LONDON (Reuters) - British online grocer Ocado (LON:OCDO) will open its first "mini" robotic warehouse in Bristol, western England, by early 2021, it said on Thursday, signaling its warehouse technology can be rolled out more quickly and in a bigger range of locations.
While Ocado's retail business holds only a 1.4% share of Britain's grocery market, its technology has powered the group's 8.1 billion pound ($10.4 billion) stock market valuation, enabling it to secure partnership deals with supermarket groups around the world, including Kroger (NYSE:KR) in the United States.
"This is not about Bristol, but about what it says for its technology biz," said Bernstein analyst Bruno Monteyne.
He said the site going live as quickly as 13 months is half the typical deployment time for a larger warehouse, indicating that warehouses overseas could also be developed at a faster rate.
Identifying Bristol as big enough to sustain what Ocado calls a "customer fulfillment center" (CFC) also triples the number of addressable cities for Ocado.
"It is about reducing execution risk, speeding up deployment and extending materially the applicable territories for the international deals," said Monteyne.
Shares in Ocado were up 0.9% at 0903 GMT, extending gains this year to 49%.
The Bristol CFC, which is being built in an existing 150,000 square feet warehouse, will be Ocado's sixth and is expected to go live at the end of 2020 or early 2021. It will support around 815 jobs in the local area.
The mini CFC will have the capacity for over 30,000 orders per week compared to about 85,000 orders per week expected from Ocado CFC 5, currently under construction at Purfleet, east of London.
Despite its smaller size, Ocado expects the Bristol site to achieve productivity close to that of its standard facilities.
Ocado and Marks & Spencer completed a 1.5 billion pound joint venture deal in August, creating Ocado Retail and signaling the end of Ocado's supply contract with upmarket supermarket chain Waitrose in September 2020.
Ocado customers in Bristol and the surrounding area will have a wider range of options for delivery, including placing orders for delivery later the same day.
"In the future, mini-sized CFCs can complement the standard-sized CFCs to build a fulfillment network including in areas not suitable for larger CFCs," Ocado said.
Ocado Retail is scheduled to update on fourth quarter trading on Dec. 12.
