Grocery-Packing Robots Are in Demand

Online supermarket wants to license its technology worldwide.

December 03, 2019

TOKYO—Ocado, the British online supermarket that has no stores and delivers exclusively from its own warehouses, has announced it will provide Aeon, Asia’s largest retailer, with its robotic technology for use in and around Tokyo, reports the Washington Post.

Ocado expects the contract to cover sales of about 1.5 billion pounds (1.9 billion USD) by 2025, increasing to 7 billion pounds by 2035. To achieve that, analysts estimate that it will need to build about 20 automated warehouses. That’s the same number predicted in Ocado’s huge U.S. deal with Kroger. A typical warehouse relies on more than 1,000 robots to collect and move crates of groceries, taking them to pickers so the items can be converted into orders. Movement of the robots is managed by a central control system' using artificial intelligence, which allows for a 50-item order to be picked in just minutes.

Ocado Chief Executive Officer Tim Steiner has wanted to license the company’s software in Japan, the world’s fourth-biggest grocery market, according to industry researcher IGD, and there’s potential in other parts of Asia. Ocado’s stock slumped earlier this month on concerns that its Kroger rollout is progressing slower than expected, and the company is facing a challenge from startup Takeoff Technologies. Like Ocado, which was started by three former Goldman Sachs bankers, Takeoff executives have both Wall Street and grocery industry experience. But instead of building giant state-of-the-art warehouses, Takeoff concentrates on making the process of picking groceries directly from supermarket shelves more efficient. Ocado sought to reassure investors recently that the Kroger project was on track, announcing the location of the chain’s sixth warehouse.

When it comes to the capital available for investing, shareholders can take heart. Earlier this year, Ocado sold a 50% stake in its U.K. online grocery business to Marks & Spencer for up to 750 million pounds. Ocado said it had 1 billion pounds of headroom, and with each warehouse costing about 30 million pounds, it can build 30 more.