest division accounts for $97 million of Ahold Delhaize USA’s total online revenue of $1.1 billion, the company said. In the U.S., the retailer generates more than 6 million online grocery orders annually.

Ahold Delhaize called Peapod “the first online grocer in the U.S.”

“This was a difficult decision given Peapod’s rich history in the Midwest,” Ahold Delhaize USA CEO Kevin Holt said in a statement. “We know changes such as these are never easy for consumers and communities. We appreciate the loyalty of associates and customers in the Midwest sales business over the past three decades. We have been and will continue to leverage the learnings from our 30-year legacy of online grocery to enable each of the brands to grow its omnichannel business on the East Coast.”  

Related:Peapod steps up e-grocery service on Long Island

Going forward, Peapod Digital Labs will support online grocery delivery and pickup service for Ahold Delhaize USA’s supermarket brands, which include Stop & Shop, Giant Food, Giant/Martin’s, Food Lion and Hannaford and combined operate nearly 2,000 stores on the East Coast. The company noted that it aims to establish those brands as the leading omnichannel grocery retailers in their market areas.

“To continue our strong track record of sales growth and market share gains, we are accelerating our growth and expanding the leadership positions of our businesses in our East Coast markets,” Holt explained. “This move will enable us to fully focus on markets where we have strong store density, leading market share and a longstanding heritage of customer loyalty.”

Based in Chicago, Peapod Digital Labs is slated to deploy a new proprietary e-commerce platform for Ahold Delhaize USA’s grocery brands. The company said Peapod technologies that will continue to be used through Peapod Digital Labs include order routing technology for same-day and next-day delivery, a back-end order selection application nearly 700 click-and-collect locations, and new loyalty programs that integrate in-store and online shopping.

Related:Ahold Delhaize USA forms e-commerce company

Led by President JJ Fleeman, Peapod Digital Labs has more than 450 associates in Chicago and in offices with the local grocery brands. The unit was formed in mid-2018 to drive digital solutions to enhance the omnichannel experience for customers of Ahold Delhaize USA supermarkets as well as Peapod.

“Chicago will remain the headquarters for our Peapod Digital Labs team, and we will continue to draw from the valuable pool of digital and e-commerce talent in the market,” according to Fleeman, who also serves as chief e-commerce officer for Ahold Delhaize USA. “Through Peapod Digital Labs, we will continue to build upon Peapod’s technology legacy. Peapod began here, and we will remain here, in the heart of Chicago. We look forward to honoring and leveraging Peapod’s longstanding legacy of expertise in online grocery and fully focusing our team’s energy and talent on supporting the growth of each of the East Coast brands.”

A pioneer in the online grocery arena, Peapod was founded by brothers Andrew and Thomas Parkinson in 1989 and launched the Peapod.com website in 1996. The company went public in 1997. To fill grocery orders, Peapod partnered with grocery retailers such as Jewel-Osco, Safeway, Kroger and Stop & Shop, among others. Ahold USA acquired Peapod in 2000.

Ahold Delhaize said the Peapod Midwest closing isn’t expected to have a significant impact on reported operating profits or free cash flow, and the move won’t impact the previously announced goal to drive 30% U.S. e-commerce growth in 2020.