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Ocado revenue reached £348.6m in its third quarter, 13 weeks to 2 September. The company saw growth of 11.5%, with strong performance from new CFCs at Andover and Erith.

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Catalan distribution group, including Bon Preu, Esclat and EsclatOil, is to strengthen its online grocery channel through a partnership with Ocado.

New ecommerce website

With the alliance, the group will launch a new ecommerce website and app as a short-term priority, possibly later in 2018. New features include searching for favourites or allergens and allowing customers to modify their basket just hours before collection. Currently the product assortment online exceeds 11,000 items.

Expanding click and collect service

Bon Preu’s click and collect service started in 2012, allowing customers to collect their groceries at certain stores. The number of click and collect points will be expanded across Catalonia in light of the partnership. The move highlights the group’s commitment to omnichannel retailing, and digital transformation.

Bon Preu's click and collect service. Source: Bon Preu

The online channel in Spain

According to Ocado, online grocery penetration in Spain is less than 2%, much lower than the UK at around 7%. Bon Preu could grow its online market share ahead of other retailers through this partnership. Other international agreements Ocado has secured include: US-based Kroger, and Sweden’s ICA.

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Ocado's retail revenue grew by 11.7% in the first half, whilst Group revenue (Retail and Solutions) was £799.9m up 12.1%.

Ocado Retail revenue was £736.6m and the Solutions business was £63.3m, an increase of 16.8%.

The Ocado Group reported a loss of £(9)m versus a profit before tax of £7.7m last year.

Efficiency and investment

Ocado reported an improvement in deliveries per van per week (DPW) of 5.3% to 189. Wastage as a percentage of sales remained flat at 0.7% whilst picking efficiency saw a slight drop of (0.8)% to 163 units per hour of labour (UPH). It stated that its state of the art ‘bot’ fulfilment centre in Andover is now processing 30,000 orders/ week versus 5,000 just 8 months ago.

Ocado works on a virtuous cycle of investing in the business to innovate, find efficiency and drive growth. In the first half Ocado invested £54m in new customer fulfilment centres and £26m in tech development, contributing to the first half loss. In the full year it has stated that it will invest £210m in the Platform.

Looking ahead to the second half

Ocado will open its new customer fulfilment centre in Erith, London, using the same technology as its Andover site. Erith will be the world’s biggest automated grocery warehouse and mange online orders for both Ocado and Morrisons.

Ocado aims to work at pace to take advantage of a growing online grocery market and international opportunities. As well as opening new fulfilment centres, it will recruit 200-300 additional software engineers to ‘write code faster’. It will develop the capabilities of its Solutions business, improve the Andover style fulfilment solution and prepare for the future, developing technology such as robotic picking.

UK-based Online grocer Ocado has announced its fifth international deal, with US grocery retailer Kroger. Under the terms of the agreement, Ocado's technology will be used in the US exclusively by Kroger, with the US firm also increasing its investment in the company by five percent. This will bring its investment in Ocado to more than six percent. 

Identifying up to 20 sites for development

The deal gives Kroger the rights to use Ocado’s technology for grocery and other food distribution related activities in the US on an exclusive basis. In exchange, Kroger will pay monthly exclusivity and consultancy fees which will offset in part the total fees that are expected to be agreed between the two parties. The two companies are currently working to identify the first three sites in 2018 for the development of new, automated warehouse facilities, while up to a total of 20 sites will be identified over the first three years of the agreement. This highlights the scale of the deal for both companies. 

Ocado’s chief executive, Tim Steiner, said: “The opportunity to partner with Kroger to transform the way in which US customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger’s customers and create value for the stakeholders of both Kroger and Ocado.”

Shifting focus to delivery options in the US

The agreement comes as retailers continue to scale up in the channel. While store pickup options have been a major focus for US retailers, including Kroger, the focus this year has shifted to home delivery. Several retailers have signed agreements with the on-demand delivery platform, Instacart, to build a presence in the channel. Over the last year, these include Costco, Sam's Club, Wegmans and Publix. This year, Walmart has also started to roll-out home delivery in partnership with several companies to 100 metro areas, Amazon is expanding its Prime Now service at Whole Foods Market, while Target is optimising its acquisition of Shipt last year to roll-out same-day delivery.

Kroger digital sales up 90% last year

Kroger has also been partnering with Instacart and other on-demand services for home delivery, with the service available in just under 900 locations. Along with its store pickup model, ClickList, this helped the retailer to grow its digital sales more than 90% during its 2017 financial year. This year, it plans to add around 500 additional stores offering the ClickList service. The future of its existing delivery partnerships remains unclear, although they are likely to be in place for some time as it will take several years for the partnership with Ocado to scale up.

Source: IGD Research

Ocado’s growing number of international partners

The deal with Kroger is the latest in a number of tie-ups announced by Ocado in recent months. Earlier this month, it announced a deal to support Swedish supermarket ICA’s online grocery business, following deals with Canada-based Sobeys and France-based Casino. The retailer also announced an agreement with an unnamed partner last June, making Kroger its fifth international partner.

This latest deal for Ocado means that is has entry into the world’s biggest market, and its role as a provider of retail technology is continuing to gain momentum.

To understand more about how Ocado operates, subscribers can see our insight presentation about its Strategic Outlook.

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