Royal Ahold delivers cash for online grocer Peapod

Dutch grocer Royal Ahold NV, the majority stakeholder in Peapod Inc., has increased the Chicago-based company's line of credit to $50 million. Royal Ahold owns five supermarket companies in the U.S., including Stop & Shop and Giant.

In a statement issued yesterday, Peapod said the credit line increase, combined with the $14.7 million in cash and cash equivalents it had on hand at the beginning of the year, gives it more than $60 million to continue operations.

Last week, the struggling Internet grocer said it needed $50 million to continue operating this year (see story). At that time, Peapod said sales in the fourth quarter of 2000 had risen 11% to $23.7 million over the comparable period in 1999, while losses widened from $9.1 million to $23.8 million. For the year, Peapod's losses doubled, jumping from $28.5 million in 1999 to $56.8 million in 2000.

"Securing this additional financing puts Peapod in a much stronger and favorable position to focus on improving its key operating metrics," Peapod President and CEO Marc van Gelder said in the statement. "We are increasingly confident that we have a winning model and one with meaningful advantages for consumers."

The company, which operates in Boston, southern Connecticut, Washington, Chicago and Long Island, N.Y., said it's on target to become profitable in Chicago and one of its East Coast markets by the middle of this year.

In the statement, Peapod said it expects its gross margin in the first quarter this year to be in the 30% range, compared with 26% in the last quarter of 2000.

Peapod is just one of many online delivery companies struggling to survive.

Last week, Foster City, Calif.-based Webvan Group Inc. pulled up stakes in Dallas and laid off its entire staff of 220 to conserve capital and focus on profitability in its nine other markets. Those markets include the San Francisco Bay area, Chicago and Atlanta.

Although not a direct Peapod competitor, Inc. laid off 60 employees last week and said it was dropping the .com suffix from its name in an attempt to move beyond the online delivery market (see story). The New York-based company said it planned to add a printed catalog and a set of order fulfillment services aimed at manufacturers and other corporate users.

Paul Ritter, an analyst at The Yankee Group in Boston, said that while $30 million is a lot of money for Peapod, he's not sure it will be able to survive in a very challenging market.

"We have shown there are doubts about the viability of any company in that model," Ritter said. "And whether or not this was a good investment for Ahold remains to be seen."


Copyright © 2001 IDG Communications, Inc.

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