Ocado expands reach with McKesson Canada deal

Ocado shares (LSE: OCDO) saw a 3.4% decline in shares on Wednesday following the announcement of a strategic agreement with McKesson Canada. The online grocer and warehouse technology firm revealed that the deal encompasses the provision of Ocado Intelligent Automation for automated fulfilment technology at a McKesson distribution site.

This collaboration signifies Ocado’s entry into the healthcare distribution and logistics sector, departing from its traditional stronghold in the grocery retail domain. McKesson Canada recognised as a leading Canadian healthcare provider and the largest pharmaceutical distributor in the country, will now benefit from Ocado’s advanced technology.

Ocado’s Chief Executive, Tim Steiner, expressed enthusiasm about this new venture, stating, “Today represents a new and exciting milestone as we bring the amazing benefits of Ocado’s technology to the healthcare distribution and logistics sector.” He emphasised that Ocado’s technology is well-suited for supply chains demanding dense storage, highly accurate inventory management, and secure stock control.

As part of the deal structure, Ocado is set to receive an upfront payment during the construction phase, a final payment upon installation, and an annual fee linked to servicing and maintenance. Despite the current share dip, Steiner remains optimistic, citing the company’s successful track record in the complex online grocery supply chain environment over the past two decades.

Ocado’s shares have fallen 11% year to date and show a 21% decrease year over year.