Ocado has penned its second major international deal after joining forces with Canadian grocery giant Sobeys to create an online food business.

Sobeys, which operates more than 1,500 stores and raked in revenues of almost C$24bn (£13.87bn) in its last financial year, will leverage Ocado’s Smart Platform to launch groceries online.

The deal will see Ocado work in partnership with Sobeys to develop a state-of-the-art warehouse in the Greater Toronto region, which will take approximately two years to build.

Ocado and Sobeys will also “consider” developing more customer fulfilment centres in urban parts of Canada.

The online grocer will provide Sobeys with its front-end website functionality, mobile grocery ordering apps and its last-mile routing management technology.

News of the deal comes two months after Ocado agreed a similar tie-up with French grocer Casino – its first major partnership with an overseas business.

Ocado aims to pen “multiple” deals with overseas retailers in the medium term as it steps up plans for its Ocado Solutions division.

Ocado boss Tim Steiner said: “We are delighted to be working with one of the leaders in North American grocery retailing.

“Sobeys is a highly successful and much admired Canadian business and we are proud that they have chosen Ocado Solutions to partner with to build their online grocery business”.

Sobeys president and chief executive Michael Medline added: “Sobeys intends to play to win in Canadian online grocery shopping. We are very excited to bring this best-in-the-world grocery ecommerce experience to Canadian customers.

“This unique and innovative Sobeys and Ocado experience will offer consumers the biggest selection, freshest products and most reliable delivery available anywhere on the planet.

“Our end-to-end ecommerce solution will allow Sobeys to build an online offer in a manner that is profitable and creates exceptional value for our customers, investors and supplier partners.”

Ocado said the deal would create “significant long-term value” for the business, but admitted the tie-up would be “earnings neutral” in its current financial year as costs involved with establishing the partnership offset the initial fees Sobeys will pay.

It added that initial capital expenditure of ÂŁ15m would be required to lay the foundations of the partnership. 

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