LONDON/LOS ANGELES, May 17 (Reuters) - U.S. supermarket chain Kroger Co struck a deal with British online grocer Ocado to build and deliver from robot-staffed warehouses, upping the ante in Kroger's battle with Amazon.com Inc and sending Ocado shares rocketing.
Kroger shares closed higher Thursday as the USA grocer announced it has agreed an exclusive deal with United Kingdom grocer Ocado, to use its online shopping tech in the US.
The good news for OCDGF stock is that the company is now the exclusive grocery delivery service for Kroger in the U.S. As part of this agreement, KR is increasing its investment in the company by 5%.
Kroger will begin with three sites in 2018, and has a goal of up to 20 fulfillment centers for the first three years of this arrangement said Ocado.
'After years of starving investors of the global deal they so desperately craved, Ocado has been rattling off transformational tie-ups at an astonishing rate in the last few months, ' said Connor Campbell, financial analyst at Spreadex.
It also said that Kroger, which recorded sales of US$122bn during 2017, making it the largest grocery retail chain in the USA in terms of revenue, was best placed to retain that market-leading position.
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Tim Steiner, CEO of Hatfield, England-based Ocado Group, noted that the alliance provides the opportunity to revamp the grocery shopping experience for Kroger's customers as well as the way US consumers buy groceries.
"Instacart is still the best partner for home delivery if one doesn't have dedicated e-commerce" operations, said Burt Flickinger, managing director of consultancy Strategic Resource Group.
Kroger operates almost 2,800 stores in 35 U.S. states and has a turnover of more than $115 billion (£85 bn).
"He added: "[It] represents a huge opportunity to redefine the grocery experience of Kroger's customers and create value for the stakeholders of both Kroger and Ocado".
"We see Ocado as an innovative, exciting and transformative partnership, said Kroger chairman and CEO Rodney McMullen". 'This is clearly a transformative deal for Ocado, and one that is on a completely different scale to those announced in the past'.