Ahold Delhaize USA said it plans to close the Midwest division of its Peapod online grocery delivery business to focus on expanding its operations in the more lucrative East Coast, where most of its stores are located, resulting in the layoff of 500 employees.
Dutch-based Ahold said the Midwest operation of Peapod represented just $97 million of the $1.1 billion in total online sales in the U.S. Ahold’s grocery chains in the U.S. include Food Lion, Giant Food, Giant/Martin’s, Hannaford and Stop & Shop.
As of Feb. 18, online grocery ordering and delivery will be discontinued for Peapod customers in Illinois, Wisconsin and Indiana, and the company will close a distribution center and food preparation facility in Lake Zurich, IL, distribution facilities in Chicago, Milwaukee and Indianapolis, and a pickup point in Palatine, IL.
Chicago will remain the headquarters for Peapod Digital Labs, which runs ecommerce technology for Ahold’s U.S. grocery brands. It handles order routing technology for same-day and next-day delivery, a back-end order selection application supporting nearly 700 click-and-collect locations and loyalty programs that integrate in-store and ecommerce shopping.
“This was a difficult decision given Peapod’s rich history in the Midwest,” said Kevin Holt, CEO of Ahold Delhaize USA in a release. “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.”
Selma Postma, president of Peapod, told the Chicago Tribune that Peapod’s Midwest operation was challenged because it was online only and not connected to a local network of stores to supply online orders, making it more difficult to gain new customers.
“This was a very difficult decision given our rich history in Chicago,” Postma said. “We have a lot of loyal customers, we have a lot of loyal employees.”
Peapod, founded in 1989 in Evanston, IL as the first online grocer in the U.S., was acquired by Ahold in 2000. It survived and thrived where much ballyhooed competitor Webvan stumbled and fell.