Prospectus Summary
The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus assumes no exercise of the Underwriters' over-allotment option. See "Underwriting." In addition, except as otherwise noted, all information in this Prospectus gives effect to the Conversion (as defined below). The Company is a successor to a business originally founded in 1989 as a Delaware corporation and operated since 1992 through an Illinois limited partnership ("Peapod LP") . The original Delaware corporation ("Old Peapod" or the "General Partner") has served as the general partner of Peapod LP. In January 1997, the Company was incorporated in Delaware. In a conversion (the "Conversion") that will be effected prior to the consummation of the Offering (i) all of the equity interests in Peapod LP will be transferred to the Company in exchange for shares of Common Stock, (ii) Peapod LP will dissolve, (iii) all of the assets and liabilities of Peapod LP will be transferred to the Company and (iv) outstanding options for equity interests in Peapod LP will be converted into options for shares of Common Stock. As used in this Prospectus, references to "Peapod" or the "Company" prior to the Conversion means Peapod LP and its predecessor, and thereafter, Peapod, Inc. THE COMPANY Peapod(R) is the leading interactive, online grocery shopping and delivery company and a provider of targeted media and research services. Founded in 1989, Peapod believes it is the only company currently providing an integrated, comprehensive service designed to address the distinct needs of online consumers, grocery retailers and consumer goods companies. By attracting loyal consumers through its compelling online shopping system and personalized service, Peapod opens a valuable new sales channel to its grocery retail partners and constructs a national online network designed to offer superior interactive media and research services to consumer goods companies. Peapod's proprietary technology, which has been developed and refined through the Company's operating experience, provides the Company a competitive advantage in serving the complex needs of consumers, retailers and consumer goods companies.
For the consumer, Peapod provides "Smart Shopping for Busy People(R)" through a user-friendly, highly functional virtual supermarket and personalized shopping, delivery and customer services. With Peapod, members are able to avoid the hassles typically associated with grocery shopping and enjoy a more pleasant and productive shopping experience. Members can choose among a variety of shopping methods, access up-to-date product and pricing information and sort items in any product category by a wide variety of nutritional and other variables.
For the retailer, Peapod provides its online sales channel, which is designed to enable the retailer to gain incremental revenues and profits by capturing an increased share of the grocery purchases of existing customers and by attracting new loyal customers. Peapod's systems link with those of the retailer, which allow it to create multiple, customized online stores that conform to local merchandising, pricing and promotional strategies. Peapod's systems and employees also provide constant feedback to retailers on out-of- stock inventory and the quality of perishable items. Moreover, Peapod's interactive marketing capabilities allow the retailer to experiment with creative merchandising and promotions and execute local marketing strategies.
For the consumer goods company, Peapod provides a forum for targeted interactive advertising and promotion and extensive product research by linking together members from multiple markets into a national online network and collecting substantial data regarding members' attitudes, purchasing behavior and demographics. In addition, Peapod's growing membership base, of which approximately three-quarters are upper middle class consumers and approximately three-quarters are women, has an attractive demographic profile which is difficult to reach through other direct-response media channels.
The Company's objective is to substantially expand its online grocery shopping channel in the United States and to be a preferred venue for national and local online marketing programs and research for consumers goods companies. The Company's growth strategies include the following:
. Build Peapod Brand Identity and Awareness. The Company intends to build brand identity through the functionality, quality, convenience and value of the services it offers. Peapod also intends to aggressively market its services, through promotions and advertising, as a means to further establish brand name recognition.
. Provide a Superior Member Experience. The Company is committed to providing its members with a superior experience in all aspects of its services. The Peapod solution provides members with user-friendly, highly-functional and cost-effective shopping tools, convenient delivery and pick-up services and a host of customer support and services designed to ensure member satisfaction.
. Expand Into New Geographic Markets and Further Penetrate Existing Markets. The Company plans to increase revenues and realize economies by aggressively expanding into new metropolitan markets and increasing penetration in existing markets. The Company believes that it can achieve competitive advantages in its various markets as the first mover to build a substantial online membership base and operating scale.
. Build Interactive Marketing Services; Leverage Database. Peapod has pioneered, in partnership with consumer goods companies, innovative interactive marketing services consisting of advertising, promotion and market research services. Peapod intends to continue using the combination of its database and online shopping channel to create new services tailored to its interactive marketing clients.
. Work with Retail Partners in Evolving Retail Model. Peapod has developed a range of technical, management and fulfillment services which can be adapted to meet a retail partner's needs and Peapod's marketing strategies. The Company has begun assisting its retail partners in expanding their role in the fulfillment of member orders. Peapod also is working closely with its retail partners in evolving the product distribution and order fulfillment model in order to reduce costs, improve quality and enhance scaleability. In addition, Peapod has initiated efforts to license its technology to retailers on an international basis and in select U.S. markets.
. Leverage Peapod's Membership and Technology into Other Online Services. The Company intends to create additional online stores by partnering with non- grocery retailers to offer services and products that appeal to Peapod's membership base. These offerings are expected to enhance Peapod's member data profiles and expand the interactive marketing services opportunities available to the Company. The Company further intends to make its broader "Smart Shopping For Busy People" service accessible on a national basis via the Internet.
As of March 31, 1997, Peapod had approximately 43,000 members, an increase of 244% since January 1996. Peapod currently offers its online grocery service in six metropolitan markets (Chicago, San Francisco/San Jose, Columbus, Boston, Houston and Atlanta), four of which have opened since September 1996. Peapod's service areas encompass approximately 5,057,000 households, or approximately 5% of U.S. households. Peapod is under contract to open the Dallas and Austin markets in mid-1997. The Company's current retail partners include four of the five largest national supermarket chains.
Peapod commenced offering interactive marketing services in late 1995 and currently has agreements to provide interactive marketing services to a number of national consumer goods companies, including Anheuser-Busch, Incorporated, Bristol-Myers Squibb Company, Frito-Lay, Inc., The Gillette Company (USA) Inc., Helene Curtis, Inc., The J.M. Smucker Company, Kraft Foods, Inc., M&M/Mars, Nestle U.S.A., Inc., Novus Services, Inc. (Discover Card), Ore-Ida Foods, Inc., Ralston Purina Company and Tropicana Products, Inc. Customers for the Company's research products have included ConAgra, Inc., Johnson & Johnson, and Procter & Gamble Co.