Ocado has hailed its landmark deal with French retailer Casino as vindication of its multimillion investment in robot-powered technology.
In today’s shock announcement, Ocado revealed it would “shortly” start building a fulfilment centre for Casino using its trademarked technology in the Paris area.
The site will be even bigger than its 240,000 sq ft site in Andover, which first pioneered the use of a robot-powered, grid-style picking system at the end of 2016 and is capable of processing 65,000 orders a week.
Ocado chief financial officer Duncan Tatton-Brown hailed the move as “quite a significant development” for its technology arm. He expected the deal to fuel more such discussions with retailers.
“As I’ve said before, we expect to sign multiple deals in the medium term and this announcement won’t do any harm to our prospects,” he told a media call this morning.
Since opening its Andover site last November, Ocado has been showcasing its robot-powered technology as a key selling point of its third-party service for retailers.
The buy-in from Casino will no doubt come as a relief to Ocado’s management team, which has come under scrutiny for the cost of the Andover site - having been forced to plough an extra £2m into the project in September.
Under the deal, Casino will commission Ocado to build the site in Paris by 2020 and has agreed to pay for an undisclosed number of additional fulfilment centres as its online grocery business grows. It will also pay to use Ocado’s routing software for its home delivery service and will use its web platform to create a customer-facing site. In return, Casino will have exclusivity on the technology in France.
Tatton-Brown said the deal would be “earnings neutral” in 2018, when it expects to fork out £15m on the project, but would create “significant long-term value” in future years.
He added that the “state-of-the-art” technology would enable Casino to become the largest online grocery retailer in France, where home delivery is in its infancy.
“France is quite a well-developed market with online share probably around 5% or 6%,” said Tatton-Brown. “What’s less developed is home delivery because primarily they have click & collect services where customers drive to pick up the groceries themselves.
“Casino has an ambition to develop the home delivery model so our solution, which has shown you can make money delivering to customers in the UK with a high quality of service, is something Casino was interested in.”