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Ocado has signed a deal with South Korean consumer conglomerate Lotte Group to roll out its technology in the country.
Under the agreement, Ocado and Lotte will develop a network of Customer Fulfilment Centres (CFCs) across the market, underpinned by Ocado smart platform technology. Ocado’s in-store fulfilment solution will also be rolled out across Lotte’s store estate.
The agreement also plans for the development of a nationwide fulfilment network, with six CFCs planned by 2028, covering multiple geographies and cater to a wide range of online grocery missions.
Ocado says it plans to implement its in-store fulfilment solution in 2024, with the first CFC due to go live in 2025.
Lotte Group is one of the largest business conglomerates in South Korea, with annual revenues of £45bn and interests spanning retail, food, hotels and chemicals.
Lotte Shopping, the largest retail affiliate of Lotte Group, operates department stores, hypermarkets, supermarkets and e-commerce in South Korea, with more than 1,000 stores nationwide and an annual revenue of £9.5bn.
This partnership will also introduce multi-storey CFCs for the first time. This innovation features OSP grids installed on multiple levels, unlocking a wider range of property types for CFCs and enabling more efficient use of space in densely built environments.
The structure of fees agreed with Lotte are similar to those agreed with other international Ocado Solutions partners. Lotte will pay Ocado Solutions certain fees upfront and during the development phase, then ongoing fees linked to both sales achieved and installed capacity within the CFC and service criteria.
The partnership is exclusive in South Korea on the basis of Lotte ordering an agreed schedule of CFC capacity and in the longer term meeting mutually agreed market share targets.
Kim Sang-hyun, CEO of Lotte Shopping, commented: “This partnership with Ocado, one of the most innovative companies worldwide, will be a great opportunity for Lotte Shopping to provide our customers with a new online grocery shopping experience.
“Also I expect this will be the first step for us on the way not only to increasing our competitiveness and presence in the e-grocery market, but also to achieving the leading position in the overall grocery market in Korea.”
Tim Steiner, CEO of Ocado Group, added: “”This partnership brings the Ocado Smart Platform, the most advanced technology for serving online grocery, to one of the most mature ecommerce markets in the world.
“I’m delighted to welcome Lotte to the innovative group of retailers developing their online operations with Ocado. With this new partnership, our unique, proprietary technology will now power the online businesses of twelve major retailers across ten countries worldwide.”
Ocado expects the deal to create significant long term value to the business.
However, the impact of this transaction should be negligible on earnings in the current financial year as no cash fees will be recognised in revenue until operations commence. Ocado Group expects minimal additional capex in 2023 with the majority of additional capex in the 12 months prior to the opening of CFCs, the first of which is expected in 2025.
Ocado shares have leapt 28.9% this morning on the news to 608.6p having fallen as low as 380.3p in October.
Morning update
Diageo has announced it is commencing the fourth, and final, phase of its previously announced return of capital (ROC) programme of up to £4.5bn to shareholders to be completed during its 2023 financial year.
Under the first three phases of the ROC programme, which were completed on 31 January 2020, 11 February 2022 and 5 October 2022 respectively, Diageo repurchased shares with an aggregate value of approximately £3.86bn.
Diageo has announced today that it has entered into a non-discretionary agreement with Merrill Lynch International to enable the company to buy back shares with an aggregate value of up to approximately £0.64bn.
This agreement will commence on 1 November 2022 and will end no later than 24 February 2023. The purpose of the repurchases is to reduce the share capital of Diageo and all shares repurchased under this agreement will be cancelled.
On the markets this morning, the FTSE 100 has jumped 1.5% to 7,197.8pts.
Along with Ocado, risers include Just Eat Takeaway.com, up 7.1% to 1,598.2p, Greencore, up 5.3% to 70.6p and THG, up 4.7% to 55.7p.
Fallers include Bakkavor, down 3.3% to 88p, Kerry Group, down 1.2% to €88.78 and Glanbia, down 0.6% to €11.79.
Yesterday in the City
The FTSE 100 ended Monday down 0.4% at 7,047.6pts.
Fallers included THG, down 5.8% to 53.2p, Domino’s Pizza Group, down 1.9% to 226.2p, FeverTree, down 1.9% to 955.5p, Kerry Group, down 1.6% to €89.86 and McBride, down 0.8% to 24p.
The day’s risers include Hotel Chocolat, up 5.4% to 147p, Just Eat Takeaway.com, up 3.7% to 1,492.8p, Glanbia, up 3.2% to €11.86, Coca-Cola HBC, up 2.7% to 1,902.5p, Finsbury Food Group, up 2.7% to 91.4p, Sainsbury’s, up 2.1% to 194.4p and AG Barr, up 2.1% to 449p.
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