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Ocado signs U.S. partnership

18 May 2018

U.S. retailer Kroger has signed a landmark deal with Ocado to use its technology for grocery deliveries, marking the British online grocer's first entry into the United States.

Shares in Ocado (OCDO) have rocketed after the online supermarket signed a deal to become the exclusive partner of U.S. giant Kroger (KR.N).

Kroger and Ocado said they're now mulling potential sites in the U.S.to build three new, automated warehouse facilities this year.

The deal with Kroger is arguably Ocado's biggest to date and demonstrates that the company's technology push is starting to gain traction after some five years or so of pushing it.

"We are actively creating a seamless digital experience for our customers", said Kroger CEO Rodney McMullen in a press release.

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Kroger is one of the largest supermarket chains in the U.S., with sales reaching $122 billion in 2017.

The scale of the pair's ambitions was summarised by Ocado boss Tim Steiner, who said it could transform the food retail industry in the US.

The new agreement is also one of a series of partnerships that Ocado has made with retailers around the world in order to share its innovative technology.

Shares in Ocado are up by more than 250% over the last six months, as the company has finally delivered on expectations of an worldwide expansion. Ocado Solutions is responsible for corporate partnering.

The two companies are working to identify the first three sites in 2018.

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This isn't the first such deal for Ocado, which has licensed out its technology to grocery companies in France, Canada and Sweden.

"The scale of the deal could shake up the current USA grocery e-Commerce market, offering a step-change in service levels, order accuracy and timeliness", said Roberts in an email sent to Retail TouchPoints.

As part of the partnership with Ocado, the group will adopt the Ocado Smart Platform. More than 56 million Ocado shares were on loan on Tuesday, the most recent data from industry tracker FIS' Astec Analytics showed. Ocado has no chain of stores and does all home deliveries from its warehouses.

The detailed financial terms have yet to be agreed, but Kroger could bring forward some of its payments under the deal, which would reduce Ocado's need for capital.

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Ocado signs U.S. partnership