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Peapod Sharpens Pricing as Competition Intensifies

The growth of traditional grocers in the e-commerce space is forcing Peapod to get sharper on pricing, officials of owner Ahold Delhaize acknowledged Wednesday.

CEO Dick Boer said that recently announced deal bundles and other pricing initiatives would help the company compete in markets such as Chicago, where Peapod operates a pure-play online business facing new competition from traditional grocers using click-and-collect, and in its core Northeast markets associated with Ahold’s owned stores. There, the company is trying to get Peapod’s retail prices to better conform to its Stop & Shop and Giant physical counterparts—a job made complicated by the use of multiple price zones across the store base.

“Traditionally, Peapod was always up-priced, but with upcoming competition from traditional retailers with online models—mostly click-and-collect models—we feel the need to continue to invest in our price points at Peapod.”

Ahold Delhaize for the first time this week began specifying online sales as part of its financial reporting, showing that U.S. e-commerce accounted for about $222 million in the first quarter, a 9.4% increase from the same period a year ago. Peapod accounts for about 85% of that figure, CFO Jeff Carr said, with other efforts such as Hannaford to Go and Instacart sales making up the remainder.

Ironically, the stepped-up price activity at Peapod came at the same time promotions were relatively cool at Ahold Delhaize’s store banners. Carr said promotional activity at Stop & Shop in the first quarter was less intense than the same period last year as the company explores ways to promote more effectively.

In-store sales continued to grow during the quarter, the company said, with U.S. banners combining for sales of $10.9 billion, a 2.1% increase, and nonfuel comparable-store sales increasing by 2.8%. Boer called out especially strong performance from Food Lion, which posted volume gains and its 23rd consecutive quarter of same-store sales growth, as well as its Giant Food Stores division, which showed 3.6% quarterly comp growth, powered in part by the addition of beer and wine at various stores in Pennsylvania.

U.S. sales growth in the quarter was also supported by positive effects of New Year’s and Easter sales falling in the quarter and weather events driving sales gains, the company said.

In the final call, during which the retiring Boer addressed shareholders, he said the company would renew its controversial “foundation” structure for another 15 years; but in deference to shareholder concerns, he said the company would call a meeting to discuss the vote within six months of exercising the option, and schedule a shareholder vote to cancel the structure within one year of exercising it.“We feel the foundation is in the best interest of the company and all its shareholders because it puts a procedure in place that allows us, if needed, to fully and carefully investigate [acquiring shareholders],” he said. “But we also listened closely to all our stakeholders.”

The concessions prompted activist investor CIAM to drop its demand that Ahold Delhaize put the matter to a special shareholders meeting, reports said Wednesday.

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