Kroger paying $247M to license Ocado online home-delivery technology
17 May, 2018, 17:30
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.
Kroger has agreed to raise its stake in Ocado Group PLC, bringing its total investment in the United Kingdom company to more than 6%, and license technology to run automated warehouses and make online deliveries to customers.
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 U.S. over the next three years.
As part of the deal, Kroger will take a stake in the British company, equivalent to 5 percent of the existing share capital valued at 183 million pounds ($247.5 million), Ocado said.
The two companies are working to identify the first three sites in 2018 for the development of new, automated warehouse facilities, and will identify up to a total of 20 over the first three years of the agreement, Ocado said. In the event of a failure to commit to the target capacity, Kroger will pay compensation to Ocado.
The threat of a big disruptor entering the sector has put pressure on food retailers to be on top of their game when it comes to online deliveries, and that's playing into the hands of Ocado, with a number of deals in the pipeline now coming to fruition.
Tim Steiner, CEO of Ocado, said the deal means that his company can bring its transformative retail technology to consumers worldwide.
The retailer's efforts to create a "seamless digital experience" for customers would speed up as a result, he added.
Ocado said that it expects that the structure of the terms that it will agree with Kroger will be "broadly similar per CFC" to those agreed with its existing global partners: Groupe Casino, in France; Sobeys, in Canada; and ICA, in Sweden.
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