Peapod 1998 Annual Report

Peapod 1998 Annual Report

s u m m a r y a n n u a l report 98 p e a p o d.c o m

Peapod will retain leadership in the potentially huge Internet

grocery market by demonstrating the success of its new fulfillment

model, and aggressively replicating the model in major U.S. cities.

Estimates of the size of the U.S. Internet grocery channel range from $10 billion to

$85 billion over the next five to ten years. Today the market is in its infancy, and

Peapod holds a dominant market share position. Its challenge to capitalize on this

market in the long term is to solve the complexities of order fulfillment in order to

deliver a superior customer experience at a very large scale, and on a profitable

basis. Peapod believes that it has developed this solution, and is positioned to be

the principal beneficiary of the market’s growth.

m a r ket

o p p o r t u n i t y

p e a p o d.c o m 98 p(1 )




4 5


1 5

2 0

1 5

1 0



1999 2003 2 0 07

Source: Andersen Consulting, Jan. 1998


Peapod now utilizes centralized distribution centers, customized for the fulfillment of Internet grocery orders. Centralization

removes a costly step from the traditional retail distribution channel and provides Peapod with greater product margins. N e w

t e chnologies and operating processes employed in the distribution centers enable Peapod to deliver superior customer

service through better control over product selection, inventory stocking levels, process design and transportation.

c e n t r a l i z e d

d i s t r i b u t i o n

Peapod’s new centralized distribution centers,

combined with new technologies and processes, will

enable Peapod to fulfill Internet grocery orders with

superior quality, at high volumes, on a profitable basis.

p e a p o d.c o m 98 p(2 -3) offers convenience. It is easy to access,

simple to use, and provides information to enable customers

to make better purchase decisions.

s h o p p i n g

e x p e r i e n c e

Nobody understands Internet grocery shoppers as well as Peapod, having sold

more than 40 million products and processed over one million online grocery

orders. Peapod has used this understanding to create an exceptional We b

shopping ex p e r i e n ce—a complete and well-merchandised assortment of

products, valuable information available at the right time to assist in decisionmaking,

easy access through any Web browser, and time-saving fe a t u r e s .

Beginning with its Website, Peapod delivers convenience to its customers.

p e a p o d.c o m 98 p(4 - 5 )

Peapod employees, using state-of-the-art technology, strive to amaze and delight our

customers at every step of the order. Inventory specialists keep the distribution center

fully stocked. Shoppers, using Peapod’s hand-held technology, fill orders in a timely

manner without mispicks. Trained produce specialists select and prepare only the

finest produce. Pr o fessional Peapod drivers, following system-generated routes, deliver

orders in Peapod trucks and provide an important customer interface. Our member

care representatives provide personal attention to thousands of phone calls and e-mail

m e ssages per day. At Peapod, our dedicated people make the difference.

s u p e r i o r, personalized

s e r v i c e

Te chnology empowers Peapod employees to be informed a n d

e f f i c i e nt, but their passion to amaze and delight our cust o m e r s

will always be our key to superior customer service.

a bo v e :( l to r) Yvette Arnoux, Member Care Representative;

Stephanie O’Dell, Shopper; Timoteo Torres, Driver

p e a p o d.c o m 98 p(6-7)

I am pleased to report that 1998 was a year of significant and positive

change for Peapod. The Company continued to lead the development

of the Internet grocery industry, a market that is projected to grow to

$ 60-$85 billion 1 over the next ten years. Peapod ended 1998 w i t h

a p p r oximately 100,000 members across eight U.S. cities, $69 million

in revenues, and an estimated market share of 70% of the online and

grocery market. Most notably, Peapod substantially changed its service

model by re-engineering its fulfillment operations to improve its service

q u a l i t y, scalability and profitability.

At the beginning of 1998, Peapod announced that it would focus

its efforts during 1998 on implementing new, centralized fulfillment

operations in select key markets. We concluded, based on substantial

testing, that by moving our fulfillment operations to centralized facilities

with customized technology and operating processes, Peapod would

be able to deliver superior customer service through better control over

inventory levels, product quality and selection, and delivery. In addition,

by eliminating the retail step in the distribution channel, Peapod could

increase its gross margins, thereby enabling the Company to lower its

service fees to the consumer and further stimulate demand. As a final

element of its new service model, Peapod also committed to delivering

an enhanced web-based shopping site which would greatly improve

Peapod’s ease-of-use and accessibility.

To focus our resources on these changes, we limited our marketing

expenditures and slowed new market expansion, recognizing that this

would moderate our revenue and membership growth. Accordingly,

while revenue and membership growth was moderate during 1998, we

accomplished something of much greater significance. We believe we

have developed the model that will allow us to deliver superior customer

p e a p o d.c o m 98 p(8 - 9 )

(l e ft) Thomas L. Parkinson, Executive Vice Pre s i d e n t–

Chief Te chnology Officer (c e n t er) John C. Walden, Chief

Operating Officer (r i g ht) A n d rew B. Parkinson, Chairman,

P resident & Chief Executive Officer

dear shareh

o l d e r s

service on a very large scale with attractive financial returns, and

w h i ch will position Peapod to be the principal beneficiary of the

potentially huge Internet grocery market.

Implementing the new Peapod service required hard work on

the part of every Podster (Peapod employee) and patience on

behalf of our customers, and I am proud of what we accomplished

in 1998. We launched our new web-based shopping site in

S e p t e m b e r, providing greater accessibility and ease of use over the

Internet. We also built and introduced in Long Island, New York, the

first implementation of our centralized fulfillment model.

In addition, we constructed and opened a centralized facility in

Chicago where we consolidated approximately $30 million in

Chicago’s annual volume during the first few months of 1999. Th i s

move allows us to showcase the scalability of our new model, as our

Chicago center now processes substantially more Internet grocery

orders than any facility of its kind.

As of this writing, we have also announced the opening of our

third distribution center, a high, capacity facility in San Fr a n c i s c o ,

California. These operations, like Long Island, will allow us to

demonstrate the ramp of order volume and profitability in new cities

and serve as a template for future new market expansion.

In 1998, Peapod also continued to provide research, promotions

and other interactive marketing services to the top consumer

1 Andersen Consulting, January, 1998

(l e ft) Peapod’s fleet of delivery trucks and pro f e s s i o n a l

drivers allow us to operate cost-effectively, and present a

positive image to customers and the public.

p a ckage goods companies in the U.S. As

Peapod’s membership growth gains momentum,

we expect this business to grow rapidly and to c o n-

tribute significantly to the Company’s profitability.

I feel that Peapod is now extremely well

positioned to realize its potential for growth in

an increasingly dynamic Internet grocery market.

During 1999, I am confident Peapod will

demonstrate the success of its centralized

model—providing consumers with increased

service levels at a lower consumer price,

increasing our gross margins and demonstrating

a solid trend toward profitability.

I would like to thank all of my fellow Po d s t e r s ,

our customers, our business partners and our

shareholders for their critical support. With our

superior team of employees, I look forward to an

exciting and productive 1999 .

S i n c e r e l y,

Andrew B. Pa r k i n s o n

Chairman, President & Chief Executive Officer

condensed balance sheets

December 31, 1998 and 1997

(in thousands, except share data) December 31, 1998 1997


Current assets:

Cash and cash equivalents $ 4,341 $ 54,079

Marketable securities 15,836 8,798

Receivables, net of allowance for doubtful accounts

of $287 and $352 in 19 98 and 1997 2,516 1,195

Prepaid expenses 186 444

Other current assets 974 228

Total current assets 23,853 64,744

Property and equipment:

Computer equipment and software 4,010 4,499

Service equipment and other 2,147 1,053

Property and equipment, at cost 6,157 5,552

Accumulated depreciation (2,252) (2,301)

Net property and equipment 3,905 3,251

Non-current marketable securities 15,213 —

Capitalized software development costs — 998

Goodwill, net of accumulated amortization

of $174 in 1997 — 117

Total assets $ 42,971 $ 69,110

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable $ 3,442 $ 7,515

Accrued compensation 802 1,258

Other accrued liabilities 2,688 926

Deferred revenue 1,000 1,969

Current obligations under capital lease 590 727

Total current liabilities 8,522 12,394

Deferred revenue 448 1,212

Obligations under capital lease, less current portion 395 701

Total liabilities 9,365 14,307

Stockholders’ equity:

Preferred stock, $.01 par value, authorized 5,000,000

shares, none issued and outstanding — —

Common stock, $.01 par value, 50,000,000 shares authorized;

17,245,828 and 16,852,557 shares issued in 1998 and 1997 172 169

Additional paid-in capital 64,319 63,148

Accumulated other comprehensive income—

Unrealized gain on available-for-sale securities 83 —

Accumulated deficit (30,060) (8,495)

Treasury stock, 117,476 and 2,000 shares in

1998 and 1997 (908) (19)

Total stockholders’ equity 33,606 54,803

Total liabilities and stockholders’ equity $ 42,971 $ 69,110

See accompanying notes to condensed financial statements.

p e a p o d.c o m 98 p(10-11)

condensed statements of operations

Years ended December 31, 1998, 1997 and 1996

(in thousands, except per share data) Years ended December 31, 1998 1 997 1 996


Net product sales $ 57,305 $ 43,487 $ 22,015

Interactive marketing 1,460 2,222 1,069

Member and retailer 9,650 11,234 4,558

Licensing 850 — —

Total revenues 69,265 56,943 27,642

Costs and expenses:

Cost of goods sold 53,903 40,823 20,485

Fulfillment operations 17,196 14,469 6,889

General and administrative 8,029 5,935 3,785

Marketing and selling 7,545 7,726 4,739

System development and maintenance 3,386 1,696 1,124

Depreciation and amortization 3,264 1,234 651

Total costs and expenses 93,323 71,883 37,673

Operating loss (24,058) (14,940) (10,031)

Other income, net 2,493 1,961 465

Net loss $ (21,565) $ (12,979) $ (9,566)

Net loss per share:

Basic $ (1.27) $ (0.87) $ (0.82)

Diluted $ (1.27) $ (0.87) $ (0.82)

Shares used to compute net loss per share:

Basic 16,964,439 14,915,734 11,664,956

Diluted 16,964,439 14,915,734 11,664,956

See accompanying notes to condensed financial statements.

condensed statements of stockholders’ equity

Years ended December 31, 1998, 1997 and 1996

Ac c u m u l a t e d

Additional O t h e r

(in thousands, except share data) Common Stock Treasury Stock P a i d - i n Co m p r e h e n s i v e Ac c u m u l a t e d

Shares Amount Shares Amount C a p i t a l I n c o m e Deficit Total

Balance at January 1, 19 96 9,564,371 $ 95 — $ — $ 1,317 $ — $ — $ 1,412

Issuance of stock,

net of offering costs 2,876,000 29 — — 16,203 — — 16,232

Issuance of stock for

services rendered 100 — — — 1 — — 1

Issuance of stock for services

rendered and at a discount 86,341 1 — — 323 — — 324

Net loss — — — — (9,565) — (1) (9,566)

Balance at December 31, 19 96 12,526,812 125 — — 8,279 — (1) 8,403

Issuance of stock prior to

May 31, 1997 for services

rendered at a discount 89,080 1 — — 577 — — 578

Issuance of stock for

services rendered 15,000 — — — 105 — — 105

Issuance of stock upon

exercise of warrants 8,125 1 — — 17 — — 18

Issuance of stock upon

exercise of options 213,540 2 — — 575 — — 577

Treasury stock — — (2,000) (19) — — — (19)

Initial public offering of stock,

net of offering costs 4,000,000 40 — — 58,080 — — 58,120

Net loss—from January 1, 19 97

through May 31, 1997 — — — — (4,485) — — (4,485)

Net loss—subsequent to

May 31, 1997 — — — — — — (8,494) (8,494)

Balance at December 31, 19 97 16,852,557 169 (2,000) (19) 63,148 — (8,495) 54,803

Issuance of stock for

services rendered 45,406 — — — 45 — — 45

Issuance of stock upon

exercise of warrants 28,793 — — — 64 — — 64

Issuance of stock upon

exercise of options 319,072 3 — — 1,062 — — 1,065

Treasury stock — — (115,476) (889) — — — (889)

Unrealized gain on available-

for-sale securities — — — — — 83 — 83

Net loss — — — — — — (21,565) (21,565)

Balance at December 31, 19 98 17,245,828 $172 (117,476) $ (908) $ 64,319 $ 83 $ (30,060) $ 33,606

See accompanying notes to condensed financial statements.

p e a p o d.c o m 98 p(12-13 )

(in thousands) Years ended December 31, 1998 1 997 1 996

Cash flows from operating activities:

Net loss $ (21,565) $ (12,979) $ (9,566)

Adjustments to reconcile net loss to net cash used in

operating activities:

Depreciation and amortization 3,264 1,234 651

Stock and options issued for services rendered 45 533 147

Loss on disposition of fixed assets 270 204 2

Changes in operating assets and liabilities:

(Increase) decrease in receivables, net (1,321) (660) (349)

(Increase) decrease in prepaid expenses 258 5 (310)

(Increase) decrease in other current assets (746) (39) 55

Increase (decrease) in accounts payable (4,072) 4,144 1,710

Increase (decrease) in accrued compensation (456) 179 732

Increase (decrease) in other accrued liabilities 1,762 50 483

Increase (decrease) in deferred revenue (1,733) 1,052 1,943

Net cash used in operating activities (24,294) (6,277) (4,502)

Cash flows from investing activities:

Property and equipment purchased (2,346) (1,515) (824)

Capitalized software development costs (513) (849) (148)

Purchases of marketable securities (53,352) (8,798) —

Sales of marketable securities 31,184 — —

Proceeds from sale of property and equipment 117 21 —

Net cash used in investing activities (24,910) (11,141) (972)

Cash flows from financing activities:

Proceeds from issuance of stock, net of offering costs — 58,270 16,409

Proceeds from issuance of stock upon exercise of warrants 64 18 —

Proceeds from issuance of stock upon exercise of options 1,065 558 —

Stock purchased for treasury (889) — —

Repayment of subordinated debentures — — (125)

Payments on capital lease obligations (774) (388) (237)

Net cash provided by (used in) financing activities (534) 58,458 16,047

Net increase (decrease) in cash and cash equivalents (49,738) 41,040 10,573

Cash and cash equivalents at beginning of year 54,079 13,039 2,466

Cash and cash equivalents at end of year $ 4,341 $ 54,079 $ 13,039

S u p p l e m e n tal disclosure of cash flows information—interest paid $ 159 $ 67 $ 72

Supplemental disclosures of noncash investing

and financing activity:

Equipment on capital leases 331 1,144 502

Options exercised by sale of stock to the Company 889 19 —

See accompanying notes to condensed financial statements.

condensed statements of cash flows

Years ended December 31, 1998, 1997 and 1996

note 1 Description of the Company and Basis of Presentation. Peapod, Inc. (“the

Company”) is a Delaware corporation and was incorporated on December 5, 1996 ,

and is the successor to a business originally founded in 1989 as a Delaware corpo-

ration and operated since 1992 through an Illinois limited partnership (“Peapod LP”).

In a conversion (the “Conversion”) that was effected on May 31, 1997 (i) all of

the equity interests in Peapod LP were transferred to the Company in exchange for

1 2 , 6 56 , 4 17 shares of Common Stock, (ii) Peapod LP was dissolved, (iii) all of the

assets and liabilities of Peapod LP were transferred to the Company, and (iv) out-

s tanding options and warrants for equity interests in Peapod LP were exchanged for

warrants and options for shares of the Company’s Common Stock. The transfer of

the assets and liabilities of Peapod LP to the Company has been recorded by the

Company at the historical carrying values of Peapod LP. The financial statements are

presented as if the Company were in existence throughout all periods. Net losses

incurred by Peapod LP through May 31, 1997 have been reflected in additional

paid-in capital since such losses were allocated to the partners of Peapod LP (and

do not represent a component of the Company’s accumulated deficit).

On June 10, 1997, the Company completed its initial public offering and

issued 4,000,000 shares of common stock, resulting in net proceeds (after

deducting offering costs) of $58.1 million.

The Company is an interactive online grocery shopping and delivery service,

w h i ch as of December 31, 1998 operated in the Chicago, Illinois; San Francisco/

San Jose, California; Columbus, Ohio; Boston, Massa chusetts; Long Island, New

Yo r k ; and Dallas, Houston and Austin, Texas metropolitan markets.

The notes to the condensed financial statements do not include all disclo-

sures required by generally accepted accounting principles. The Company’s

complete financial statements and notes thereto are included in the Company’s

annual report on Form 10-K for the year ended December 31, 1998.

note 2 Summary of Significant Accounting Policies. Revenue Recognition.

Product sales are recognized when the grocery order is delivered to the

c u s t o m e r. Interactive marketing revenues are recognized over the life of the contract

as services are provided. Member and retailer revenues consist of grocery reta i l e r

fees and fees from consumers. Grocery retailer fees consist of contractual fees

w h i ch are recognized on a straight-line basis over the life of the contract. Fe e s

from consumers are recognized as earned. Licensing revenues are recognized as

s u ch services are provided.

Cost of Goods Sold. Cost of goods sold consists of the groceries purchased

on behalf of the Company’s members, net of product returns and net of perform-

a n c e based fees received from grocery retailers.

Member Acquisition Costs. Member acquisition costs are expensed as incurred.

Cash and Cash Equivalents. Cash and cash equivalents are comprised of highly

liquid investments with original maturities of less than three months.

Property and Equipment. Property and equipment is recorded at cost and

depreciated on a straight-line basis over the estimated useful lives of the related

assets, generally three to five years. Leasehold improvements are amortized over

the shorter of the lease term or the estimated useful lives of the assets.

Capitalized Software Development Costs. Software development costs are

capitalized in accordance with Statement of Financial Accounting Standards

( “ SFAS”) No. 86, which requires capitalization of certain costs incurred subsequent

to the determination of technological feasibility. The Company has determined

that technological feasibility occurs in its product development cycle when a

working model exists. Capitalization ceases and

product amortization commences upon the general

release of the product. Amortization is computed on

a product-by-product basis, using the lesser of the

product’s estimated useful life or a period based on

anticipated revenues. The Company capita l i z e d

$513,000, $849,000 and $148,000 in consumer

product software development costs in 1998, 1997

and 1996, respectively. Amortization expense in

1998 totaled $353,000. No amortization expense

was recorded in 1997 and 1996. In December

1998, the remaining capitalized software develop-

ment costs of $1,158,000 were written-off and are

included in depreciation and amortization in the

statement of operations. The write-off included the

costs associated with Version 5.0 of the Company’s

software which will no longer be utilized and sup-

ported by the Company. In addition, the C o m p a n y ’ s

development cycle for the HTML version has accel-

erated due to the rapid change in internet t e ch n o l o-

g y. As the Company’s HTML product is con-

tinuously updated and the technology is constantly

changing, the Company has written-off these costs

as of December 31, 19 98.

Goodwill. Goodwill was being amortized on a

straight-line basis over its estimated useful life of

eight years. During December 1998, goodwill of

$78,000 was written-off as it was determined to

have no future value.

Income Taxes. Effective with the Conversion, the

Company accounts for income taxes in accordance

with S FAS No. 109, Accounting for Income Taxes.

Under the asset and liability method of SFAS No.

109, deferred tax assets and liabilities are recog-

nized for the future tax consequences attributable to

the differences between the financial statement car-

rying amounts of existing assets and liabilities and

their respective tax bases and operating loss and tax

credit carryforwards. Deferred tax assets and liabili-

ties are measured using enacted tax rates expected

to apply to ta xable income in the years in which those

temporary differences are expected to be recovered

or settled. Under SFAS No. 109, the effect on deferred

tax assets and liabilities of a change in tax rates is

recognized in income in the period that includes

the enactment date.

Prior to the Conversion, Peapod LP operated in

the form of a partnership and was not subject to ta x-

ation directly as its net losses were allocated to and

included in the income tax returns of its partners.

p e a p o d.c o m 98 p(14-15 )

S t o ck Option Plans. Prior to January 1, 1996, the Company accounted for its

option plans in accordance with the provisions of Accounting Principles Bo a r d

( “A PB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related

i n t e r p r e tations. As such, compensation expense would be recorded on the date

of grant only if the fair market value of the underlying stock exceeded the exercise

price. On January 1, 1996, the Company adopted SFAS No. 123, Accounting for

S t o ck - Based Compensation, which permits entities to recognize as expense over

the vesting period the fair value of all equity-based awards on the date of grant.

A l t e r n a t i v e l y, SFAS No. 123 allows entities to continue to apply the provisions of

A PB Opinion No. 25 and provide pro forma disclosures for employee stock

option grants made in 1995 and future years as if the fair-value based method

defined in SFAS No. 123 had been applied. The Company has elected to con-

tinue to apply the provisions of APB Opinion No. 25 and apply the pro forma dis-

closure provisions of SFAS No. 123. Such pro forma disclosures are included in

the Company’s complete financial statements and notes thereto included in the

Company’s annual report on Form 10-K for the year ended December 31, 1998 .

Financial Instruments. The fair values of the Company’s financial instruments

do not materially vary from the carrying values of such instruments.

Long-Lived Assets. Long-lived assets to be held and used are reviewed for

impairment whenever events or changes in circumstances indicate that the car-

rying amount be evaluated. Impairment is measured by comparing the carrying

value to the estimated net future cash flows expected to result from the use of

the assets and their eventual disposition.

Use of Estimates. Management of the Company has made a number of esti-

mates and assumptions relating to the reported amounts of assets and liabilities

and the disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the

reporting period. Actual results could differ from those estimates.

Reclassifications. Certain prior year balances have been reclassified to con-

form with the current year presentation.

Earnings per Share. The Company applies SFAS No. 128, Earnings Per Share, and

Securities and Exchange Commission Staff Accounting Bulletin No. 98 (“SAB 98 ” )

The Board of Directors Peapod, Inc.:

in computing earnings per share. Basic net loss per

share is computed using the weighted average number

of common shares outstanding. Diluted net loss per

share is computed using the weighted average number

of common shares outstanding and equivalent shares

based on the assumed exercise of stock options and

warrants (using the treasury stock method). However,

since the diluted net loss per share would be anti-dilu-

tive, the basic net loss per share is used.

note 3 Reliance on Ce rtain Relationships. The busi-

ness of the Company is dependent upon contracts

with a grocery retailer in each metropolitan market

where the Company is doing business. The continua-

tion and the favorable renegotiation of each of its

existing contracts with grocery retailers are material to

the Company’s operations. A number of these agree-

ments are terminable prior to expiration by either party

with short notice.

The Company’s Chicago market, serviced

through an agreement with Jewel/Osco, accounted

for approximately 42%, 44%, and 67% of the

Company’s revenues for the years ended December

31, 1998, 1997 and 1996, respectively.

note 4 Split Pea So f tware, Inc. On December 31,

1 998, the Company concluded a restructuring trans-

action which established its licensing business within

a newly-formed company called Split Pea Software,

Inc. (“Split Pea”). A group of the new company’s sen-

ior managers hold majority equity ownership of Split

Pea. Peapod owns a minority interest of 40% of the

voting common stock of Split Pea. All future licensing

services will be provided by Split Pe a .

We have audited, in accordance with generally accepted auditing standards, the balance sheets of Peapod, Inc. as of December 31,

1998 and 19 97, and the related statements of operations, stockholders’ equity, comprehensive income, and cash flows for each of

the years in the three-year period ended December 31, 1998 (not presented herein); and in our report dated February 5, 1999, we

expressed an unqualified opinion on those financial statements.

In our opinion, the information set forth in the accompanying condensed financial statements is fairly stated, in all material respects,

in relation to the financial statements from which it has been derived.

Chicago, Illinois

March 4, 1999

independent auditor’s report

Directors and Executive Officers

Andrew B. Parkinson

Chairman, President and Chief

Executive Officer; Director

John C. Walden

Chief Operating Officer

Thomas L. Parkinson

Executive Vice President—Chief

Technology Officer; Director

Timothy M. Dorgan

Executive Vice President—Marketing

John A. Furton

Senior Vice President—Chief

Information Officer

Carl E. Alguire

Senior Vice President—Fulfillment


Daniel Rabinowitz

Vice President—Chief Financial Officer

William J. Christopher

Vice President—Member Services

Michael P. Brennan

Vice President—Product Management

Tasso H. Coin


Robert Goodale


Trygve E. Myhren


Seth L. Pierrepont


Mark Van Stekelenburg


© Copyright 1999, Peapod, Inc.

Design: Paragraphs Design Inc., Chicago

board of directors and shareholder information

Corporate Headquarters

9933 Woods Drive

Skokie, Illinois 60077

Transfer Agent and Registrar

For questions concerning common

stock certificates, change of address,

consolidation of accounts, transfer

of ownership or other stock matters,

please contact:

General Shareholder Correspondence:

First Chicago Trust Company

a division of EquiServe

P.O. Box 2500

Jersey City, NJ 07303-2500

1 (800) 446-2617

Transfer of Stock Ownership:

First Trust Company

a division of EquiServe

P.O. Box 2506

Jersey City, NJ 07303-2506

Dividend Reinvestment Plans:

First Chicago Trust Company

a division of EquiServe

P.O. Box 2598

Jersey City, NJ 07303-2598

Common Stock

Peapod, Inc. common stock is traded on

the NASDAQ National Market under the

symbol PPOD

Annual Meeting of Shareholders

will be held at 9:00 a.m. on Wednesday,

May 12, 1999 at:

The Hyatt Regency

5 Embarcadero Center

San Francisco, California 94111

Form 10-K and Other

Corporate Information

Copies of the form 10-K can be obtained

without charge by contacting:

Investor Relations

Peapod, Inc.

9933 Woods Drive

Skokie, Illinois 60077

(847) 583-9400

Outside Counsel

Sidley & Austin

One First National Plaza

Chicago, Illinois 60603

Cowen, Crowley, Nord & Staub

55 W. Monroe Street

Chicago, Illinois 60603

Independent Auditors

KPMG Peat Marwick LLP

303 E. Wacker Drive

Chicago, Illinois 60601

“Smart Shopping For Busy People ® ”

9933 Woods Drive • Skokie • Illinois 60077 • 847-583-9400

© Copyright 1998, Peapod, Inc.