Published: Thu, May 17, 2018
Markets | By Otis Pena

Ocado cadges Kroger in exclusive United States technology supply deal

Ocado cadges Kroger in exclusive United States technology supply deal

Britain's online supermarket Ocado OCDO.L clinched a game-changing deal with Kroger KR.N as its exclusive partner in the US, securing its entry into the world's biggest market and sending its shares up 50 percent.

The shares jumped 62% to 894.6p on news of the tie-up with the largest supermarket chain in the US, Ocado's fourth worldwide deal with a supermarket in the last six months.

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

UK-based online grocery specialist Ocado has added to its recent list of high-profile partnerships with the news that it has signed a major collaboration agreement with U.S. group Kroger, the world's third-largest food retailer, to build new ecommerce infrastructure.

Ocado will discontinue discussions with other US-based retailers, in return for Kroger paying exclusivity and consultancy fees on a monthly basis ahead of a more permanent financial agreement in the future.

The Kroger deal will see the American grocery giant take a 5% stake in Ocado with an investment worth about £183 million ($247 million).

Now, the two companies are working to identify the first three sites for the development of new, automated warehouse facilities and will identify up to 20 sides over the first three years of the agreement.

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Neil Wilson, senior markets analyst at Markets.com, said: "Ocado has some protection in the deal as if they fail to hit the capacity target, Kroger will pay compensation".

Ocado's chief executive, Tim Steiner, described the deal as "transformative" and said it would "reshape the food retailing industry in the United States in the years to come".

Ocado chief executive Tim Steiner said working with Kroger to transform the way in which U.S. customers bought groceries represented "a huge opportunity to redefine the grocery experience" for Kroger customers.

He added: "We are actively creating a seamless digital experience for our customers".

Tim Steiner, CEO of Ocado, commented: "The opportunity to partner with Kroger to transform the way in which USA customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado".

Ocado has signed a string of similar technology deals with major supermarkets in France, Canada and Sweden.

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