Ocado branches out beyond groceries for first time in Canadian expansion

Ocado has announced its first deal beyond retail with the Canadian business of McKesson Corp, the country’s largest pharmaceutical distributor.

Ocado, most known for its grocery delivery services in the UK, on Wednesday said that its Ocado Intelligent Automation robotics unit will provide automated fulfilment technology at a distribution site for McKesson Canada.

The deal will see Ocado sell its warehouse fulfilment technology in a sector outside of grocery retail for the first time, while the company will also provide the AI-powered software applications necessary to operate that technology long term.

Ocado said that it will receive upfront fees during the construction process with the final payment upon final installation. Ocado will also receive an ongoing annual fee related to the servicing and maintenance of the technology.
The company noted that the impact of this transaction will be minimal on cash flow and earnings in the current financial year with it only set to become profitable in the 2025 financial year “when installation is complete and we recognise the income, costs and profit.”

Tim Steiner, chief executive officer of Ocado Group, said that the deal represents a realisation of the company’s potential for expansion outside of the grocery sector. He said: “Today represents a new and exciting milestone as we bring the amazing benefits of Ocado’s technology to the healthcare distribution and logistics sector.

“Our technology is ideally suited to supply chains that require dense storage, highly accurate inventory management and secure stock control. lt has been proven over 20 years in one of the most complex supply chain environments, online grocery, and we’re now bringing our experience and IP to more sectors. We are very pleased to be expanding in Canada.”

Ocado has tech deals in place with 12 grocery retailers including Kroger in the US, Casino in France, and holds a 50 per cent share of Ocado Retail in the UK alongside Marks & Spencer.

In June, it was reported that Ocado was being eyed for takeover by US-based firms including Amazon. There has been little news on this potential sale since.

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