Ocado and Kroger looking to transform U.S. grocer sector

Ocado and Kroger looking to transform U.S. grocer sector

Ocado, the online supermarket chain turned technology company, has signed a major deal with United States supermarket chain Kroger that could see Ocado technology powering as many as 23 Kroger fulfilment warehouses across the US.

In a note commenting on the deal, under which Kroger will buy a 5% stake in Ocado for £183m, Kantar Consulting VP of retail and shopper insights Diana Sheehan said: "Ocado's current logistics and technical expertise in supporting online grocery fulfillment in Europe allows Kroger to potentially leapfrog both Walmart and Amazon in this space".

"We look forward to innovating together with Ocado to provide our customers the best possible online and in store experience", said Alex Tosolini, Kroger's Senior Vice President of Business Development.

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

Ocado' s biggest deal to date, is the latest in a series of tie-ups by the online retailer.

Kroger is upping its investment in the British online grocer Ocado as it fends off Amazon.com and other online threats to traditional grocers.

The Kroger deal is definitely Ocado's biggest yet but certainly not its first.

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That figure could rise to 20 during the first three years of the partnership, it added.

Founded in 2000 by three former Goldman Sach's bankers, Ocado has licensed its platform to grocers operating in markets including ICA in Sweden, Sobeys in Canada and Casino in France. Shares in Ocado were at 552 pence before the deal was announced.

As part of the partnership with Ocado, the group will adopt the Ocado Smart Platform.

Kroger operates almost 2,800 stores in 35 USA states and has a turnover of more than $115 billion (£85 bn). More than 56 million Ocado shares were on loan on Tuesday, the most recent data from industry tracker FIS' Astec Analytics showed. "We are actively creating a seamless digital experience for our customers".

Rodney McMullen, chairman and chief executive of Kroger, said: "We see Ocado as an innovative, exciting and transformative partnership in pursuit of our Restock Kroger vision, to serve America through food inspiration and uplift".

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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