Ocado and Kroger ratify terms of smart platform partnership

Ocado and Kroger have signed the Master Services Agreement as part of the strategic partnership they announced back in May.

A plan for 20 Kroger customer fulfilment centres (CFC) to be developed and operated by the UK online grocer has been agreed, with three to be ordered by the end of 2018. The US business will use the Ocado Smart Platform to run core parts of its eCommerce operation.

The terms and fee structure are similar to those for other transactions Ocado has made with third parties to date, combining up-front fees and ongoing capacity fees.

As with other recent Ocado Smart Platform deals agreed by the technology arm of the UK online supermarket, which include arrangements to provide the tech infrastructure for Sobey’s in Canada and Groupe Casino in France, Ocado has agreed to install and maintain modules of mechanical handling equipment to support the projects.

The target is for Kroger's CFCs to go live within approximately two years of each order being placed. Further details on the location of the first three sites will be made public by Kroger within the next few weeks.

Luke Jensen, CEO of Ocado Solutions, commented: "We are delighted to have signed this services agreement with Kroger which sets out the key parameters for our working relationship going forward.

“The Kroger and Ocado teams have been working hard for some time to prepare for the opening of the first CFCs in the US. We are very excited at the prospect of helping Kroger bring new services and value to its customers and transform the food retail market in the US.”

Ocado said it expects the earnings impact of the master services agreement to be neutral in the current financial year, with the “peak net outflow” for the initial three CFCs to be £90 million. It added that the company has over £500 million of financing headroom, describing this as “more than sufficient funds to cover this” deal.