Ahold ups stakes in US grocery war

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Ahold Delhaize headquarters is seen in Zaandam, Netherlands August 23, 2018. REUTERS/Eva Plevier

EINDHOVEN, Netherlands/NEW YORK (Reuters) – Grocery group Ahold Delhaize will roll out small, automated warehouses to speed order picking and cut delivery times, Reuters has learned, as it revamps its ecommerce business in response to rising competition in a fast-growing sector.

At an investor event on Nov 13, the world’s eighth biggest food retailer is set to showcase a partnership that will allow it to automate order collection at mini “robot supermarkets” attached to the stores of its US chains like Stop & Shop.

That marks a departure from its previous strategy of relying more on manual labor at bigger warehouses, or on a mixture of man and machine, to meet online food orders.

Now Netherlands-based Ahold Delhaize is teaming up with Takeoff, a start-up which builds small warehouses that stack groceries to the ceiling to save space and use robot arms to assemble shoppers’ orders for items such as beer, milk, bread and fruit.

The warehouses serve as condensed supermarkets that can supply several stores with click-and-collect orders. They cost about $3 million to build, which Takeoff says is less than the cost of a typical store revamp.

“Ahold is preparing for a major push,” Curt Avallone, Takeoff’s chief development officer who led digital innovation at Stop & Shop until 2003, told Reuters.

“If it goes well, both from their side and our side, the hope is we would rapidly be able to build quite a few.”

Ahold chief executive Frans Muller confirmed the deal on Wednesday and said it should help expand online faster and at a lower cost than with standalone warehouses.

“With the robotized solution we can optimize those picking costs and be closer with micro fulfillment to our catchment areas. We also reduce the cost of the last mile,” he said.

Ahold’s shares jumped 5 percent on Wednesday as it reported third-quarter results that beat analysts’ forecasts, lifted by strong online sales and growth in its key markets.

Ahold’s move is the latest salvo in a war for the online grocery market that has escalated since Amazon’s takeover of Whole Foods last year.

Whole Foods since launched same-day grocery delivery with Amazon’s Prime Now in more than 60 cities. Other retailers are also racing to respond: Walmart will test Alert Innovation’s Alphabot automated grocery picking at a store in New Hampshire, and Kroger has teamed up with British online grocery expert Ocado.

Kroger said it will disclose the location for the first three U.S. sites out of a planned 20 high-tech Ocado warehouses in the next couple of weeks. They will take about two years to build and each cost Ocado about $39 million.

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