CHICAGO (Reuters) - A merger between Dutch supermarket Ahold AHLN.AS and Belgian rival Delhaize DELB.BR will be a boon for U.S. online grocer Peapod, an Ahold unit which will gain valuable resources to fend off rival Amazon.com (AMZN.O) and upstart competitors, according to retail industry consultants
Peapod, acquired by Ahold in 2001, is the biggest online grocer in the U.S by sales, but it has struggled to keep up with the growth of rivals.
Access to Delhaize’s efficient and low-cost distribution centers in the east and its presence in the U.S. east coast is likely to give Peapod an upper hand over Amazon, Wal-Mart.com and smaller rival Fresh Direct, all of whom are expanding in the fast-growing north and south eastern markets, Strategic Resource Group’s Managing Director Burt Flickinger said.
The merger will give Peapod an opportunity to leverage Delhaize’s network in south eastern states like Virginia, Georgia and North Carolina, consultants said.
“The merger should help Peapod maintain its lead in the market at least through 2016 even with Amazon Fresh making significant inroads in this space,” Flickinger said.
Ahold agreed to buy Delhaize in a 25 billion-euro ($28 billion) deal that will create one of the biggest food retailers in the United States and a major player in Europe.
A restricted geographical footprint with operations in 24 markets and limited low price offerings have kept the online grocer from faster growth, consultants said. Reuters was not able to independently verify if the chain turns profits.
Peapod, which serves 24 U.S. markets like Chicago, New York and Boston, had 11.4 percent of the total market for online food, grocery and drug sales in the U.S. in 2014 compared to Amazon Fresh which had 2.7 percent, according to data from Conlumino Research.
“Peapod has been expanding but it hasn’t been growing as quickly as Instacart or Amazon Fresh,” said Phil Lempert, founder and editor of SupermarketGuru, a food and health focused website.
“Its like the old uncle who has been around for 30 years who just plods along.”
Peapod posted sales of $550 million in 2013 and said then it expected to grow revenue to $1 billion in five years, according to data from SRG and Internet Retailer. By comparison, SRG data showed Amazon Fresh, which launched in June 2007 reported sales of $250 million in 2014.
Earlier this month Ahold named Jennifer Carr-Smith, a former J. Crew executive, as its new president, replacing Andrew Parkinson, who founded the company with his brother in 1989.
Reporting by Nandita Bose in Chicago; Editing by Bernard Orr