Sentiment towards Ocado (OCDO) has soured year-to-date as pandemic gains fade and the cost-of-living crisis impacts its online grocery delivery business.

But the share price ripened on news of a planned groceries mega-merger between Kroger (KR:NYSE) and Albertsons (ACI:NYSE) which, if it gets the nod from regulators in the US, could benefit the FTSE 100 online grocer-to-e-commerce tech licensor.

Groceries giant Kroger is Ocado’s biggest client and a significant shareholder, having signed an exclusive US partnership with Ocado in 2018 to help ramp up its online grocery business through the construction of robotic warehouses, or customer fulfilment centres (CFCs), which pick and pack grocery orders to be distributed to customers.

Kroger is confident its planned $25 billion takeover of smaller rival Albertsons will be approved by US regulators due to store disposals, though it doesn’t expect the deal to complete until early 2024. However if the combination, which could provide Kroger with the clout to compete with Walmart (WMT:NYSE) and Amazon (AMZN:NASDAQ) is approved, it could open the door for major expansion in the US should Albertons make use of Ocado’s warehousing and automation technology.

The merger buzz has provided a boost for Ocado at a tough time for Ocado Retail, its joint venture with Marks & Spencer (MKS), as cash-strapped customers cut back on spending and switch
to discounters in droves. On 13 September, Ocado Retail reported that its average basket size fell 6% to £116 in the 13 weeks to 28 August.

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