Ocado hauls in Kroger

Ocado’s outreach services have now brought in another major international retailer – this time US based Kroger which will use the Ocado Smart Platform technology to power its online food and grocery deliveries.

Ocado said in a statement that having signed the agreement with Kroger it will now “discontinue discussions with other US-based retailers “.

Kroger will may monthly exclusivity and consultancy fees to Ocado that “will offset in part the total fees that are expected to be agreed between the two parties”.

Ocado added: “An overall services agreement will be negotiated to provide for the drawdown of multiple CFCs [customer fulfilment centres] across the US, on the basis of standard Ocado OSP terms.”

The deal also involves Kroger buying 5% of existing share capital of Ocado at a value of £183 million.

Under the partnership, Ocado and Kroger will be identifying the first three sites in 2018 where Kroger will develop new, automated warehouse facilities in the US, with a further 20 planned for the first three years. Should Kroger not reach the target capacity then it will pay Ocado compensation.

Tim Steiner, CEO of Ocado, commented: “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.”

Ocado said that it expects that the structure of the terms that it will agree with Kroger will be “broadly similar per CFC” to those agreed with its existing international partners: Groupe Casino , in France; Sobeys, in Canada; and ICA, in Sweden. But Ocado did add: “Ocado and Kroger will, however, explore value neutral alternatives to our normal fee structure to reduce the initial capital requirements for Ocado compensated by an appropriate reduction in ongoing fees.”