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Monday 28 May 2018

Ocado flies into US market in latest overseas foray

New York listed Kroger has about 2,800 retail food stores.

Ocado is set to enter the US market (Katie Collins/PA)
Ocado is set to enter the US market (Katie Collins/PA)

By Ravender Sembhy, Press Association City Editor

Online grocer Ocado has announced its fifth international deal, with US grocery retailer Kroger.

Under the terms of the agreement, Ocado’s technology will be used in the US exclusively by Kroger, with the US firm also taking a 5% stake in the London listed group.

The duo are working to identify the first three sites in 2018 for the development of new “automated” warehouses in the US and will ramp it up to a total of 20 over the first three years of the agreement.

Ocado expects the earnings impact of the announcement to be neutral this year.

Shares in Ocado rocketed nearly 40% following the announcement.

New York listed Kroger has about 2,800 retail food stores under a variety of brands and serves nine million customers a day.

The US group will pay a monthly exclusivity and consultancy fees to Ocado as part of the tie-up.

Ocado chief executive Tim Steiner said: “The opportunity to partner with Kroger to transform the way in which US customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger’s customers and create value for the stakeholders of both Kroger and Ocado.

“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 US in the years to come.”

The online firm was under pressure over a delay in clinching an international deal after missing a self-imposed deadline of the end of 2015 to expand overseas.

However, the US deal is the latest in a string of overseas partnerships Ocado has struck in the past year, including in Scandinavia with Swedish supermarket group ICA, in France with supermarket giant Groupe Casino and another in Canada with Sobeys.

In the UK, Ocado is in bed with Morrisons.

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.

“We are actively creating a seamless digital experience for our customers. Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience – creating value for customers and shareholders alike.”

Press Association

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