LONDON/LOS ANGELES (Reuters) - U.S. supermarket chain Kroger Co (KR.N) struck a deal with British online grocer Ocado (OCDO.L) to build and deliver from robot-staffed warehouses, upping the ante in Kroger’s battle with Amazon.com Inc (AMZN.O) and sending Ocado shares rocketing.
The U.S. grocery industry is dominated by Walmart Inc (WMT.N) and Kroger but has been in upheaval since last summer, when Amazon’s $13.7 billion purchase of Whole Foods sent supermarkets scrambling to match the online retailer on home delivery.
The Kroger deal announced on Thursday was Ocado’s first in the United States and the British company’s fourth major agreement with retailers in six months.
Ocado shares soared as much as 80 percent to an all-time high. Kroger shares were last up 1.6 percent on the deal, with investors reassured by the U.S. company saying the move would not dampen expected earnings for 2018 and 2019.
Kroger Chief Executive Rodney McMullen in a statement called the partnership “transformative” and said it was a step toward the company’s goal of giving customers anything, anytime, anywhere.
U.S. supermarkets fear Amazon could apply its distribution know-how to Whole Foods, quickly turning the existing stores into a grocery delivery network.
“The most critical consequence of today’s news is the need for other major U.S. players to react,” said Jefferies analyst James Grzinic. “The risk is that today’s news will accelerate that shift, and on less rational terms.”
Britain was one of the first countries to see widespread adoption of online grocery shopping, giving its retailers a head start in developing technology to deal with the challenges of delivering food, especially fresh and frozen goods.
E-commerce already accounts for 7.5 percent of sales of packaged consumer goods in Britain,
