Peeking inside the pod: A deep look inside Peapod's grocery delivery business
As competition increases and more consumers purchase food online, the Chicago company increasingly depends on drivers like Ron Gordon to be the face of its business.
In a nondescript industrial building sitting on a dead-end road 14 miles south of Baltimore, a serene parking bay suddenly begins buzzing with activity. A few minutes before 5 a.m, nearly four dozen Peapod drivers climb into their green grocery delivery trucks that have been loaded overnight with everything from ice cream, apples and bottled water to Spam, bread and waffles.
The early-morning ritual has become a choreographed exercise the Chicago company has perfected during a nearly 30-year history where it has emerged as a leader in grocery delivery. From humble beginnings that included hand delivering floppy discs containing its product catalog, Peapod now delivers groceries to thousands of shoppers in 24 U.S. markets, including Washington, D.C., Boston, Chicago and New York City.
But that dominance could be at risk as e-commerce sales command an ever-growing share of the $640 billion U.S. grocery market, prompting more players such as Amazon, FreshDirect and Instacart to expand their presence in the space, all with varying degrees of success.
When Ron Gordon, 45, started driving for the company in 2003, Peapod was the lone survivor of the dotcom implosion that befell competitors such as Webvan, HomeGrocer and Kozmo. Today, the 29-year old Peapod finds itself moving more aggressively than ever to mine efficiencies from its operations, reward its loyal employees and keep customers from abandoning the service or turning to a competitor.
Increasingly, Peapod will depend on Gordon — a self-described people person who enjoys talking with customers and driving the often lengthy routes between deliveries — along with its 2,600 other drivers to keep it competitive.
“The service that we provide, sometimes we’re early, sometimes we’re late, sometimes we miss the mark, but that’s part of the business," Gordon told Food Dive. "We try to do our best to fine tune things so we can keep the customer base that we have and we don’t lose those customers to our competitors.”
A trove of valuable data
After Gordon climbs into his Peapod truck on this cool morning, he checks the 124 green and black totes chock full of groceries to make sure the racks they are loaded on are locked in place. Moments later, he sits down in his driver's seat, turns on the overhead light and flips open the gray route book loaded with information on each of the 17 stops he will make.
The data Peapod gives each driver is amazingly precise: Gordon knows roughly how many miles he will drive that day (158), how long it will take him to complete each delivery once he arrives (from 8 to 15 minutes, depending on the size of the order) and how much time it will take him to travel to each stop. The overall journey is expected to take just under 9 hours. He's given contacts and invoices for each of his customers who, on this particular Friday, have collectively purchased more than $2,600 worth of groceries.
To the upper right of his steering wheel, Gordon affixes an iPhone containing software that has been preprogrammed by workers in Chicago to create the most efficient route. The deliveries are listed in the order he will make them, taking into account both the route as well as the two-hour window the customer requested for the order to arrive.
'We were like rock stars'
Just two months ago, Peapod wasn't even delivering groceries to lower Anne Arundel and Calvert counties, which parallel the western shore of the Chesapeake Bay. As Gordon transverses this predominately rural area of southern Maryland, his truck rolls past small towns, strip malls, restaurants and subdivisions dwarfed by large parcels of forests and tracts of agricultural land.
Until November 30, the region had been served by Peapod competitor AmazonFresh before it suddenly pulled out, leaving customers in the lurch. Many were left holding on to uncollected AmazonFresh bags the company used to deliver the groceries in but never picked up.
"When I was riding out in the new area, the excitement. We were like rock stars. It's like 'Oh my God, Peapod is here.' People came out and they greeted us."
Senior supervisor, Peapod
In late May, Peapod entered the market, and Gordon was reassigned from his route in Annapolis, Maryland. He had driven in that area for seven years, establishing a close rapport with some of his customers, many of whom he knew by name. Gordon, an avid fisherman, was invited by one person to fish from the shore of her home into the bay. Another customer, who came to be like family, gave Gordon and his wife a terra-cotta stoneware casserole baking dish for their wedding; a gift they use to this day.
"We personally picked Ron to go out to the customers for the first time" when the company expanded in southern Maryland, said Milton Battle, a senior supervisor with Peapod who was a driver for 10 years before switching to his current management role. "We get one shot to get it right."
As part of its entry into the market, Peapod rolled out what it called a "white glove service" on the first day that included giving new customers hand-delivered flowers, water bottles and Peapod pens.
The marketing offensive worked. Peapod's corporate office gave the new market two months to reach 200 orders. Battle said they reached that mark within three weeks. One of the first people to place an order was a customer who had purchased from Peapod 16 years earlier before moving. She had waited for the company to deliver again to her area.
"When I was riding out in the new area, the excitement. We were like rock stars," Battle noted. "It's like 'Oh my God, Peapod is here.' People came out and they greeted us."
Back to the future
While Peapod has survived, many of the challenges it faced 20 years ago remain the same. Webvan and HomeGrocer have been replaced by AmazonFresh, Walmart and Instacart, and the grocery delivery business continues to be a challenging space where churning out a steady, reliable profit is often elusive.
Analysts interviewed by Food Dive said the decision by Ahold Delhaize, the owner of Peapod, to take a slower, more methodical approach to investing in the division— an approach that underscores its large network of brick-and-mortar stores up and down the East Coast — could come back to haunt it. Ahold Delhaize executives last fall made it clear they weren't satisfied with the performance of Peapod amid growing competition.
Some have been critical of the failure to tap into Peapod's trove of valuable consumer data the company has amassed and the reluctance to promote the service in Ahold Delhaize stores — the latter being a misstep that officials at the grocer have publicly acknowledged.
"They don't seem to understand the pace at which they need to be moving and the agility at which they need to have to stay relevant ... with the shopper," Elley Symmes, an analyst at Kantar Consulting, told Food Dive. "They are the king of the hill … but the threat is more the longer term. Five years from now, how much market share will Peapod have lost to the Amazons of the world, the Instacarts of the world, the Kroger Clicklists of the world? I think it will be a result from the pace at which they are moving now.”
Carrie Bienkowski, Peapod’s chief marketing officer who joined the grocery deliverer in 2014 from eBay, defended the company's roadmap for growth and efforts it has taken to promote and expand the brand.
"There is a reason why a lot of people have failed in this industry, and that there are a lot of players that burned very brightly, but burned out very quickly," Bienkowski said. "We have been very methodical and we have been very measured because we want to make sure that we're building a business that stands the test of time."
Convenience is paramount
As Gordon progressed on his route on this day in June, the sun rose and the slight chill that greeted drivers earlier that morning gave way to 70-plus degree temperatures.
Many customers — representing a diverse slice of America; young and old, black and white, rich and poor — peeked out from garages and front doors as Gordon arrived to receive their Peapod orders that can sometimes top $200, $300 or even $400 dollars.
A study released last August by Kantar Consulting found people spent an average of $121 for their last Peapod order, compared to $72 at Walmart Pickup Grocery and $60 with AmazonFresh. More than three-quarters of Peapod's customers used the service more than once, reflecting the 93% satisfaction rating the company enjoys.
Customers who purchased groceries from Peapod told Food Dive they use it primarily for the convenience. Some are elderly or have disabilities, while others have children that make it hard to shop. A few individuals just don't like going to the grocery store.
Several people said they picked Peapod because they saw on the side of one of their trucks that it was affiliated with Giant, a banner owned by Ahold Delhaize, that they regularly visit. Ahold, the Netherlands-based food and grocery retail company that merged with Delhaize in 2016, purchased a majority stake in Peapod in 2000 before buying the rest of the company a year later.
Kantar estimated 40% of Peapod's shoppers are millennials compared to a quarter of the people who visit an Ahold Delhaize store — making the food delivery company a key way for the grocer to expand its customer base, especially as this younger demographic starts having children.
Reshone Moore, who lives in Upper Marlboro, Maryland, said she had been using Peapod for a year. Moore has a disability and depends on Peapod to carry water, juice, detergent and other heavy items she ordered up the stairs to her kitchen.
“Convenience is paramount for me, because what I do is a big grocery store run" when ordering from Peapod, Moore said. "If I have to run to the store, all the bigger, heavier stuff I already have.”
“I may never have to leave the house. I hate going to the grocery store. I order almost everything off of Amazon except for the groceries," she said. “I don’t like the lines. I don’t like the crowds.”
Then, she paused: "My son actually works at (Albertsons-owned) Safeway so I probably shouldn't be doing this," she laughed.
'We're the last line of defense that they see'
When the truck pulls up to a new stop, Gordon walks to the back where the totes are stacked according to a specific number and letter grid system, allowing him to identify which ones he needs to grab. Plastic bags full of products are pulled from the totes in a specific order so that he can make one horseshoe-shaped trip around the vehicle without having to double back. Gordon checks to see if any milk containers have leaked or eggs have broken. If there is a problem, the customer receives a credit for a future order.
The white plastic grocery bags with a black and green Peapod logo are placed at the end of the truck. Once they are all collected, Gordon calls or knocks on the door to see if the customer is home before bringing their bags to them.
The breadth of products being delivered includes both name brands and private label items, many of which carry the Giant logo. Perishable items are the most likely to make it into a customer's basket at Peapod, followed by dairy, fresh produce and fresh meat/poultry/fish, according to Kantar Consulting.
"I think (what) is really eye opening, really striking, is that at-the-door human touch that is really, really important to get right. That at-the-door experience is pretty impactful, and I think a lot of people don't really appreciate that about the online grocery experience."
Chief marketing officer, Peapod
Gordon, meanwhile, employs his own white glove service: He calls customers by name, asks if they have any questions and carries their orders of bread, juice boxes, broccoli, paper towels, frozen corn, seltzer water and other items inside their homes to the exact location where they want them placed.
"We're the last line of defense that they see, so when we get there and we're late, they're not very happy," Gordon said. "The company has gotten much better with that because there were times when these routes were leaving two hours, three hours late, and customers, oh they were furious, and a lot of the orders ended up coming back because they canceled. When we’re late that pretty much sets the tone of the day for [the customer].”
Bienkowski told Food Dive the company's drivers, or "brand ambassadors" as they are called, are crucial to Peapod's success. Unlike most e-commerce orders where the customer purchases an item online, and then has it delivered to their home or office without ever seeing the delivery person, online grocery is different.
Food is inherently emotional, she said, and the chance to interact with the individual who is delivering your products only deepens that connection.
"I think (what) is really eye opening, really striking, is that at the door human touch that is really, really important to get right," Bienkowski said. "That at the door experience is pretty impactful, and I think a lot of people don't really appreciate that about the online grocery experience."
Experts who closely follow Ahold Delhaize agree that Peapod has excelled on customer service. Ioannis Pontikis, an analyst with Morningstar, said Peapod chose to keep the last mile delivery rather than outsourcing it in order to maintain the relationship with the shopper.
"Delivering groceries at home is a tough business and it can backfire if an order doesn't arrive on time or is incomplete," Pontikis said. "Customers' expectations when it comes to groceries are higher relative to other delivered goods such as apparel or electronics/books; punctuality is of paramount importance. From that perspective, Peapod's strategy to control this crucial stage of the process is justified despite the high costs involved."
Symmes with Kantar Consulting told Food Dive that one major advantage Peapod has is that it's fulfilling its own orders, unlike many brick-and-mortar grocers that use a third-party service like Instacart or Shipt.
"That gives them a bit of an advantage in terms of satisfying the shopper and using it as a way to increase that shopper loyalty," she said.
More miles on the road
After driving thousands of routes for Peapod, Gordon has fine-tuned his delivery technique and implemented practices to make his own operation run more efficiently. Even though the company requires that drivers carry each tote inside, he says it's much faster to remove the necessary bags and re-slot the container in the truck.
He'll also try to assess all the deliveries he has to make in a day. If he's in a neighborhood doing one delivery and notices another nearby later in the day, particularly if it involves a significant drive — some locations, especially in rural areas, can be 40 or 50 minutes apart — he'll call the customer to see if he can drop off their order early.
On this particular Friday, the usually astute Gordon made a delivery in the morning, only to return in the early afternoon to the same area after failing to notice a customer just a few blocks away who requested a later delivery time. In some cases, Gordon and other drivers have to make a lot of stops in one area, drive to another city far away, only to return back to the first to make just a single delivery.
"It's all customer friendly, even if it disadvantages the company and the driver with more miles out there on the road," Battle said.
'Another route in the books'
Once Gordon makes it to each stop, he hits a button on his iPhone that not only lets the customer know he's there, but sends a text to the next person in line notifying them that he'll soon be at their home.
It's a far cry from when he started working for the company. At that time, directions were printed on paper he had to fumble around with during his route. He would call Peapod every five stops so they could gauge if he was on time, late or if they needed to send him help.
To be sure, technology, even today, can be fickle. Sometimes Gordon will lose his signal when he's in rural areas and there are tall trees as far as the eye can see. He'll pull over to call the shopper from the side of the road for directions. For the last five stops of this route, the cellular network the company uses to help navigate went down, forcing Gordon to get directions by calling his office and the customer.
Gordon stumbled into grocery delivery almost by accident. In 2003, he and his wife were sitting at a traffic light when he saw a Peapod truck drive by. His contract working as a helpdesk technician on Capitol Hill had expired a month earlier.
"I said, 'You know what, I would like to try that,'” he recalled. “The job is straightforward and it’s not for everybody. It’s just that I enjoy the driving. I enjoy meeting people. I enjoy talking to people. I wanted to try something different, and I also needed a job.”
As competition in the grocery business has intensified, Peapod has done more to reward its employees. Battle estimated the top 50 drivers working from his location have been with Peapod for about a decade, including one person who has been driving for the company for 18 years.
After Amazon announced it would be delivering from Whole Foods stores in the Baltimore region in early June, Peapod increased the minimum wage for some of its drivers in the area. It recently started Friday cookouts every other week with burgers and hotdogs, gives drivers who consistently deliver their orders ahead of schedule 94% of the time hats emblazoned with the Peapod logo and rewards the top 14 employees of the month — the "pick of the pods" as the company calls them — with $200 bonuses.
"We've done this in the past, but not at the rate at which we are doing it now," Battle said. "We needed to retain good employees and just stay marketable."
As Gordon climbed aboard his Peapod truck for the last time on Friday afternoon after delivering his final order, he walked past the now emptied totes that earlier were loaded with groceries. He ended up logging 173 miles, 15 more than had been forecast, but completing his 17 deliveries 10 minutes ahead of schedule.
"Another route in the books,” he said. “I just usually say that, 'Hey I’m done. No missing products, no customer issues, no breakdowns. It’s a good day."
See more Peapod delivery photos below
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