Ocado: Another Deal to Squeeze Bears

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(KR), under which Kroger will use Ocado's technology in the USA for grocery and other food-distribution activities.

Under the terms of the deal, Kroger has discontinued discussions with other retail tech firms, will pay Ocado a monthly consultancy fee and is to acquire a five per cent stake in Ocado.

Tim Steiner, Ocado's CEO, used the announcement to underline his belief "Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

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"The company now has an extremely credible partner in the largest grocery market in the world". It started distributing groceries for Waitrose and floated in 2010.

The online grocery market in the USA is less developed than in markets in western Europe but analysts believe, slowly but surely, more Americans will look to add shopping online to the way they buy food in the years ahead - and the country's largest bricks-and-mortar chains are weighing up how to play in the channel.

According to a press release issued by Ocado, it is already working with Kroger to identify three sites in the U.S. for new, automated warehouse facilities. Ocado added that, in the event of a failure to commit to the target capacity, Kroger will pay compensation to Ocado.

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The deal should help Kroger compete with Amazon, which has entered the grocery delivery market in a big way.

The retailer's efforts to create a "seamless digital experience" for customers would speed up as a result, he added.

Ocado had kept investors waiting for years after setting out a strategy to grow faster by providing its technology to other supermarket chains overseas as well as being an online retailer in its own right.

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The positive share price reaction is as much a factor of Kroger's United States grocery market dominance, as being hot on the heels (and after a great deal of waiting) of similar deals in Sweden (ICA, 2 May 18), Canada (Sobeys, 22 Jan 18) and France (Casino, 28 Nov 17).

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