Online grocery delivery service Peapod is closing its Midwest division, cutting 500 jobs in the process. Parent company Ahold Delhaize (AD.AS) announced the news on Tuesday.

Peapod will stop service to its Midwest customers on Feb. 18, including the states of Illinois, Wisconsin, and Indiana. The company is also closing a distribution and food preparation plant in Lake Zurich, Illinois; distribution facilities in Chicago, Milwaukee, Indianapolis; and a pick-up point in Palatine, Illinois.

The Midwest operations make up $97 million in revenue for Peapod, which Ahold Delhaize said it was closing to focus on expanding its service on the East Coast, where it has a leadership position in the online grocery delivery service market.

“This was a difficult decision given Peapod’s rich history in the Midwest,” Kevin Holt, CEO at Ahold Delhaize USA said in a statement. “We know changes such as these are never easy for consumers and communities. We appreciate the loyalty of associates and customers in the Midwest sales business over the past three decades. We have been and will continue to leverage the learnings from our 30-year legacy of online grocery to enable each of the brands to grow its omnichannel business on the East Coast.”

Layoffs will impact about 500 workers in the greater Chicago, Indianapolis, and Milwaukee areas, which Ahold Delhaize said can apply for other positions with the company. According to the Chicago Tribune, the job cuts will also affect the company’s corporate headquarters and 100 drivers. Laid-off employees will be offered severance and job transition support, the company said.

Ahold Delhaize does not expect a significant impact from the closures or layoffs and still has plans in place to grow the company’s e-commerce segment by 30% in 2020. The company has revenues of $1.1 billion.

Peapod will continue to headquarter its Digital Labs team in Chicago, which reportedly operates Ahold Delhaize’s e-commerce technology segment for the company’s grocery brands. A total of 450 workers are employed by Peapod Digital Labs, which the company said it has plans to grow in the Chicago area.

About 50,000 people use Peapod in the Midwest, with 10,500 orders being placed weekly, the news outlet said. The company was founded in Evanston, Illinois, in 1989, where it was then purchased by Ahold Delhaize in 2000. The company moved to Skokie, Illinois, and then to Chicago in 2018.

Shares of Ahold Delhaize were up 0.29% as of 10:16 a.m. EST on Wednesday.

Peapod
Peapod is closing its Midwest division. The side of a Peapod delivery truck is seen May 17, 2001 at a Peapod's warehouse in Niles, IL. Peapod, an online grocery supermarket, plans to upgrade their web site with new technology to improve services, the company told shareholders. Getty Images/Tim Boyle
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