King Soopers parent Kroger partners with world's largest online grocery supermarket

Kroger paying $247M to license Ocado online home-delivery technology

As part of a newly inked alliance, Kroger (KR) is harvesting the ordering, fulfillment and home delivery capabilities of United Kingdom -based online grocer Ocado, ramping up its arsenal against grocery rivals Walmart (WMT) and Amazon (AMZN).

Ocado is known for fast deliveries and, according to CNN Money, Ocado said it will be helping Kroger with warehouse operations, logistics, delivery route planning and automation.

The deal, Ocado's biggest to date, marks the latest in a series of tie-ups among grocers as online competition heats up and pricing pressure squeezes profit margins.

Ocado shares soared as much as 80 percent to an all-time high. The partnership is part of the Restock Kroger initiative. (KR), under which Kroger will use Ocado's technology in the US for grocery and other food-distribution activities. "The risk is that today's news will accelerate that shift, and on less rational terms". It is underpinned by Ocado's expertise and experience as a dedicated online grocery operator in the UK. It will now discontinue discussions with other US-based retailers.

"The opportunity for a business like Kroger is huge", he said.

The e-commerce grocery battle has a got a new turn with the interesting announcement of strategic alliance between U.S. supermarket giant, Kroger and United Kingdom grocery e-commerce pure play, Ocado.

Walmart shares fell 1.9%.

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The partnership also raises questions about the fate of third-party delivery company Instacart, which delivers from Kroger stores in 45 metropolitan markets and counts it as a major customer. Ocado Solutions is responsible for corporate partnering.

The company will increase its existing investment in Ocado by five percent in a subscription rights agreement, bringing total investment to more than six percent.

To support the agreement, the two companies will work together to identify three sites in the USA in order to create and develop three automated warehouse facilities.

Tatton-Brown said the potential for the partnership goes far beyond the initial 20 centres, with scope for two or three times that in the future.

Kroger operates almost 2,800 stores in 35 U.S. states and has a turnover of more than $115 billion (£85 bn).

However, the deal of Kroger has taken the idea of merging this to a whole new level. 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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