Published: Fri, May 18, 2018
Economy | By

Kroger Turns to UK Online Grocer to Lift Its Digital Business

Kroger Turns to UK Online Grocer to Lift Its Digital Business

The agreement was Ocado's fourth global partnership in six months and should bring substantial sums from the world's largest grocery market.

Tim Steiner, CEO of Ocado, said the deal means that his company can bring its transformative retail technology to consumers worldwide. The Kroger partnership represents the fourth agreement Ocado has made during the past six months, although this represents its first foray into the USA market.

"The exclusivity of Kroger's offer is unique", she added, "because it keeps that technology out of competitors' hands trying to get up to speed in the online grocery landscape in the U.S".

"The most critical outcome of today's news is the need for other major US players to react", said Jefferies analyst James Grzinic.

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Ocado's software and hardware automates the processing and packing of online groceries, using hundreds of robots rather than people to pull together orders quickly. Kroger CFO Michael Schlotman explained to CNBC why the deal made sense as opposed to the company just doing it themselves.

Whole Foods did not immediately respond to requests for comment on the deal. It will now discontinue discussions with other USA -based retailers.

Shares in Ahold fell 1.8 percent. The partnership is part of the Restock Kroger initiative. "Kroger has been impressive in its efforts to explore innovation and stand up to threats from Amazon and Walmart in grocery".

The shares were first listed in 2010 at 167p.

The two companies are now working to identify the first three sites to develop new automated warehouse facilities in the US. The duo will identify up to a total of 20 over the first three years of the agreement.

Kroger Co shares were trading at $25.58 per share on Thursday morning, up $0.64 (+2.57%).

Recently, Ocado has been working on licensing their technology solutions and had created partnerships with Morrisons, Grupe Casino and Sobeys in Canada.

It has even said it will pay compensation if it fails to hit the capacity targets the two retailers have agreed. The average multiple for the United Kingdom grocery retail sector is 17.

Ocado's share price rocketed by 44% after the deal was announced. Kroger will also take a 5 per cent stake in Ocado.

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