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LONDON (Reuters) – British online supermarket pioneer Ocado has signed a partnership agreement with Australian group Coles, its fifth major overseas deal in less than 18 months, allowing retailers around the world to raise the challenge of online competition.
The agreement will allow Ocado's technology and software to expand Coles Online's grocery business in Australia.
Two robotic distribution centers – or customer processing centers (CFCs) as Ocado calls them – will be built and put into operation four years from now, one in Sydney and the other in Melbourne.
The Coles action rose by 3.1%. Although Ocado occupies a 1% share of the UK grocery market, its market valuation of £ 8.7 billion is based on its technology business: providing international retailers with infrastructure and services. the software needed to develop their own online grocery business in order to compete with their Amazon tastes.
After struggling for years to generate profits, it has prospered since the end of 2017 by signing contracts with the American group Kroger Co, Casino in France, Sobeys in Canada and the ICA group in Sweden.
Coles is one of the largest Australian retailers. It operates 818 supermarkets, 911 liquor stores and 712 Coles Express service stations across the country. It achieved a turnover of the year 2018 of 39.4 billion Australian dollars. He is already an online retail market leader in grocery stores in Australia with Coles Online, with an annual business turnover greater than $ 1 billion.
The Coles Online program serves customers in major Australian urban areas by placing orders through Ocado's CFCs, while customers in less populated areas benefit from Ocado's store selection software.
Coles will pay the upfront fees to Ocado at the time of signing and during the development phase, then the ongoing fees related to both the sales made and the installed capacity under the EFA and the service criteria. The agreement is exclusive in Australia as long as certain conditions are maintained.
Ocado said it expects this agreement to create significant long-term value for the company. The result would be negative for the current year, as no cash commission will be recognized in the proceeds until the start of operations. Ocado expects minimal additional investment spending for the full year of 2019, with the majority of additional investments in the 18 months prior to the opening of CFCs.
The Coles agreement comes one month after Ocado announced the creation of a £ 1.5 billion distribution joint venture in its home market with Marks and Spencer.
(Report by James Davey, edited by Leslie Adler)
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