The Goods On Grocery

International food giant Royal Ahold's rescue late last week of Web grocery service Peapod is likely the first of many moves by brick-and-mortar grocers online, grocery experts told executives attending eRetailing World in San Jose, Calif. "It blows my mind that a [brick-and-mortar store] wouldn't want to be there," says Ted Gladson, president of Gladson Interactive Services, Lisle, Ill. "It's defensive as well as progressive. It's low-cost and incremental. There's no reason not to be on the Web."

     In fact, Wall Street's recent souring on Internet pureplays will give brick-and-mortar grocery chains the impetus to invest in online ventures, adds Alice Richter, national director of the food and beverage practice at KPMG Peat Marwick, Minneapolis. Though Albertson's has experimented with Internet sales in Seattle, and Safeway yesterday announced a 50% equity stake in Groceryworks.com, few traditional grocery stores have made moves online.

     In Ahold's case, Richter told Internet Retailer, experience with Peapod probably helped drive the deal. Ahold's East Coast chains Stop & Save of Boston and Edward's in the New York area were Peapod suppliers. Ahold's 50% stake in Peapod, valued at $73 million, will help Peapod proceed with plans to build fulfillment centers in its eight metropolitan markets. "Peapod also gives Ahold an established customer base," Richter says. "It's a well-known name--they were the online leader. They've also gotten the arrows for having tried and failed, tried and failed. The rumors came out pretty quickly that Ahold was one of Peapod's potential white knights."