Kroger has announced a deal that will have it taking a five percent stake in British e-commerce and logistics company Ocado, which will allow it to bring Ocado’s technology to the US exclusively.
The Financial Times reports that “the deal with Kroger is the latest in a string of tie-ups announced by Ocado in recent months, soothing market fears that the retail technology and logistics group was struggling to find takers for its ambitious model. Earlier this month, it inked a deal to build Swedish supermarket ICA’s online grocery business, following deals with Canadian grocer Sobeys and French supermarket operator Groupe Casino.”
The five percent of Ocado, FT writes, is worth about $247 million.
Kroger will be required to hit certain targets in terms of penetration if it is to maintain its exclusivity. Ocado was said to be in talks with other US retailers before striking the deal with Kroger; those other talks now have been dropped.
Reuters reports that “Ocado’s technology automates the processing and packing of online grocery orders, using hundreds of robots in technologically advanced order fulfillment centers. Kroger will identify at least 20 sites to build new, automated warehouse facilities in the United States … more than all of the facilities Ocado has built or is planning to build for all its other partnerships to date.”
The BBC reports that “Ocado and Kroger are already looking to identify the first three sites for automated warehouse facilities in the US, and are aiming for up to 20 sites over the first three years of the agreement.”
Kroger CEO Rodney McMullen says that the deal will help it speed efforts to “redefine the food and grocery customer experience — creating value for customers and shareholders alike”.
Ocado CEO Tim Steiner says that “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.”
The Financial Times reports that “the deal with Kroger is the latest in a string of tie-ups announced by Ocado in recent months, soothing market fears that the retail technology and logistics group was struggling to find takers for its ambitious model. Earlier this month, it inked a deal to build Swedish supermarket ICA’s online grocery business, following deals with Canadian grocer Sobeys and French supermarket operator Groupe Casino.”
The five percent of Ocado, FT writes, is worth about $247 million.
Kroger will be required to hit certain targets in terms of penetration if it is to maintain its exclusivity. Ocado was said to be in talks with other US retailers before striking the deal with Kroger; those other talks now have been dropped.
Reuters reports that “Ocado’s technology automates the processing and packing of online grocery orders, using hundreds of robots in technologically advanced order fulfillment centers. Kroger will identify at least 20 sites to build new, automated warehouse facilities in the United States … more than all of the facilities Ocado has built or is planning to build for all its other partnerships to date.”
The BBC reports that “Ocado and Kroger are already looking to identify the first three sites for automated warehouse facilities in the US, and are aiming for up to 20 sites over the first three years of the agreement.”
Kroger CEO Rodney McMullen says that the deal will help it speed efforts to “redefine the food and grocery customer experience — creating value for customers and shareholders alike”.
Ocado CEO Tim Steiner says that “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.”
- KC's View:
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When Ocado launched, almost two decades ago, the strategy was to be a pure-play online supermarket … it had no stores, and no alliances with traditional stores. Clearly - and wisely - that has changed over time, as Ocado has recognized that it has far greater value being a component in a larger enterprise.
Consumers, it seems to me, want options - they want the convenience of not having to go to the store, and like it when their store also gives them a rationale to go to a store that is compelling and differentiated.
I think this was a smart move for Kroger, and I’m glad they pulled the trigger. The grocery space in the US just got a lot more interesting and competitive.
