Ocado strikes first fulfilment deal outside of grocery

Ocado today announced it has reached a deal to open an automated distribution site for healthcare business McKesson Canada.

The deal with McKesson will see Ocado Intelligent Automation (OAI) provide “the AI-powered software applications necessary to operate” its warehouse fulfilment technology “long term”.

CEO of Ocado Group Tim Steiner 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.”

He added: “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.”

OAI has had an existing partnership with Sobeys, Canada’s second largest food retailer, since May 2020.

Unlike its previous third-party deals, Ocado said the McKesson Canada deal will see the healthcare provider pay fees upfront during the construction process, with the final payment being made once the site is completed.

Ocado Group will also receive “an ongoing annual fee related to the servicing and maintenance of the technology.”

Ocado said: “The impact of this transaction will be minimal on cash flow and earnings in the current year.

“This is a capital-light deal which will be cash neutral throughout the development phase, and cash and EBITDA positive in FY25 when installation is complete and we recognise the income, costs and profit.”