Kroger inks Ocado grocery delivery deal to battle Amazon threat

Kroger inks Ocado grocery delivery deal to battle Amazon threat

Kroger inks Ocado grocery delivery deal to battle Amazon threat

UK-based online grocery specialist Ocado has added to its recent list of high-profile partnerships with the news that it has signed a major collaboration agreement with United States group Kroger, the world's third-largest food retailer, to build new ecommerce infrastructure.

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.

Kroger and Ocado are already working to identify the first three sites in 2018 for development of new, automated warehouse facilities in the US, and will identify up to a total of 20 over the first three years of the agreement.

Kroger shares were last up 1.6 percent on the deal, with investors reassured by the US company saying the move would not dampen expected earnings for 2018 and 2019.

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

The scale of the pair's ambitions was summarised by Ocado boss Tim Steiner, who said it could transform the food retail industry in the US.

There are losers in the rapid ascent of the share price - the short sellers betting that Ocado would stumble and fall with the onslaught of the big beasts of online retail, led by Amazon. This will bring the company's total investment to more than 6%. Ocado Solutions is responsible for corporate partnering. The company also notes that it is planning to open a total of 20 of these locations in the first three years after the deal. Retailers are experimenting with different ways of delivering online grocery orders, seeking to balance speed with cost as e-commerce takes off for food.

Shares in the group, which listed in 2010, jumped over 50 percent in early Thursday to trade at a record high. He is also a beneficiary of the Millennium Trust, which owns a separate 2.4pc stake in Ocado, according to Bloomberg data.

Ocado already has a presence in other countries, including partnerships with Sobeys in Canada, Groupe Casino in France and ICA Group in Sweden.

It has even said it will pay compensation if it fails to hit the capacity targets the two retailers have agreed. Ocado has no chain of stores and does all home deliveries from its warehouses.

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