ORGANIC SALES UP AT PEAPOD

Matthew Enis

CHICAGO -- Several recent initiatives taken to pump up organic food sales are delivering double-digit increases for Peapod, Ahold USA's online grocery division based here.

Sales of organic produce, dairy and dry grocery are currently up 68%, 58% and 65%, respectively, over first-quarter 2004 sales, according to Tony Stallone, Peapod's vice president of fresh markets merchandising.

Organic meats, which now account for 10% of all natural and organic sales at Peapod, showed the strongest growth with sales spiking 104% from the same period in 2004.

The reason is simple -- more of the company's regular customers are buying organic products.

"In 2004, 72% of our customers purchased natural and organic products. In 2005, it was up to 77%," said Stallone, adding that the company plans to continue mining sales data to improve customer service.

"We need to understand more about what they're purchasing, why they're purchasing and what else they're purchasing as well."

The more the company has highlighted organic foods on its Web site or simplified searching for products, the more the category has grown, Stallone said.

For example, Peapod saw noticeable sales bumps in July 2004, when it revamped and relaunched its online natural and organic store; in August, when it introduced Ahold USA's "Nature's Promise" private label; and in October, when it began offering Wild Oats' private-label products in Chicago.

Yet the biggest growth seems to have been spurred by a new search option. The feature, which debuted in November, allows customers to group and search organic items separate from conventional brands or, alternately, to search for products based on fat, sugar or carbohydrate content.

"It's a huge point of differentiation," said Stallone, later noting that the search feature, in part, has helped the category grow to represent 6% of Peapod's total sales, and 8% of total sales in the Chicago market.

The company plans to continue to grow rapidly across Ahold USA's markets at a rate of 25% per year, according to Stallone, who predicted the online grocery business still had a lot of potential beyond its current 1% to 2% of total U.S. retail food sales.

"The trends are with us right now," he said, addressing an industry group at the recent All Things Organic show.

"Almost 50% of Internet users now are women," Stallone pointed out.

"A few years ago, it was much lower than that," he added. "These are the same people who put the groceries in the household."