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Kroger will open its second Customer Fulfilment Centre (CFC), as part of its strategic partnership with UK-based Ocado, in Groveland, Lake County, Florida.

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Ocado plans to build a state-of-the-art customer fulfilment centre to replace the Andover facility that burnt down in February.

In Ocado's recent trading statement, CEO Tim Steiner said, “The fire has been a setback, but it will be only a temporary one. Over the last few weeks, our teams have been working hard to minimise any disruption to our customers and we will build a state-of-the-art replacement facility that reflects all the innovations and improvements we have made since Andover opened in November 2016.”

Solid results, despite the setback

The news came as the company saw strong growth of 11.2% in the 13 weeks to 3rd March 2019. However, numbers were impacted by the fire in February, equivalent to almost 1.2% of sales over the quarter.

Following the fire at Ocado’s Andover CFC in February, Ocado announced that efforts are being made to minimise the disruption to consumers through providing more CFC capacity, including growing its capacity in its Erith CFC earlier than originally planned.

Initial findings…

Ocado is undertaking a thorough examination of the causes of the Andover fire, stating “Our initial assessment of the reasons for the fire gives us confidence that, going forward, there are no significant implications for the risk profile of the assets or the viability of our model and therefore for either Ocado Retail or Ocado Group.”

The service called ‘Ocado Zoom’ will be tested in West London.

Customers can now place orders with Ocado for delivery within an hour. The new service is caters to smaller order sizes and was first announced in February. The Zoom service has been compared to Amazon’s Prime Now, a comparison that Ocado is keen to distance itself from, stating that the service is a response to customer demand.

Minimum order value

There are 10,000 SKUs available to choose from, and orders can be delivered within the hour, or later the same day, with delivery slots subject to availability. There is a minimum order value of £15, and delivery charges are applied at the checkout.

Environmentally friendly delivery

Ocado is offering a one-hour grocery delivery powered by the delivery platform Stuart. Stuart is a delivery fleet company that offers a variety of deliver methods, from bikes to cars to ensure the delivery arrives promptly. Stuart was founded in 2015 and is focused on moving goods around major urban centres in an environmentally friendly way. Stuart’s technology is integrated with Ocado’s ordering process to ensure the best suited delivery method is used for each job.

David Saenz, chief operating officer at Stuart, said “By bringing together both companies’ cutting-edge technologies, we have built a service which facilitates the grocery shopping experience and gives consumers quicker and more flexible access to grocery shopping, matching their own fast-paced lives. This sector is quickly evolving, and we are excited to be at the forefront of it.”

M&S will gain a 50% share in Ocado’s UK retail business for £750m.

The joint venture will be known as Ocado and will deliver M&S products from September 2020 at the latest, when the current deal with Waitrose & Partners is due to expire. The deal will allow Ocado to supply its own branded products, M&S items and third-party branded items.

Ocado currently supplies about 4,500 Waitrose branded products, just under 10% of their 50,000-item product range. The joint venture would see these SKUs replaced with M&S goods. In a statement today, M&S referred to the venture as “a strategically compelling route to unlock growth for M&S Food through a profitable, scalable presence in the online grocery market, the UK’s fastest growing channel.”

The view from the top

M&S chief executive Steve Rowe said, “I have always believed that M&S Food could and should be online. Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth.”

Ocado CEO Tim Steiner said, “The combination of Ocado and M&S will allow us to grow faster, add more jobs, and create more value, as we lead the channel shift to e-commerce here in the UK. We are very excited by the many opportunities ahead.”

Supporting Ocado’s international ambitions

The joint venture will help Ocado implement existing international agreements to roll out the Smart Platform and build customer fulfilment centres (CFCs) e.g. Kroger in the US, Sobey’s in Canada, ICA in Sweden and Casino in France. In 2019, Ocado is forecasting capital expenditure of £350m driven by these Solutions agreements.

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