Looking to focus more on its East Coast brands, Ahold Delhaize USA will cease operations of its Midwest division of its Peapod online grocery sales business, which, according to the Quincy, Mass.-based grocer, accounts for $97 million in revenue of the $1.1 billion in total online revenue in the United States.
The company said that the move will enable it to focus on growing the leadership position of its brands on the East Coast and to execute its strategy of enabling each of its local brands to be the top omnichannel grocery retailers in their respective markets, using the capabilities of Peapod Digital Labs.
As of Feb. 18, Peapod service for customers in Illinois, Wisconsin and Indiana will cease. Accordingly, the following facilities will close: a distribution center and food preparation facility in Lake Zurich, Ill.; distribution facilities in Chicago, Milwaukee and Indianapolis, Ind.; and a pickup point in Palatine, Ill.
“This was a difficult decision, given Peapod’s rich history in the Midwest,” noted Ahold Delhaize USA CEO Kevin Holt. “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.”
The discontinuation of Peapod service in the Midwest is expected to affect about 500 employees in the greater Chicago, Indianapolis and Milwaukee markets. Affected associates will be able to apply for other jobs within Ahold Delhaize USA companies, or be eligible to receive severance pay and transition support services.
“As we’ve previously shared, 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,” said Holt. “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.”
Ahold Delhaize anticipates no significant impact to reported operating profits or free cash flow related to the discontinuation of service. Further, the move doesn’t affect Ahold Delhaize USA’s previously stated goal of 30% e-commerce growth in 2020.
With more than 450 associates in Chicago and the East Coast, Peapod Digital Labs will remain focused on enabling Ahold Delhaize USA’s divisions to deliver omnichannel experiences for customers and will deploy a new proprietary e-commerce platform, developed in Chicago, for the Ahold Delhaize USA’s local brands.
“Chicago will remain the headquarters for our Peapod Digital Labs team, and we will continue to draw from the valuable pool of digital and ecommerce talent in the market,” said JJ Fleeman, president, Peapod Digital Labs and chief ecommerce officer. “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.”
Ahold USA acquired Peapod, the first online grocer in the United States, in 2000. Peapod technologies that will continue to be used for e-commerce and omnichannel growth through Peapod Digital Labs include order routing technology for same-day and next-day delivery, a back-end order selection application to support the U.S. brands’ almost 700 click-and-collect locations, and new loyalty programs integrating in-store and online shopping.