Online supermarket Ocado has signed a partnership agreement with US grocer Kroger which will see Ocado’s technology used exclusively by the American company for grocery and other food distribution related activities.
The objective of the partnership is to allow Kroger to “redefine” the grocery customer experience in the US through the adoption of the centralised, automated model of online retailing provided by the Ocado Smart Platform.
Kroger is one of the world’s biggest grocery retailers, and a market leader in the US. Its sales in 2017 totalled $122bn.
As part of the deal, Ocado has agreed to discontinue discussions with other US-based retailers, while Kroger will pay monthly exclusivity and consultancy fees which will partially offset the total fees agreed between the firms.
Kroger will subscribe for up to 33,146,200 new ordinary shares in the capital of Ocado, equivalent to 5% of the existing issued share capital of Ocado, at a value of £183m.
The companies are already working to locate 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.
Tim Steiner, CEO of Ocado, said: “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.
“As we work through the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the US in the years to come.”
Rodney McMullen, chairman and CEO of Kroger, said: “We see Ocado as an innovative, exciting and transformative partnership in pursuit of our Restock Kroger vision, to serve America through food inspiration and uplift. 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.”