Kroger Link-up Boosts Brit-Based Ocado

Ocado shares have surged more than 60% after the U.K.-based online retailer signed an exclusive deal to provide its grocery delivery service to U.S. retailer Kroger (NYSE: KR)

Kroger, which had sales of $122 billion U.S. in its last fiscal year, will take a 5% stake in the British online delivery firm as part of the agreement.

Luke Jensen, CEO of Ocado Solutions, told the media on Thursday that getting into the U.S. market would prove a tremendous opportunity as Americans warmed to the idea of online deliveries.

"The grocery online market in the U.S. has been relatively underdeveloped compared with some European markets. It represents less than 2% of the total grocer market, versus 7.5% in the U.K., but is now growing very fast and is an enormous growth market," he said.

Jensen added that the recent Amazon tie-up with Whole Foods proved that the U.S. grocery market is changing and that people want to both order online and shop in-store.

The Ocado CEO said his firm will work with Kroger to roll out up to 20 robotic warehouses across the U.S. over the first three years of the agreement.

The deal is the latest in a series of tie-ups announced by Ocado recently. It has already inked agreements with Sweden's ICA, Canada's Sobey's and French supermarket operator Casino.

Kroger and Ocado are already working to identify the first three sites in 2018 for development of new, automated warehouse facilities in the U.S., and will identify up to a total of 20 over the first three years of the agreement.

Kroger shares rocketed $1.01, or 4.1% to $25.95 Thursday morning