The rollercoaster ride for investors in online grocery delivery firm Ocado (OCDO) continues following news that the UK company has broadened the scope of its agreement with French hypermarket group Casino.
The two firms signed an MOU (memorandum of understanding) to extend their partnership with the creation of a joint venture to provide logistics services to Ocado Smart Platform-powered CFCs (customer fulfilment centres) in France, making the technology available to all retailers.
Ocado shares rallied around 3% in morning trade on Thursday to £13.84 before falling back to £13.44, an illustration of how volatile the shares have been. The stock remains nearly 14% off one-month highs and is down almost 50% over the past year.
INFLECTION POINT
Ocado and Casino believe there is significant and growing demand for online grocery services across the French market. If right, the French market could present a huge opportunity to leverage the pair’s combined expertise, including Ocado’s UK experience providing multi-retailer CFCs.
As well as providing logistics, the joint venture includes project management for constructing and setting up new CFCs for third party retailers together with recruitment and operational management of the work force. All CFC-related costs will be met by the grocery retail tenants as part of their capital spending, meaning the initial cost to Ocado and Casino will be nil.
Online grocery shopping in France ‘has reached an inflection point, with a huge rise in demand for compelling, affordable and efficient grocery ecommerce propositions’ said Ocado chief executive Tim Steiner.
OPENING UP THE MARKET
Casino will also deploy Ocado’s in-store fulfilment solution across its network of 317 Monoprix urban stores, which sell branded food, beauty, fashion and household products, with delivery vans using the same distinctive advertising as in the UK.
Additionally, Ocado will integrate the Octopia marketplace platform developed by Cdiscount into its own Smart Platform, in order to support Octopia’s strategy of expanding its B2B (business to business) operations. Under the terms of the deal, Ocado has an option to buy a stake in Octopia in the event of a future fundraising.
The expansion of Ocado’s agreement with Casino opens up the whole of the French grocery market and is a vindication of Steiner’s argument that the Smart Platform is ‘one of the most significant steps forward in technology in Ocado's history’ and will bring bigger long-term benefits than are immediately apparent.
At its ‘Ocado Re:Imagined’ event last month the company unveiled its latest innovations including the world's lightest and most efficient grocery fulfilment bot, dramatically lighter grids and robotic arms that automate the most physically demanding job in CFCs by picking groceries directly from the grid.
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