Canada Markets close in 3 hrs 33 mins

Ocado Invests in Indoor Farming in Step Beyond Grocery Tech

Ellen Milligan
Ocado Invests in Indoor Farming in Step Beyond Grocery Tech

(Bloomberg) -- Ocado Group Plc is investing in a pair of vertical-farming ventures as the U.K. maker of online retail technologies branches out following its mammoth deal with Marks & Spencer Group Plc.

The company said Monday it bought a 58% stake in Jones Foods Co., Europe’s largest operating vertical farm, based in Scunthorpe, England. Ocado will use its know-how in automation and distribution to make the herb grower more efficient and potentially integrate it with Ocado Zoom to deliver fresh products to customers within an hour.

The online retailer is also helping set up a company called Infinite Acres that will use artificial intelligence, climate control systems and other tools to design infrastructure for environmentally friendly vertical farms. The joint venture includes U.S.-based 80 Acres Urban Agriculture Inc. and Dutch firm Priva Holding BV.

“Vertical farming has always been on our wish-list for a lot of strategic reasons, but we were really busy doing other core things,” Stewart McGuire, Ocado Group’s head of corporate development, said in an interview. The two investments combined total 17 million pounds ($22 million).

The shares gained as much as 2.6% in early trading in London.

Ocado has struck technology licensing deals with U.S. grocer Kroger Co., France’s Casino Guichard-Perrachon SA and others in the last few years. It’s also entering a joint venture with U.K. grocer M&S, which agreed to pay 750 million pounds for a 50% stake in Ocado’s retail business in February.

The company has been evaluating new fields for growth, and vertical farming is its first step away from its main business.

“The sale of half of our retail business to M&S changed our ability to invest ourselves in spin-out opportunities and to accelerate what we wanted to do,” McGuire said.

Vertical Farming

Vertical farming is an emerging industry in which crops are grown in controlled indoor environments, reducing waste and the use of water and pesticides. Jones Foods’s farm is partially powered using solar energy and it’s planning to use more renewable energy in the future.

There’s been a series of high-profile investments in the industry in recent years. Alphabet Inc.’s Google Ventures and Uber Technologies Inc. Chief Executive Officer Dara Khosrowshahi both bought into New-York based urban farming startup Bowery Farming Inc. in December.

San Francisco-based Plenty Inc. has raised $200 million from the Japanese conglomerate SoftBank Group Corp.’s Vision Fund and is backed by funds that invest on behalf of Eric Schmidt and Amazon.com Inc. CEO Jeff Bezos.

“Ocado is a technology company now so we’re not interested in becoming the world’s farmer, but we are interested in ensuring that people who have food supply chains have the best technology and the ability to operate that if need be,” McGuire said.

Frank the Robot

Jones Foods’s farm currently deploys just one robot, named Frank, which moves trays of coriander, parsley and basil throughout the supply chain, from seed to germination to harvest. Ocado plans to deploy more automated systems at the farm to streamline its product flow and scale it up.

Once its U.K. farm is developed, the partners are looking to build more farms in the rest of Europe and the world.

This is just the start of Ocado’s ventures outside of retail, the company said. It sees potential to adapt its technology to industries ranging from port and railyard operations and parcel sorting to baggage handling and parking centers.

(Updates with shares in fifth paragraph.)

--With assistance from Deirdre Hipwell.

To contact the reporter on this story: Ellen Milligan in London at emilligan11@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman, Marthe Fourcade

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.