The UK developer of automated delivery systems secures an exclusive deal with the South Korean online grocery company.

Ocado Group Plc shares soared over 30% after signing an exclusive deal with Lotte Shopping Co. o expand the South Korean retailer’s online grocery business.

The UK-based developer of automated delivery systems will work with the South Korean retailer to create a network of robotic warehouses using Ocado’s Smart Platform. It will also provide technology for building online orders from Lotte’s stores.

The South Korean retailer operates supermarkets, department stores, hypermarkets and e-commerce within its own country, with more than 1,000 stores nationwide and with a yearly revenue of 15.6 trillion KRW (£9.5 billion).

It is a big deal for Ocado as its share price plummeted in recent months after the surge during the pandemic. Today in early trading, the share rose over 30%, however, they are still down about 60% this year.

Until this week, the UK developer did not secure any new clients for its warehouse technology since expanding a deal with French supermarket chain Auchan in Poland earlier this year. Now, the company has 12 partnerships with grocers in countries including Spain, the US, France, UK and Japan. Some of the grocers include Alcampo in Spain, Kroger Co. in the US, Casino Guichard Perrachon in France, Morrisons in the UK and Aeon in Japan.

Ocado stated the pipeline for the opportunity to secure more partners is strong, and that the firm is pursuing further developments across the Asia Pacific. Tim Steiner, Chief Executive Officer said, “we believe we will sign more deals as our addressable market grows”.

It is clear that the company has struggled to maintain its momentum with the pandemic easing and inflation now rocketing, but the deal with Lotte should create a strong enough point against the disputes about not signing enough new deals.

In addition, as part of the contract, Ocado intends to build six customer fulfilment centres for Lotte by 2028.  The first one is planned to go live in 2025 and for the first time some of the warehouses will be multistorey. The company said the majority of extra capital outflow will come in the year before the first warehouse opening in 2025.

(Sources: investing.com, bloomberg.com, reuters.com)