Ocado signs partnership agreement with U.S. giant Kroger

Ocado signs partnership agreement with U.S. giant Kroger

Andrew Cummings
May 17, 2018

"The company now has an extremely credible partner in the largest grocery market in the world".

The news also inflicts pain on people who had been betting against Ocado via short selling as the spike in the price will have triggered margin calls, forcing them to deposit more money or close out their position.

United Kingdom online grocer Ocado has struck another licencing deal with an global food retailer, announcing this morning (17 May) US giant Kroger will use its technology for food deliveries.

Kroger, who posted revenues of $122bn a year ago, will utilise Ocado's technology to automate and process the packing of grocery orders, using smart warehouses and robots in advanced fulfilment centres.

"Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world", said Tim Steiner, CEO of Ocado Group.

In the event of a failure to commit to the target capacity, Kroger will shell out compensation to Ocado.

Under the terms of the deal, Kroger has discontinued discussions with other retail tech firms, will pay Ocado a monthly consultancy fee and is to acquire a five per cent stake in Ocado.

The deal should help Kroger compete with Amazon, which has entered the grocery delivery market in a big way.

Earlier this month, it inked a deal to build Swedish supermarket ICA's online grocery business and it also has finalised deals with Canadian grocery Sobey's and french supermarket company Groupe Casino.

Ocado said that it expects that the structure of the terms that it will agree with Kroger will be "broadly similar per CFC" to those agreed with its existing global partners: Groupe Casino, in France; Sobeys, in Canada; and ICA, in Sweden. However, the tie-up with USA chain Kroger is not expected to be immediately earnings enhancing, so the company will remain loss-making for the time being.

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