Blog: US giant Kroger is Ocado's latest partner

Dean Best | 17 May 2018

UK online grocer Ocado has struck another licencing deal with an international food retailer, announcing this morning (17 May) US giant Kroger will use its technology for food deliveries.

Ocado, which already works with Sweden's ICA, Canada's Sobeys and France's Casino (as well as Morrisons in its home market), said it had agreed a contract that could see Kroger open up to 20 automated warehouses in the US over the next three years.

Kroger will pay "compensation" to Ocado "in the event of a failure to commit to the target capacity", the UK firm said.

It added: "In the longer term, Kroger will retain exclusivity in the US conditional on it meeting market share targets or ordering an agreed number of CFCs per annum."

As part of the deal, Kroger is pay GBP183m (US$247.5m) for a 5% stake in the London-listed, online pure-play.

The online grocery market in the US is less developed than in markets in western Europe but analysts believe, slowly but surely, more Americans will look to add shopping online to the way they buy food in the years ahead - and the country's largest bricks-and-mortar chains are weighing up how to play in the channel.

Rodney McMullen, Kroger's chairman and CEO, described the deal with Ocado as "an innovative, exciting and transformative partnership".

He added: "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."

For Ocado, the investment case for the business has long been based on its insistence it could get international grocers to sign up and pay for its technology.

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".

He added: "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."