Kroger Inks Deal with Ocado to Enhance Ecommerce

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Kroger Co. and online supermarket Ocado have an exclusive partnership agreement in the US that will automate Kroger warehouses with the help of Ocado's technology.

The online grocer saw shares soar more than 80 per cent during trading yesterday after it announced that Kroger, one of the world's biggest grocery chains with annual sales of $122bn (£90bn), will now use Ocado's technology to automate grocery orders. Within the terms of the agreement, Kroger will also acquire a 5 percent stake in Ocado.

"With such a deal, Kroger is now primed to meaningfully improve upon its current scale advantages and omnichannel offerings versus peers, as Ocado will boost its online ordering, automated fulfillment and home delivery capabilities", Jefferies analyst Christopher Mandeville said in a research note.

"We are actively creating a seamless digital experience for our customers", Kroger CEO Rodney McMullen said in a statement.

The e-commerce grocery battle has a got a new turn with the interesting announcement of strategic alliance between USA supermarket giant, Kroger and United Kingdom grocery e-commerce pure play, Ocado.

Meanwhile, U.S. grocery market leader Walmart has tapped Postmates and DoorDash to aid in the rollout of its online grocery delivery service to 40% of the country by year's end.

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Chief executive Tim Steiner, said: "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

The Ocado CEO said his firm will work with Kroger to roll out up to 20 robotic warehouses across the US over the first three years of the agreement.

Ocado has always been considered a weak link in the supermarket sector by some analysts who brand it grossly overvalued.

In the longer term, Kroger will retain exclusivity in the USA conditional upon its meeting market share targets or ordering an agreed number of fulfilment centers per year.

The Kroger deal is "seismic" for Ocado, which has been looking to break into the US for some time, according to Bryan Roberts, Global Insights Director at tcc global.

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

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