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Peapod to shut down grocery delivery in the Midwest and cut 500 jobs

February 13, 2020

Peapod, the grocery delivery pioneer developed by Stop & Shop in 1989, has announced plans to cease operations in the Midwest—a move that will mean the loss of 500 jobs, according to a report by The Chicago Tribune.

Customers of the online grocer who live in Illinois, Wisconsin, and Indiana won’t be able to place delivery orders through the Peapod website starting as soon as February 18, the parent company of both the online grocer and its bricks-and-mortar originator, Netherlands-based Ahold Delhaize, announced Tuesday.

About 50,000 people in the Midwest currently use Peapod, placing 10,500 orders weekly.

Chicago-based Peapod will close a distribution center and food preparation facility in Lake Zurich, a pick-up point in Palatine; and distribution facilities in Chicago, Milwaukee and Indianapolis — affecting 400 employees. Another 30 employees will be cut at corporate headquarters in the West Loop, and about 100 drivers will lose their jobs.

Chicago will remain the headquarters for Peapod Digital Labs, which runs the e-commerce technology for Ahold Delhaize’s U.S. grocery brands. Peapod Digital Labs employs about 450 people, half of them in Chicago, and plans to hire 100 more people this year.

Peapod is exiting the Midwest as grocery delivery heats up, the Tribune says. The value of the online grocery market more than doubled from $12 billion in 2016 to $26 billion in 2018, and some projections have it reaching $100 billion by 2025.

Peapod will continue to serve customers on the East Coast, where Ahold Delhaize—the Dutch parent of Food Lion, Stop and Shop, and Giant—is the region’s largest grocery retailer. The decision to cut service in the Midwest will allow the company to focus on a strategy that offers in-store, delivery, and pick-up options.

“Customers really want groceries to be available for them whichever way they choose to shop,” JJ Fleeman, Chief ECommerce Officer and president of Peapod Digital Labs, explained to the news outlet.

Peapod’s Midwest operation posed challenges because it was online only, so it didn’t have a network of stores to connect to the supply chain and it was more difficult to gain new customers who want to know the grocery brand where their fresh food is coming from, said Selma Postma, president of Peapod.

“This was a very difficult decision given our rich history in Chicago,” Postma told the Tribune. “We have a lot of loyal customers, we have a lot of loyal employees.”

Peapod’s Midwest operations accounted for about $97 million of Ahold Delhaize’s $1.1 billion in online revenue in the United States.

 Research contact: @chicagotribune