Dive Brief:

• Ahold Delhaize announced it will launch an e-commerce division dedicated to innovation in the rapidly evolving channel. The new venture, Peapod Digital Labs, will oversee online development across all of the company’s retail brands, including Peapod.
• The new venture will be led by JJ Fleeman, who most recently served as executive vice president of commercial services and strategy with Ahold Delhaize’s Retail Business Services division. Before that, he served as chief strategy and development officer with Delhaize America.
• "We have a tremendous opportunity to build upon Peapod's longstanding history of innovating to meet consumers' needs to create an unparalleled omni-channel grocery experience,” Fleeman said in a statement. “Whether it's searching for inspiration on meals, shopping online or driving digital and personalization in-store, Peapod Digital Labs will enhance the digital experience to the benefit of U.S. consumers." 

Dive Insight:

The time for incremental growth and investments in online grocery is over. Major chains need to map out an innovation strategy in this rapidly evolving channel, and then put resources behind that plan.

The industry saw an example of this last week when Kroger partnered with Ocado, the world’s largest and most sophisticated online grocer. It also saw this when Target bought Shipt, when Albertsons bought meal kit pioneer Plated and when Walmart and Amazon announced they would roll out delivery to major markets throughout the U.S. by the end of this year.  

Aside from owning the nation’s largest online grocer, Ahold Delhaize hasn’t yet staked out a compelling claim in e-commerce. This has dinged the company’s bottom line, with its most recent earnings report showing just a 9% increase in U.S. online sales — well behind the industry average. Ahold Delhaize has gradually expanded store delivery through Peapod and through Instacart, but in order to compete against the likes of Whole Foods, Walmart and Kroger in intensely competitive East Coast markets, it needs to come up with some unique offerings that resonate with shoppers.

The creation of an innovation lab is a positive step in this direction, and it comes one month after the retail conglomerate announced a similar effort focused on another promising technology: artificial intelligence.

Taken together, these labs prove Ahold Delhaize is committed to leveraging its size and cross-chain expertise to come up with big ideas. Whether it actually comes up with those big ideas or not, of course, will ultimately determine the success of these ventures. The clock is ticking as the industry continues to evolve.

In addition to its broader innovation work, the company will likely continue to pour resources into Peapod. The e-grocer, which delivers in 24 metro markets across the East Coast and Midwest, has struggled lately, and Ahold Delhaize has responded by forging creative partnerships, investing in price drops and other steps. If it can get more shoppers using Peapod regularly, and then further integrate Peapod’s operations with its physical retail footprint, Ahold Delhaize could gain the edge it so desperately needs in grocery e-commerce.