Ocado Group lauds 'transformative' technology partnership with Kroger

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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 U.S. group Kroger, the world's third-largest food retailer, to build new ecommerce infrastructure.

The deal, finalized on May 17, 2018, involves Ocado's technology platform for online retail sales, which are primarily groceries. Within the terms of the agreement, Kroger will also acquire a 5 percent stake in Ocado.

The companies 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 notes that it isn't expecting the deal with Ocado to affect its earnings for the full year of 2018.

Kroger is one of the largest supermarket chains in the U.S., with sales reaching $122 billion in 2017.

Ocado chief executive Tim Steiner said the deal would be "transformative" for the business.

Perhaps the string of tie-ups with big worldwide retail players and yesterday's blockbuster response will force Ocado's critics to acknowledge the online grocer's potential.

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Ocado will boost Kroger's digital and robotics capabilities, helping to expand its seamless coverage area to provide every family in America with the convenience of shopping for anything, anytime and anywhere - furthering the Cincinnati-based company's commitment to being "America's grocer".

"The grocery online market in the USA has been relatively underdeveloped compared with some European markets".

"Ocado has really awesome technology that works", said Ken Lonyai, Independent Consultant and Strategist, in a RetailWire discussion. Over the first three years of the agreement they are to identify a further 20 sites.

The U.S. grocery chain announced Thursday its alliance with Ocado and its plans to bring the British supermarket's "unparalleled technology" to the United States. It has made similar deals with Morrisons in the U.K., Group Casino in France, Sobeys in Canada and ICA in Sweden.

Kroger shares ended the US Thursday trading session 1.44% higher at $26.30.

"Amazon has indeed fuelled a US Ocado deal, ' said Peel Hunt analyst James Lockyer, who rates the shares a 'buy" and placed his target price under review.