Peapod delivery vans are seen April 10, 2016, outside a distribution warehouse in Hanover, Md. The Skokie-based online grocery delivery system serves 24 metro markets, including Chicago, New York City and Baltimore. (Kris Tripplaar / Sipa USA)
Peapod, the online grocery delivery system started in 1989, has prevailed in a business segment that’s seen some high-profile and aggressive competitors come and go.
Now the Skokie-based company is girding for another wave of energized rivals seeking a slice of a market that’s expected to be worth $100 billion by 2025, according to industry estimates.
Considering the potential payoff and sheer amount of money, you can see why Peapod’s competitors are lining up locally and elsewhere. Among them: AmazonFresh, a unit of e-commerce pacesetter and retailer Amazon, and Instacart, a well-funded San Francisco-based entrant.
This growing competition will test Peapod’s respected operational prowess and its ability to effectively deliver online orders to customers. Peapod also will be pressed to sharpen and boost its marketing efforts as it tries to become known for more than its signature pea green delivery trucks.
"Naming the company Peapod was pretty sexy, but they haven’t kept up," says Phil Lempert, founder of California-based Supermarket Guru which tracks grocery store and e-commerce trends. "Now is the time."
Delivering groceries ordered online can prove daunting.
In Peapod’s case, the average basket includes 55 items, among them frozen and fresh items, and each order must arrive before food melts or spoils. If not, there’s trouble for all involved.
In its early days, the company was dependent on workers plucking fruit, vegetables, meats and other food from store shelves. It now has a central, proprietary distribution system designed to more quickly fill and deliver customer orders. Peapod’s 26 distribution facilities, including one in Lake Zurich, serve 24 metro markets — including Chicago, New York City, Baltimore and other parts of the Midwest and East Coast. The company offers customers a choice of connecting by computer or smartphone app and either delivery or curbside pickup.
"We learned years ago that centralized distribution facilities (can) fill an order three times faster," said Carrie Bienkowski, chief marketing officer for Peapod, who earned her brand management stripes at Procter & Gamble and eBay.
It’s the company’s commitment to such dry, but critical, operational methods that helps set Peapod apart from some other Internet wannabes.
Over Peapod’s lifetime, food store chains and upstart online sites have reached for the e-commerce grocery delivery gold only to stumble or fail because they couldn’t deliver the goods, sometimes literally.
Among the casualties was the highly touted and well-financed Webvan, based in California, which in 2001 filed for bankruptcy after a three-year run. (Amazon bought some Webvan assets.)
These days, a raft of stronger online competitors is targeting Peapod’s backyard.
The competition is really cooking in New York City, where Peapod’s regional expansion includes a deeper dive into Brooklyn.
It’s dueling with delivery services offered by established grocery stores along with online foes AmazonFresh, Instacart and New York-based FreshDirect.
To win Big Apple customers, Peapod is stepping up its digital marketing, coupons and use of transit ads, similar to a campaign underway in Chicago. It’s also gotten more creative by holding a community contest that challenges neighborhood professional and amateur artists to redesign the look of a Peapod delivery truck.
Supermarket Guru’s Lempert is encouraged by Peapod’s burst of ideas but contends the company needs to do more to tell its story if it is intent on beating back Amazon or other deep-pocketed competitors.
That could mean investing in a bigger, splashier advertising campaign emphasizing the Peapod brand or building a clever marketing message around its competitive edge at fulfilling and delivering customer orders.
"It’s not about the app or coupons," Lempert says.
To its credit, Peapod has a history of adapting to the times.
Founding brothers Andrew and Thomas Parkinson began testing their then-unique delivery concept with about 400 customers. Peapod orders were placed online; the company provided computer software to its customers and would even sell them modems. Employees, including at times the two brothers, would assemble orders and then truck them to customers.
You’ve probably seen their delivery trucks tooling around at all hours of the night and day.
The venture was intriguing enough to attract Dutch food store giant Ahold Delhaize, which in 2001 bought Peapod for a reported $35 million. Ahold is an international grocery powerhouse whose U.S. properties include the East Coast-centric Food Lion, Giant and Stop & Shop chains.
These days, Peapod isn’t ruling anything out but stresses it prefers the steadfast selling approach that’s worked for so long. Marketing chief Bienkowski adds that "word of mouth" references remain Peapod’s most effective way of attracting new customers.
As a result, don’t expect Peapod to suddenly spend millions on a glitzy new advertising effort even if the competition for the online grocery delivery business is speeding up.
So far, Peapod’s shown that slow and steady can win a fast-paced e-commerce race.