Ocado branches out into Canada in new overseas online drive
Ocado, the online grocer, yesterday unveiled its second major overseas partnership and its first foray into North America after reaching a deal with Canadian retailer Sobeys.
Ocado said the partnership will involve building an online grocery business in Canada, where Sobeys operates more than 1,500 stores under brands including Safeway, IGA and and Thrifty Foods.
The two firms are planning to build their first warehouse in the Greater Toronto area within the first two years of the partnership, but will consider other locations across the country.
Ocado said it was “delighted” to be working with one of the leading retailers across the Atlantic.
Luke Jensen, chief executive of Ocado Solutions, said: “Channel shift to online in North America is gaining pace as consumers increasingly seek the benefits of grocery shopping from the comforts of their own homes, and as retailers attempt to offer services to meet this growing customer trend.”
It is the second major international partnership to be signed by Ocado in recent months, having announced a partnership with French supermarket giant Groupe Casino late last year. The FTSE 250 firm announced a separate international deal in early June, but it has so far kept the customer anonymous.
“Soon Sobeys, along with Ocado, Morrisons and Groupe Casino will be powered by Ocado Smart Platform, sharing a common goal of harnessing the best technology for grocery e-commerce to win in their markets,” Jensen said.
Sobeys will pay Ocado “certain upfront fees” after signing the deal and during the project’s development, with further fees linked to the warehouse capacity and “service criteria”. Ocado said it expects the deal to add “significant long-term value to the business”, though it will be earnings neutral for the current financial year.
The initial fees will be offset by the costs linked to establishing the partnership and integrating its software platform with Sobeys’ systems.
Ocado added that it will book around £15 million in capital expenditure for full-year 2018 to support the partnership and “accelerate” the development of the platform.
However, it said that profitability of its Ocado Solutions business is “likely to grow” from full-year 2019 onward thanking to rising fees from its existing deals, and “as other deals are signed”.
Sobeys president and chief executive Michael Medline said: “We are very excited to bring this best-in-the-world grocery e-commerce experience to Canadian customers.”