Advanced Automation's Grip on the E-Grocery Industry?Tightens

I’m proud to announce the acquisition of Kindred Systems, a robotics and artificial intelligence (AI) company that develops advanced automation solutions for warehouse environments and fulfillment centers. The 6-year-old company has been purchased by the British e-grocer Ocado Group PLC for $262 million.

For Ocado, robotic-manipulation solutions are crucial for accelerating the development of the automated systems in its fulfillment centers. The acquisition of Kindred — along with robot-arm designer and manufacturer Haddington Dynamics for $25 million — is intended to improve the speed, accuracy, product range and economics for the Ocado Smart Platform.

When I first connected with Ocado’s Head of Corporate Development, Stewart McGuire, during the preliminary negotiations, it was clear that the company was deeply committed to addressing the fundamental inefficiencies that plague today’s e-grocery value chain, from farming all the way to delivery. This industry is ripe for disruption and Ocado is leading the way. Working with Stewart and his colleagues during the acquisition process brought into sharp focus the enormous opportunity we have to rebuild one of the world’s most essential industries with innovative technology solutions.

Ocado’s vision to empower people through technology and provide customers with the best shopping experience reminded me of interactions with another e-commerce trailblazer in Eclipse’s portfolio. Just over a year ago, Shopify announced its acquisition of 6 River Systems, another leading provider of warehouse automation and fulfillment solutions. The $450 million deal was critical to realizing Shopify's plans to build out a network of fulfillment centers throughout the United States to ensure timely deliveries, lower shipping costs and help merchants on its platform match consumer expectations that have been set by the juggernaut Amazon.

Both Kindred and 6 River represent the future of logistics. Both companies epitomize our thesis that the world's most fundamental, physical-world industries are being transformed in the same way that technological innovation has altered every other aspect of our lives. That’s why we've spent the last five years building companies that will enable old-line industries to thrive in the digital age.

Ocado has described its supermarket division as "the world's largest dedicated online grocery retailer." But its parent company, the Ocado Group, defines itself as a "technology company," with entire divisions devoted to engineering and R&D, not just retail.

The way we see it, there is no distinction between technology companies and non-technology companies. That said, retail — and e-groceries in specific — loom large here. Ocado's retail division is growing, with about 800,000 active customers last year, representing at 10 percent increase over 2018 and a 14-percent share of the UK online grocery market.

Ocado's retail arm has also expanded in scope to include dedicated operations for pet supplies and a new one-hour grocery service. Meanwhile, the parent company continues to aggressively pursue its broader goal of getting more supermarket chains around the world to adopt its proprietary platform, furthering its mission to transform the entire retail grocery space.

But whether its kitty litter or fresh fruit, it all comes down to physical objects that must be stocked, sorted, picked and packaged for delivery. And that's where companies like Kindred provides a competitive advantage. Its next-generation robotics combine computer vision to enable exceptional speed and versatility, with AI that enables intelligent grasping, manipulation and autonomous learning.

Hardware, software and data — the three pillars required of any innovation aimed at advancing the complex, physical industries that drive global commerce and prosperity. Kindred's piece-picking robots, called SORT, embody this thesis, and the company's successes leading up to this acquisition only strengthen our conviction.

Over the last few months, Kindred has announced some impressive accomplishments. In June, Gap Inc. announced the purchase of 73 SORT units, on top of the 33 already installed, to keep up with the surge in online shopping and physical-distancing requirements due to Covid-19. In August, another leading apparel brand, American Eagle Outfitters, also expanded its fleet of SORT robots by more than two dozen units.

And then, in October, Kindred reported that its robots reached a major milestone, picking a combined total of 100 million retail units since market launch in 2017. We congratulate Kindred CEO Marin Tchakarov and his entire team on this next chapter in Kindred's journey. We also share the excitement felt by the company's other investors. 

For our part, we knew deep expertise and experience would be critical to building Kindred into a successful company. They’ve been in good hands with Eclipse Partner Pierre Lamond.

"It has been gratifying helping Kindred grow its business and establish a strong reputation among retail and logistics companies," says Pierre, who also chairs Kindred’s board of directors. "The rise of e-commerce has put immense pressure on these companies to innovate their fulfillment operations, and the adoption of advanced automation to meet this challenge will only increase in the years ahead." 

We know that digital transformation is just beginning to take hold across industries. And this grip will only get firmer and smarter, just like the robots Ocado is about to arm its operations with.

__________________________________________________________________________

Follow Eclipse Ventures on LinkedIn. We publish new articles frequently!