Ocado lands major Kroger Smart Platform deal

Ocado lands major Kroger Smart Platform deal

Shares in Ocado (OCDO) rocket 43% higher to 787.9p following the announcement of a tasty partnership with U.S. grocer Kroger, giving the online grocer-to-e-commerce tech licensor a foothold in the vast groceries market across the pond.

The online supermarket said the deal means Kroger will take a five per cent stake in the company and gives the U.S. business the rights to use Ocado's technology for grocery and other food distribution related activities in the USA on an exclusive basis, in return for "monthly exclusivity and consultancy fees".

Kroger, the largest US supermarket chain by revenue, operates about 2,780 supermarkets in the USA and has some 443,000 employees. As a result, the United States retailer will use its Smart Platform technology on an exclusive basis Stateside, in return for monthly exclusivity and consultancy fees.

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

Significantly, Kroger will also take a 5% stake in Ocado, worth £183m, as the pair partners up to tackle the threat from the likes of Amazon, which announced a takeover of Whole Foods last summer.

To support the agreement, the two companies will work together to identify three sites in the USA in order to create and develop three automated warehouse facilities. Over the next three years, they will aim to find locations for 20 fulfilment warehouses.

"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", he said. It has also inked a deal with a yet-to-be named European retailer. "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world", he said.

Rodney McMullen, chairman and chief executive of Kroger, said the partnership would allow it to "speed up our efforts to redefine the food and grocery customer experience".

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

Tatton-Brown said the detailed financial terms still had to be agreed, but the deal was expected to be neutral in respect to earnings in the full-year 2018.

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