Kroger to modernize supply chain and fulfilment with Ocado deal

On Thursday May 17, the US’ second-largest grocery retailer Kroger announced it had entered into an exclusive partnership with UK’s online grocer Ocado. The deal will leverage Ocado’s supply chain and fulfilment technology to modernize Kroger’s 42 distribution centers in the US.Business Insiderreported Kroger will pay Ocado an undisclosed monthly exclusivity and consultancy fee to offset the total cost of the deal that has yet to be agreed upon.

With Kroger buying a 5 percent stake in Ocado for £183 million, it will have more than a 6 percent investment in the company. “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,” said Rodney McMullen, Kroger’s chairman and CEO. In a statement, Kroger said it was already working with Ocado to identify the first three sites in 2018 for development of new, automated warehouse facilities in the US and would identify up to a total of 20 during the first three years of the agreement.

Tim Steiner, CEO of Ocado Group, said, “The opportunity to partner with Kroger to transform the way in which US customers buy groceries 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, 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.”

This is Ocado’s third international partnership this year. In January 2018 they struck a deal with Canadian retailer Sobeys and earlier this month they entered a partnership with ICA Sweden. After the deal was announced Ocado’s shares jumped by 50 percent.