ibusinesslines.com August 21, 2018

Ocado to enter United States market with 'transformative' Kroger deal

17 May 2018, 05:28 | Kelvin Horton

Ocado strikes 'transformational' deal with US giant Kroger

Ocado Cracks US Online Grocery Market as Kroger Buys Stake

Shares in Ocado, the online grocery delivery platform, soared +44% to fresh record highs on news of another licensing agreement, this time with Kroger, which would allow the USA supermarket giant to use Ocado software to strengthen its own grocery-delivery network. As part of the agreement, Kroger will buy a 5% stake in the British company by purchasing more than 33.1 million new, ordinary shares at a value of GBP183 million ($247 million).

Ocado said it will begin setting up Kroger with various systems to help it manage warehouse operations, automation, logistics and delivery route planning in the US.

"Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world", he 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", said Rodney McMullen, Kroger's chairman and CEO.

The two companies said they were already looking for sites for their first three warehouses and planned to identify up to 20 within the first three years of their deal.

Kroger will pay "compensation" to Ocado "in the event of a failure to commit to the target capacity", the United Kingdom firm said. "As we work through the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the USA in the years to come".

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

'A significant milestone in this strategy was marked in November previous year when the company announced its first overseas deal with France's Groupe Casino supermarket brand - providing the company with the necessary kit and technology to launch its own online offering.

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