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Business Analysis & Features

Green grocer to leave Ocado as sales soar

Co-founder Jason Gissing retires, as signs suggest this may finally be the year firm turns profitable

When shareholders gather for Ocado's annual meeting in May, they are likely to be commiserating and celebrating in equal measure.

In what has been one of the busiest years in its history, investors will raise a glass to the 400 per cent increase in the share price.

They will also be saying farewell to co-founder Jason Gissing, who will leave after 14 years setting up and running the online grocery business. However, he will be unable to say he left the company he started with two other former Goldman bankers, Tim Steiner and Jonathan Faiman, in a profitable position, despite early signs suggesting this may finally be the year it goes from red into black.

Mr Steiner told the market yesterday that all the signs point to next year as the time for profits, although he also suggested details about a new distribution centre could be unveiled within the next 12 months, which could no doubt be the next big expense to eat into the bottom line.

Sales were up 17.2 per cent to £843m in the year to the beginning of December. However, pre-tax losses increased from £600,000 to £12.5m, as distribution costs rose 16.7 per cent and administrative costs were up 42 per cent.

Not that Mr Gissing will care that greatly that losses have increased. Along with Mr Steiner, the management believe investment and expansion, at the expense of profits, is the key.

Mr Steiner said: "If we wanted to turn a profit instantly, we could change our focus and do that, but we are investing in growth. Shareholders are asking us to invest for the opportunity to be part of a global shift of scale far beyond the size of Ocado." Mr Gissing tends to agree with the sentiments and had already said he did not want to be around when Ocado is the global player he hopes for.

Last year, the company took a step in the right direction to achieving that lofty ambition, with a £210m deal with Morrisons catapulting the share price and showing other businesses around the world what service Ocado has to offer – although no further deals have been forthcoming.

Mr Steiner said the deal with Morrisons has been a success with few hiccups.

He also revealed relations between Ocado and Waitrose, its former exclusive business partner, had thawed after a frosty year where the supermarket's managing director, Mark Price, threatened possible legal action over the deal with its rival.

However, it is unlikely Mr Gissing played much part in healing those wounds. The gaffe-prone commercial director once said Waitrose was "a pain in the ass to deal with". In another ill-thought comment, he said: "I would rather shoot myself than be a finance director of a listed company."

But then numbers don't interest him, despite spending eight years as a bond trader at Goldman Sachs, and instead he prefers people.

He will naturally want Ocado to succeed – he walks away with shares worth around £90m – but his former job title of director of people, culture and communication suited him better than anything too financial. The title allowed him to develop the tone of the business when communicating with customers, signing off each email, whether it be offering free champagne for a fifth visit, or money off to entice customers back.

Before announcing his plans to leave, the company explained that marketing had been honed to such a degree that 40 per cent of the 30,000 extra customers last year were placing their first order, rather than long-term absentees.

The company, under Mr Gissing's direction, wanted to move away from targeting loss-making customers who only use discount codes, and try to keep new ones instead. Little touches like texting customers the name of their delivery driver and any substitutions came from his office.

But it was introducing energy-saving initiatives that staff said brought out the most passion, allowing him to help turn Ocado into one of the country's greenest firms.

His new career will be spent focusing on environmental issues full time and he will no doubt be approached by dozens of organisations for his expertise and enthusiasm.

Although perhaps he could want a career in politics to concentrate on his ethical agenda. After all, if he wants any advice on getting ahead in Westminster, he can always call on his former Bullingdon club contemporary, and Chancellor of the Exchequer, George Osborne to put in a good word.