United States deal strengthens Ocado's case to be seen as a tech provider

Ocado shares soar as it lands major deal with Kroger to enter the

Ocado said it believed Kroger, which had sales of $122 billion in its last fiscal year, was the grocer best-positioned to succeed in the U.S. sector.

US-based retailer Kroger will be using Ocado's Smart Platform technology to power its online food and grocery deliveries.

Kroger will pay monthly exclusivity and consultancy fees to Ocado, which will discontinue discussions with other US -based retailers. However, the tie-up with USA chain Kroger is not expected to be immediately earnings enhancing, so the company will remain loss-making for the time being.

Ocado has broken off talks with other USA supermarket chains following the deal with Kroger. The deal follows on from one with Canadian grocery chain Sobeys in January.

Kroger, which is second only to Walmart in terms of U.S. market share, with revenues a year ago of $122bn (£90bn), will also take a 5pc stake in the FTSE 250 firm at a value of £183m.

In the event of a failure to commit to the target capacity, Kroger will shell out compensation to Ocado.

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The two companies are working to identify the first three sites in 2018, the company said. Over the next three years, they will aim to find locations for 20 fulfilment warehouses.

"Ocado's unique, proprietary and industry-leading technology is set to transform the shopping experience of consumers around the world".

The threat of a big disruptor entering the sector has put pressure on food retailers to be on top of their game when it comes to online deliveries, and that's playing into the hands of Ocado, with a number of deals in the pipeline now coming to fruition.

Tim Steiner, Ocado's chief executive, said the deal would be "transformational" and "reshape the food retailing industry in the United States in the years to come".

Rodney McMullen, chairman and chief executive, Kroger, comments: "We see Ocado as an innovative, exciting and transformative partnership in pursuit of our Restock Kroger vision".

"We are actively creating a seamless digital experience for our customers. Our partnership will speed up our efforts to redefine the food and grocery customer experience, creating value for customers and shareholders alike".

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