Published: Tue, January 23, 2018
Markets | By Terence Owen

Ocado partners with Canada's Sobeys

Ocado partners with Canada's Sobeys

Ocado Group PLC (LON:OCDO) is to develop an online grocery business in Canada on partnership with the country's second largest food retailer, Sobeys Inc to use the Ocado Smart Platform, a deal which it expects will create "significant long term value to the business".

Ocado's shares were up 10% in early trading on Monday at 456.10 pence per share.

The FTSE 250 firm announced a separate global deal in early June, but it has so far kept the customer anonymous.

French supermarket Groupe Casino signed a deal with Ocado a year ago to use its grocery e-commerce platform to develop its online business.

The first Customer Fulfilment Centre (CFC) will be built in the Greater Toronto Area, and will take roughly two years to complete. They will also, Ocado said, consider developing other centres in urban areas in Canada.

The partnership will bring a new website for online grocery shopping plus mobile grocery ordering apps, while Ocado's latest automated warehouse geared towards e-commerce will be built in Toronto.

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The tie-up will involve Ocado helping launch Sobeys' online grocer service, and include investment by Ocado installing its grid and robots.

In a statement, the FTSE 250 listed online grocer noted that Sobeys - which is owned by Tornoto listed Empire Foods Limited (TSE:EMP.A) operates more than 1,500 stores across Canada, generating sales of C$23.8bn in fiscal 2017.

Ocado said it was "delighted" to be working with one of the leading retailers on the continent.

The initial fees will be offset by the costs linked to establishing the partnership and integrating its software platform with Sobeys' systems, the United Kingdom company said.

Ocado said it expects the deal to be earnings neutral in the financial year ending in November and sees additional capital expenditure of 15 million pounds ($20.83 million), with more spending expected in future years.

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