Daily Management Review

Ocado’s Tech Deal With Kroger Results In 50% Increase In Its Shares


05/17/2018




Ocado’s Tech Deal With Kroger Results In 50% Increase In Its Shares
A deal with the US retail giant Kroger by online grocer Ocado resulted in a rise of its shares by an astounding 50 per cent.
 
With annual sales of $122bn (£90bn), Kroger is amongst the largest grocery chains in the world. This physical retailer would make exclusive use of the technology of Ocado for selling its products online.
 
A 5% stake in Ocado would be taken up by Kroger according to the terms od the agreement.
 
The technology that is the propriety of Ocado helps retailers to automate online grocery orders. The deal with Kroger is the latest that the tech company has struck in a line of agreements with retailers that will see retailers making use of its technology.
 
This is the first time that Ocado has ventured into the United States through this deal with Kroger and this deal with the U.S. retailer is the fourth deal that Ocado has struck in the last six months.
 
There was a rise of 41 per cent in the shares of Ocado during the early trade in London.
 
During the first three years of their agreement, Ocado and Kroger are aiming to automate its warehouse facilities of at least 20 warehouses in the US. Soon after the deal was announced, both the companies have started the process of identification of at least three warehouse facilities of Kroger to implement the automation technology.
 
All the other talks that Ocado is having with other US-based retailers would not be brought to an end by the company because the deal with Kroger is an exclusive one.
 
Groupe Casino in France, Sobeys in Canada and ICA Group in Sweden are the companies that Ocado has managed to strike a deal with for the use of its technology within the past few months. The online business of Morrisons, the fourth largest supermarket of the United Kingdom, is also managed and operated by Ocado.
 
'Ocado is making great strides in the global grocery market," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
 
"The company is known in the UK as an online supermarket, but that's just the tip of the iceberg, as Ocado is primarily a technology and logistics firm with the potential to license out its services to grocers around the world.
 
"Indeed there seems to be a bit of a queue forming, made up of those who want to play catch-up in the digital retailing age, and consequently Ocado now has a foothold in the hugely important US market, as well as the UK, France and Canada."
 
(Source:www.bbc.com)






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