Why is Sobeys closing its Ocado technology warehouse in Calgary?

Sobeys is closing the Calgary warehouse, which uses Ocado's technology, because the Alberta grocery e-commerce market's size and expansion rate have been slower than originally anticipated.

What is the Ocado Smart Platform?

The Ocado Smart Platform is proprietary software and robotics technology that Ocado provides to other companies to manage their online grocery delivery operations.

What financial impact will the Calgary warehouse closure have on Ocado?

Ocado expects to receive £18 million in compensation for the closure, but its fee revenue will be reduced by £7 million in the current financial year.

Home / Business and Economy / Ocado Shares Tumble on Canadian Closure

Ocado Shares Tumble on Canadian Closure

29 Jan

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Summary

Ocado's Canadian partner Sobeys is closing a warehouse using its technology.
The closure is attributed to slower-than-anticipated market expansion.
This follows a similar closure by Ocado's US partner Kroger earlier this year.

Ocado's stock experienced a significant decline of almost 10% after its Canadian collaborator, Sobeys, revealed plans to shutter a fulfillment center that employed the UK company's robotic and automated delivery systems. Sobeys cited the Alberta grocery e-commerce market's size and a slower-than-expected expansion rate as the primary reasons for the closure.

This development occurs less than three months after Ocado's American partner, Kroger, closed three similar warehouses, which had previously impacted Ocado's market valuation. Ocado's strategy largely depends on supplying its "Ocado Smart Platform" technology to retailers worldwide, though it faces increasing competition and a trend among retailers to fulfill online orders from existing stores.

Despite the setback in Alberta, Sobeys will continue using Ocado technology for its "Voilà" online grocery service at two customer fulfillment centers located in the Greater Toronto and Montreal areas. Plans for another facility near Vancouver are currently on hold. Ocado's CEO, Tim Steiner, described these adjustments with Sobeys and Kroger as a "reset" for their North American business, aiming for long-term growth and reintroducing Ocado's updated technology to the market.