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Peapod's Loss Is Netgrocer's Gain

Chicago-based Internet grocer Peapod Inc., in a move that further hones in on the money-making aspects of its business, is getting rid of its "Peapod Packages" delivery obligations outside of its core market area.

Privately held North Brunswick, N.J.-based Netgrocer, a nationwide online grocery retailer that delivers via FedEx, will offer its national pack and ship delivery service to those customers instead.

Financial terms of the arrangement were not disclosed, but the move clearly benefits Peapod, which gets to concentrate on achieving profitability by doing what it does best. Visitors to Peapod's Web site who are not in Peapod's local delivery area will be linked to Netgrocer's site.

Peapod's stock was up 16 cents on the news to $1.56 in mid-morning trading.

Peapod said last month it had attained operating profitability for March in its Chicago market. The bad news was that the company also reported a first quarter net loss of $15.5 million or 86 cents per share, compared to a net loss of $12.7 million or 70 cents per share for the year-ago quarter.

Peapod has exited five markets since September 2000: Austin, Houston and Dallas, Columbus, Ohio and San Francisco. The company currently serves markets in Boston, Connecticut, Long Island, Washington, D.C. and Chicago.

Peapod said today's action "sharpens its focus on its core business" of providing consumers with local delivery of groceries via trained drivers within selected markets and in Peapod's home city of Chicago.

"Having reached operating profitability in our Chicago operation, our priority is to achieve the same goal in our other home delivery markets," said Marc van Gelder, Peapod's president and chief executive officer.

Netgrocer, of course, picks up an unspecified number of new customers.

"This is an excellent opportunity for us to introduce the Netgrocer brand and our suite of services to a new customer base that is already adept at purchasing groceries online," said Lisa Kent, president of Netgrocer.com.

Netgrocer.com markets a variety of non-perishable household staples, from groceries to office and beauty supplies to pet products. There are no membership fees and groceries are delivered via the "no signature required" Federal Express service.



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