Online supermarket chain Ocado has signed a deal with US supermarket chain Kroger. The exclusive deal will see Kroger use Ocado’s technology as the basis for its assault on online retailing.
Ocado has broken off talks with other US supermarket chains following the deal with Kroger.
Ocado said that the aim of the partnership is to “allow Kroger to redefine the grocery customer experience in the US through the adoption of the centralised, automated model of online retailing provided by the Ocado Smart Platform”.
Kroger is one of the largest supermarket chains in the US, with sales reaching $122 billion in 2017. The deal follows on from one with Canadian grocery chain Sobeys in January.
Ocado’s strategy for propogating its technology, honed over almost 20 years in the UK market, is to offer companies national and sectoral exclusivity, intended to provide them with an edge over rivals, as well as an incentive to go all-in with Ocado.
Under the terms of the deal, Kroger has discontinued discussions with other retail tech firms, will pay Ocado a monthly consultancy fee and is to acquire a five per cent stake in Ocado.
Currently, the two companies are looking for suitable locations to establish three automated warehouse facilities. Over the next three years, they will aim to find locations for 20 fulfilment warehouses.
Tim Steiner, CEO of Ocado, said the deal means that his company can bring its transformative retail technology to consumers worldwide. “Ocado’s unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world,” he 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.”
Rodney McMullen, chairman and CEO of Kroger, said the retailer is on a mission to develop new customer experiences by investing in technology.
“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,” he said.
“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.”
The deal with Kroger is arguably Ocado’s biggest to date and demonstrates that the company’s technology push is starting to gain traction after some five years or so of pushing it.
In 2016, it was reported that Ocado was close to a deal with Kroger’s rival Publix. Its first technology deal was with the UK number four supermarket chain Morrisons in 2014, but it had to wait three years before it signed its second, with France’s Casino supermarket chain.
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