Business

Ocado Group breaks into Japanese market with Aeon deal

Shares up 11% as UK ecommerce firm licenses online grocery system to Japanese retailer

The Ocado Customer Fulfilment Centre in Hatfield on the outskirts of London. Photograph: Dylan Martinez/File Photo/Reuters

Fri Nov 29 2019 - 18:02

Ocado Group Plc licensed its online grocery system to Japanese retailer Aeon, expanding the UK ecommerce company's technology to a new market in one of its biggest overseas deals.

Ocado’s shares surged as much as 11 per cent early on Friday in London, the most since July.

The British company said it would develop a national fulfilment network to serve Japanese consumers, with expected sales capacity of around a trillion yen (€8.2 billion) by 2035. The partners will build automated warehouses like those Ocado has set up in the UK, where robots fill customer orders for home delivery.

The deal expands Ocado's reach into Asia as it focuses on developing its technology operations after Marks & Spencer Group bought a 50 per cent stake in the company's grocery business. Ocado also has licensing deals with Kroger in the US, Sobeys in Canada, Coles Group in Australia, Casino Guichard-Perrachon in France and others.

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Chiba, Japan-based Aeon operates more than 21,000 stores, including supermarkets, convenience stores, clothing chains and general merchandise retailers, across 14 countries. The agreement covers the Japanese market, Ocado said, though it's also casting its eye across the region.

"Asia is an area of opportunity," chief financial officer Duncan Tatton-Brown said on a call. "There will come a day when entering China is sensible, but not yet."

The UK company said the deal would lift operating costs by £25 million (€29.3 million) in the 2020 financial year.

The latest agreement provides some reassurance to investors after a fire levelled one of Ocado’s warehouses in the UK in February. The shares have risen almost 70 per cent so far this year. – Bloomberg

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