Online retail specialist Ocado has announced a new partnership with Canadian supermarket chain Sobeys, to develop an online grocery business using the Ocado Smart Platform.
Ocado says that it will partner exclusively with Sobeys in Canada, launching its end-to-end solution for online grocery services, which includes an online store, mobile ordering applications, and warehouse services.
The two companies are now set to develop a customer fulfilment centre in the greater Toronto area, which is expected to be completed in two years.
Ocado says that they will consider developing additional centres in other densely-populated urban areas in the future.
"Sobeys intends to play to win in Canadian online grocery shopping," said Michael Medline, president and CEO of Sobeys.
"We are very excited to bring this best-in-the-world grocery e-commerce experience to Canadian customers. This unique and innovative Sobeys and Ocado experience will offer consumers the biggest selection, freshest products and most reliable delivery available anywhere on the planet."
Sobeys is the second largest food retailer in Canada, operating more than 1,500 stores across the country, and generating sales of C$23.8 billion in 2017.
Online Partnerships
Ocado says that it expects this deal to create 'significant long-term value' for its business. The e-commerce company anticipates the transaction to be earnings neutral in the current financial year as a result of initial costs and investments, but expects profitability to grow in 2019 and beyond.
This is Ocado's second international partnership in recent months, following its deal with French retailer Groupe Casino in November.
In its home market, the company also has an agreement with UK supermarket chain Morrisons, but says that it is still looking to expand its business further.
"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," said Luke Jensen, CEO of Ocado Solutions.
"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 ecommerce to win in their markets. We look forward to welcoming more major grocers to this list going forward."
David Beadle, senior credit officer at Moody’s, said that these deals are credit positive for Ocado.
"These transactions will see Ocado make progress on its strategic goal of internationalising the Ocado Smart Platform, which was first established in partnership with Morrisons," he said.
“The geographic diversification will in due course dilute the reliance on the UK market and in the meantime we believe Ocado has sufficient cash resources and liquidity to incur the start-up capex before earnings begin to flow from these relationships.”
In its most recent trading update, Ocado's retail sales growth slowed to 11.6%, as the company said it was held back by a shortage of delivery drivers.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.
