Kroger paying $247M to license Ocado online home-delivery technology

The deal with Kroger takes Ocado's home-delivery platform into the US for the first time

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

America's largest supermarket chain, said Thursday it is spending $247 million to license exclusively the home-delivery technology of Britain's Ocado Group online supermarket. Those fees will partly reduce Ocado's future fees from the deal, but should make its initial outlay more affordable.

It marked the fourth such agreement that Ocado has struck with grocers worldwide in just six months.

Ocado shares were up 44 percent to 7.96 pounds at 0740 GMT.

Ocado CEO Tim Steiner is confident that this deal, and others like it, will "transform the shopping experience of consumers around the world".

James Zimmerman, the best performing manager in Citywire's UK Smaller Companies sector over the a year ago, holds 2.8% of his £297 million Jupiter UK Smaller Companies fund in Ocado, his third largest position. Markets Insider Kroger CEO and chairman Rodney McMullen said: "Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience - creating value for customers and shareholders alike".

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Kroger will identify at least 20 sites to build new, automated warehouse facilities in the United States, Tatton-Brown said, more than all of the facilities Ocado has built or is planning to build for all its other partnerships to date.

"The company now has an extremely credible partner in the largest grocery market in the world". Competition from Amazon and discounters such as Lidl saw its share price fall by over 40% last year to a four-year low and Kroger announced a $9 billion strategy called "Restock Kroger" last year aimed at modernising the company with technology.

Shares in online grocer Ocado surged nearly 50% to 790p, adding £1.5bn to its stock market value, taking it above £5bn for the first time, as investors cheered the news.

Ocado's technology automates the processing and packing of online grocery orders, using hundreds of robots in technological advanced order fulfillment centres.

Neil Wilson, senior markets analyst at Markets.com, said: "Ocado has some protection in the deal as if they fail to hit the capacity target, Kroger will pay compensation".

As part of the agreement, Kroger will be the British firm's exclusive partner in the USA and will pay undisclosed monthly exclusivity and consultancy fee to the company.

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