Kroger signs ro­botic firm de­liv­ery deal

National Post (National Edition) - - FINANCIAL POST - Paul San­dle and lisa Baertlein

LON­DON/LOS ANGELES • U.S. su­per­mar­ket chain Kroger Co. struck a deal with Bri­tish on­line gro­cer Ocado to ratchet up its de­liv­ery busi­ness with the con­struc­tion of robot­i­cally op­er­ated ware­houses, up­ping the ante in the bat­tle with Ama­zon. com Inc. and send­ing Ocado shares rock­et­ing.

The U.S. gro­cery in­dus­try is dom­i­nated by Wal­mart Inc and Kroger but has been in up­heaval since last sum­mer, when Ama­zon’s US$13.7 bil­lion deal for Whole Foods sent su­per­mar­kets scram­bling to match the on­line re­tailer on home de­liv­ery.

The Kroger deal an­nounced on Thurs­day is Ocado’s first in the United States and the Bri­tish com­pany’s fourth ma­jor agree­ment with re­tail­ers in six months.

Shares of Ocado, an on­line gro­cery re­tailer known for us­ing ro­bots rather than peo­ple to process and pack or­ders, soared as much as 80 per cent to a record high. Kroger shares were last up 1.4 per cent, with in­vestors re­as­sured by the U.S. com­pany’s say­ing the move would not dampen ex­pected earn­ings for 2018 and 2019.

Kroger chief ex­ec­u­tive of­fi­cer Rod­ney Mcmullen called the part­ner­ship “trans­for­ma­tive” and told Reuters that it ac­cel­er­ates the com­pany’s efforts to give cus­tomers any­thing, any­time, any­where.

While Cincin­nati, Ohiobased Kroger cur­rently of­fers on­line gro­cery de­liv­ery ser­vice, or­ders are filled at in­di­vid­ual stores and de­liv­ery is han­dled in-house by Kroger and by third-party providers In­stacart and Tar­get Cor­powned Shipt.

Kroger’s deal with Ocado, which is ex­clu­sive, won plau­dits on Wall Street.

“The Ocado part­ner­ship is the best in­vest­ment the Kroger Com­pany’s ever made in the last 25 years,” said Burt Flickinger, man­ag­ing di­rec­tor of con­sul­tancy Strategic Re­source Group.

“Ocado is a con­sumer’s dream and a com­peti­tor’s nightmare, and the com­peti­tor that’s go­ing to get caught in the cross­fire is clearly Ama­zon,” he said.

U.S. su­per­mar­kets fear Ama­zon will ap­ply its dis­tri­bu­tion know-how to Whole Foods by trans­form­ing ex­ist­ing stores into a gro­cery de­liv­ery net­work with help from low-cost “gig econ­omy” driv­ers. Ama­zon is al­ready of­fer­ing free two-hour de­liv­ery from some U.S. stores for mem­bers of its loy­alty club Prime.

Yet ex­perts have said that even Ama­zon, which still op­er­ates mostly hu­manstaffed ware­houses for its Fresh gro­cery de­liv­ery ser­vice, still is fig­ur­ing out the right model.

“They’re work­ing their path to the cus­tomer in two dif­fer­ent ways, from very dif­fer­ent start­ing points,” Tom Fur­phy, for­mer vice-pres­i­dent of con­sum­ables and Ama­zonFresh and now CEO of Con­sumer Eq­uity Part­ners, said of Kroger and Ama­zon.

Bri­tain was one of the first coun­tries to see wide­spread adop­tion of on­line gro­cery shop­ping, giv­ing its re­tail­ers a head start in de­vel­op­ing tech­nol­ogy to deal with the chal­lenges of de­liv­er­ing food, es­pe­cially fresh and frozen goods.

E-com­merce ac­counts for 7.5 per cent of sales of pack­aged con­sumer goods in Bri­tain, com­pared with 1.5 per cent in the United States, ac­cord­ing to data firm Kan­tar World Panel, which pre­dicts the lat­ter will rise to 8 per cent by 2025.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.