Ocado spends $287m in retail robotics double-swoop

UK e-grocer and retail tech firm Ocado has bullishly revved up its quarterly profit forecasts and unveiled two acquisitions aimed at strengthening its showing in robotics.

The Hertfordshire company says it is buying San Francisco-based Kindred Systems, which designs picking and packing robots for online fulfillment centers, for a hefty $262 million. It is also scooping up Las Vegas-based robot arm company Haddington Dynamics for a comparatively grounded $25 million. Both deals are subject to US regulatory approval.

“We consider the opportunities for robotic manipulation solutions to be significant, both for [our software platform] clients and across the fast-growing online retail and logistics sectors,” said Ocado CEO Tim Steiner during an earnings call to analysts.

Steiner said the company has “made meaningful progress in developing the machine learning, computer vision, and engineering systems required” for robotic online retail, but added that the acquisitions are intended to “accelerate the development” of the company’s robot picking solutions, including “improving their speed, accuracy, product range, and economics.”

Kindred robotic spirits

Kindred and Haddington, according to Steiner, could bring opportunities to enter new markets for robotic solutions outside of grocery “across the general merchandise and logistics sectors.”

What a difference a year makes. Ocado’s 2019 began with a disastrous fire at its newly built, high-tech Hampshire warehouse — an event that could have downed other companies, but now seems like ancient history. Within weeks of that fallout Ocado had signed a £1.5 billion ($1.94 billion) joint venture deal with retailer Marks & Spencer, which acquired 50% of Ocado’s UK retail business. That partnership was up and running by this September.

Other tech and fulfilment deals have been struck with North American retailers, including Canada’s Sobeys and the US’s Kroger. That said, demand surges can still be hard to meet while online retailers hurry to lay down their supply chains. Back in March, Ocado had to temporarily suspend website activity and turn away new orders.

Early stage eGrocery optimism

Even so, public and private investors have been undeterred by any such road bumps, as attested to by AgFunder research. The first half of 2020 saw startups in eGrocery (an AgFunder-defined category) continuing their reign as the best-funded agrifoodtech subsector.

One of the single biggest deals of the year so far — at $500 million — went to an eGrocer: China’s MissFresh. And the geographic footprint of the sector is expansive; eGrocery companies funded in H1 2020 hailed from the US (Instacart), India (BigBasket), Saudi Arabia (Nana Direct), Italy (Tannico), and Mexico (Jüsto). [Disclosure: AgFunder is the parent company of AFN. Jüsto is an AgFunder portfolio company.]

Still, not all market observers are as confident about Ocado’s twin purchases. Speaking to the Evening Standard, Clive Black, an analyst at Shore Capital who has been consistently bearish about the firm for years, said “at the current rate of cash burn, pencil in another fundraise down the line.”