Online player Ocado and The Kroger Co have announced that they have completed the service and operational terms that will see the US retailer develop Customer Fulfilment Centres (CFCs) operated by Ocado.
The agreement was first announced in May 2018.
Under the terms of the agreement, Kroger is expected to order 20 CFCs over the first three years of the agreement, and order the first three CFCs by the end of 2018. Ocado will ‘install and maintain modules of Mechanical Handling Equipment’ in these CFCs in oder to provide an agreeable level of throughput, the companies announced.
The two companies are aiming for the Kroger CFCs to go live within two years of each order being placed.
The locations of the first three CFCs are to be announced by Kroger within the coming weeks.
Key Parameters
“"We are delighted to have signed this services agreement with Kroger which sets out the key parameters for our working relationship going forward,” said Luke Jensen, CEO of Ocado Solutions.
The Kroger and Ocado teams have been working hard for some time to prepare for the opening of the first CFCs in the United States. 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".
Elsewhere, Alex Tosolini, Kroger's senior vice president of business development, said that the agreement marks a “significant step toward both solidifying our partnership with Ocado and redefining the Kroger customer experience”, adding that it will bring “unparalleled innovation and technologies” to the US marketplace.
Analyst Comment
Commenting on the announcement, Bruno Monteyne of Bernstein Research said, “The contract completion removes a (small) worry that started to build over the stock.
“Given the pull back in the share price in recent months, without a change to the foreseeable economics and returns of the Ocado platform, we think this release is a timely reminder of the investment opportunity.”
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
