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Kroger Strikes Deal With British Online Grocery To Bring Robotic Distribution Centers To The U.S.

Cincinnati-based The Kroger Co. has inked a partnership with Ocado, a British online grocer, that will bring Ocado's digital and robotic technology to the task of helping Kroger compete with the likes of Amazon.

An Ocado robotic grocery distribution center in the UK

The Ocado Smart Platform includes online ordering and home delivery capabilities, but at its heart are fully automated fulfillment centers, the BBC reports.

Kroger and Ocado are already working to identify this year the first three sites for development of these robotic warehouse facilities in the U.S., and will identify up to a total of 20 over the first three years of the agreement.

The partners are aiming for disruption.

"As we work through the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the U.S. in the years to come," Ocado Group CEO Tim Steiner said in a statement.

"Ocado’s current logistics and technical expertise ... allows Kroger to potentially leapfrog both Walmart and Amazon in this space," Kantar Consulting Vice President of Retail and Shopper Insights Diana Sheehan writes in Chain Store Age.

The robots pack groceries for customer orders without human interaction. Thanks to its complex logistics system and robotic warehouses, Ocado has built a reputation in Britain for fast deliveries, CNN reports.

As part of the deal, Kroger will increase its existing investment in Ocado to a more than 6% stake, and Ocado will partner exclusively with Kroger in the U.S. The British grocer was established in the early 2000s and has over 580,000 active customers. 

E-commerce accounts for a much greater share of the grocery business in the U.K. than in the United States, 7.5% and 1.5%, respectively, as of late last year, according to data firm Kantar World Panel.

But Kantar also predicts the share in the U.S. will grow rapidly, reaching 8% of total grocery sales by 2025. Presumably Kroger is vying for a slice of that growth.