Ocado shares rise 47 per cent on back of Kroger deal

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U.S. retailer Kroger has signed a landmark deal with Ocado to use its technology for grocery deliveries, marking the British online grocer's first entry into the United States.

The shares soared as much as 51 percent to a record high, adding about 1.8 billion pounds ($2.4 billion) to the market value and making the company a potential candidate for inclusion in the FTSE 100.

Now, the two companies are working to identify the first three sites for the development of new, automated warehouse facilities and will identify up to 20 sides over the first three years of the agreement.

Tim Steiner of Ocado says when the right combination of e-commerce benefits arrives in the U.S. grocery market the market will grow dramatically
Tim Steiner of Ocado says when the right combination of e-commerce benefits arrives in the U.S. grocery market the market will grow dramatically

Kroger will be Ocado's exclusive partner in the U.S. and the United Kingdom company said it had ended discussions with Kroger's rivals. A total of 20 will be identified in the first three years of the deal.

Ocado, which already works with Sweden's ICA, Canada's Sobeys and France's Casino (as well as Morrisons in its home market), said it had agreed a contract that could see Kroger open up to 20 automated warehouses in the USA over the next three years.

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


Tim Steiner, Ocado's CEO, used the announcement to underline his belief "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

Ocado chief executive Tim Steiner said working with Kroger to transform the way in which USA customers bought groceries represented "a huge opportunity to redefine the grocery experience" for Kroger customers.

Ocado, which has no brick-and-mortar stores, has warehouses that "are capable of collaborating to pick a typical 50-item order in a matter of minutes", its chief technology officer, Paul Clarke, wrote this week.


The company claimed the value of the Kroger partnership was worth more than the others in France, Canada and Sweden combined.

The Kroger deal is "an unmitigated positive in our eyes", Barclays analysts said in a research note.


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