Kroger, fending off online rivals, ups stake in UK's Ocado

Ivan Schwartz
May 18, 2018

Ocado boss Tim Steiner said it was a "transformative" deal that would see the two firms build an expected 20 automated warehouses in the United States over the next three years. Over the first three years of the agreement they are to identify a further 20 sites.

Ocado's software and hardware automates the processing and packing of online groceries, using hundreds of robots rather than people to pull together orders quickly.

"We don't look at this as just a home delivery mechanism in the USA", he pointed out.

Currently, the two companies are looking for suitable locations to establish three automated warehouse facilities.

USA grocery delivery company Instacart suffered a new setback on Thursday when Kroger Co, one of its major US customers, announced a partnership with British automated online grocery service Ocado Group Plc. "We are actively creating a seamless digital experience for our customers".

Rodney McMullen, Kroger's chief executive, said the partnership would the grocer "redefine the food and grocery customer experience - creating value for customers and shareholders alike".

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Tim Steiner, CEO of Ocado Group, said, "Our success as a retailer shows that we can offer customers unrivaled choice, quality and convenience, efficiently and profitably".

The U.S. grocery industry is dominated by Walmart Inc and Kroger but has been in upheaval since last summer, when Amazon's $13.7 billion purchase of Whole Foods sent supermarkets scrambling to match the online retailer on home delivery. The Kroger partnership represents the fourth agreement Ocado has made during the past six months, although this represents its first foray into the US market.

Ocado is known for fast deliveries and, according to CNN Money, Ocado said it will be helping Kroger with warehouse operations, logistics, delivery route planning and automation. "How competition will respond to the news with their own differentiated offerings is not yet understood".

Ocado will partner exclusively with Kroger in the USA, enhancing the Cincinnati-based grocer's digital and robotics capabilities and help expand its seamless coverage area.

"We have little doubt that an attractive return on invested capital will be achieved on the huge amount of capital set to be invested across Ocado's global Ocado Smart Platform partnerships and, with a significant long-term earnings runway now in place, retain our positive stance".

Kroger, the largest US supermarket chain by revenue, operates about 2,780 supermarkets in the USA and has some 443,000 employees.

Other reports by GizPress

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