Ocado to enter United States market with 'transformative' Kroger deal

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

Shares in Ocado, the online grocery delivery platform, soared +44% to fresh record highs on news of another licensing agreement, this time with Kroger, which would allow the USA supermarket giant to use Ocado software to strengthen its own grocery-delivery network.

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.

Kroger has signed an exclusive deal with UK online supermarket Ocado to use its technology in the United States.

Ocado said its "transformative" entry into the U.S. market centred on sharing its technology with Kroger, which had annual sales of $122bn (£90.4bn) in 2017.

November's announcement of a deal with France's Groupe Casino (CASP.PA) set the shares on their way, and was followed by a tie-up with Canada's Sobeys and Sweden's ICA Group (ICAA.ST).

Kroger will pay monthly exclusivity and consultancy fees to Ocado, which will discontinue discussions with other US -based retailers.

Currently, the two companies are looking for suitable locations to establish three automated warehouse facilities. A total of 20 will be identified in the first three years of the deal.

Tatton-Brown said the detailed financial terms still had to be agreed, but the deal was expected to be neutral in respect to earnings in the full-year 2018.

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Ocado's chief executive, Tim Steiner, described the deal as "transformative" and said it would "reshape the food retailing industry in the USA in the years to come".

The opportunity to partner with Kroger to transform the way in which USA 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 U.S.in the years to come".

Rodney McMullen, chairman and CEO of Kroger, said the retailer is on a mission to develop new customer experiences by investing in technology.

"We are actively creating a seamless digital experience for our customers".

Ocado chief executive Tim Steiner said working with Kroger to transform the way in which U.S. customers bought groceries represented "a huge opportunity to redefine the grocery experience" for Kroger customers.

'We can only applaud Ocado's success in engaging with the most attractive counterpart in the biggest potential market for online food'.

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