Ocado partners with USA retail giant Kroger

Jermaine Castillo
May 18, 2018

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 USA group Kroger, the world's third-largest food retailer, to build new ecommerce infrastructure.

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As part of the partnership agreement, Kroger will increase its existing investment in Ocado by five percent, bringing its total investment to more than six percent.

Ocado boss Tim Steiner said it was a "transformative" deal that would see the two firms build an expected 20 automated warehouses in the U.S. over the next three years. Ocado rose as much as 35 percent in early London trading.

It comprises one of the world's largest dedicated online grocery retailers, operating its own grocery and general merchandise retail businesses under Ocado.com and other specialist shop banners, together with its Solutions division.

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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.

Kroger, the largest US supermarket chain by revenue, operates about 2,780 supermarkets in the USA and has some 443,000 employees.

The plan is to roll out three customer fulfilment centres (giant automated warehouses) this year and a total of 20 over three years.

Kroger has almost 2,800 shops across 35 USA states and annual sales of $122bn in 2017. It also said it planned to offer curbside pickup from roughly 1,600 stores this year. It has already inked agreements with Sweden's ICA, Canada's Sobey's and French supermarket operator Casino.

Co-founder and chief executive Tim Steiner saw the value of his stake in the firm rise more than 100 million pounds on Thursday to about 240 million pounds, according to Thomson Reuters data.

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The Kroger deal is the biggest yet, and Ocado's share price is at the time of writing up 64.2% on the news.

However, the deal of Kroger has taken the idea of merging this to a whole new level. The average multiple for the United Kingdom grocery retail sector is 17.

"Shares are priced for these deals to be coming thick and fast".

This story has not been edited by Firstpost staff and is generated by auto-feed.

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