Ocado strikes 'transformational' deal with United States giant Kroger

Daniel Fowler
May 17, 2018

Ocado had kept investors waiting for years after setting out a strategy to grow faster by providing its technology to other supermarket chains overseas as well as being an online retailer in its own right.

Tim Steiner, Ocado's CEO, used the announcement to underline his belief "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

Tim Steiner, CEO of Ocado, commented: "The opportunity to partner with Kroger to transform the way in which United States 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".

Neil Wilson, senior markets analyst at Markets.com, said: "Ocado has some protection in the deal as if they fail to hit the capacity target, Kroger will pay compensation".

"The short sellers were hoping Ocado wouldn't deliver on its global expansion plans". It has struck partnerships with Groupe Casino in France, Sobeys in Canada, and ICA Group in Sweden.

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He also said that "it's the responsibility of all companies to be honest about this". We want to be part of the solution.

Ocado's stock market surge pushed the value of the company above £5 billion ($6.8 billion) on Thursday.

"It could also lose exclusivity rights, so (it) appears Ocado has given itself some options should this not go as well as planned". That said, exclusivity deals in both the U.S. and Canada now put to bed further negotiations in North America.

Britain's online supermarket Ocado OCDO.L clinched a game-changing deal with Kroger KR.N as its exclusive partner in the USA, securing its entry into the world's biggest market and sending its shares up 50 percent. It's another blow, however, for the 7.2% who remain resolutely bearish, some of whom are surely rushing for the exit (buying to cover their short positions), contributing to the share price jump. 'This is clearly a transformative deal for Ocado, and one that is on a completely different scale to those announced in the past'. 'Moreover, some of the nuances of this deal in particular give us a feeling that the tables have turned and Ocado now has the supplier power'.

To support the agreement, the two companies will work together to identify three sites in the USA in order to create and develop three automated warehouse facilities.

'We can only applaud Ocado's success in engaging with the most attractive counterpart in the biggest potential market for online food'.

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