Ocado boss says food price inflation not affecting online grocer as sales rise

The company said sales could have been higher if there had not been driver shortages and a fire at a distribution centre.

Ocado results show sales were up but heavy investment hit profits (Ocado/PA) (PA Media)

The boss of Ocado has played down suggestions that inflation is hitting food prices.

Tim Steiner said he has no concerns that shoppers will abandon the grocery business, which is seen as one of the more expensive online players in the market, as the cost-of-living crisis grows.

Speaking as the company revealed that losses trebled last year following huge investment in new robots and warehouses, he said: “We tend to kind of follow the market on pricing.

People eat one meal out less a week and actually end up spending more money in a supermarket as they eat an extra meal at home because it’s much cheaper to cook your own food than it is to eat out or order it from Deliveroo

Tim Steiner, Ocado

“So far, we’ve not seen prices rising anything near as much as I’ve been reading about in the newspapers. But we’ll wait and see what happens in the market.”

He added: “We’ve got a hugely diverse range, both at the value ends and moving up into the luxury end.

“People eat one meal out less a week and actually end up spending more money in a supermarket as they eat an extra meal at home because it’s much cheaper to cook your own food than it is to eat out or order it from Deliveroo.

“We’re not expecting to see a reduction in demand based on inflation or based on cost-of-living challenges that we’re very well aware that people are facing.”

His comments came as the online grocer revealed that sales grew last year as it continued to benefit from a surge in internet shopping during the pandemic.

Customer numbers increased 22.4% to 832,000, with the number of orders rising 11.9% to 357,000 although the amount spent per basket fell 5.8% to £129.

But Mr Steiner said the growth could have been higher if there had not been HGV driver shortages, saying the company was “constrained in the second half (of the year) by the ongoing tight labour market in the UK”.

He pointed out that Ocado’s UK operation, which is a 50/50 joint venture with Marks & Spencer, was affected by the reduction in capacity at its Erith distribution centre in Kent due to a fire in July.

Despite the growth in sales, pre-tax losses widened from £52.3 million to £176.9 million in the 12 months to November 28. At a group level, Ocado revenues rose 7.2% to £2.5 billion.

Mr Steiner said: “The past year has further reinforced that demand for online grocery is here to stay.

“In the majority of mature markets, the fastest growing channel is online and to truly win here food retailers need to deliver the best offer with the best economics across all customer missions.”

He added that a new generation of robots will increase capacity and ability even further.

During the year Ocado opened five new distribution hubs across the globe, including two in the US for the first time.

These included three sites in the UK – a mini site in Bristol and two larger ones in Purfleet and Andover – increasing capacity by around 40%.

A further three have opened since the end of November, with a total of nine due to open this year – including six in the US.

There are also plans for a second Zoom site in Canning Town in east London to provide fast deliveries within 60 minutes of ordering, and a further three sites – including two outside the capital – due in the next 18 months.

Ocado also flagged that this year will see its latest court battle with rival AutoStore hit the UK’s High Court where it is claiming patent infringement.

The battle has been played out in courtrooms in the US and Germany, with both sides arguing that the other breached intellectual property laws.

Mr Steiner said he is willing to talk with AutoStore away from courtrooms in an attempt to resolve the issues.

“We’re obviously going to defend our rights to operate our business, defend our ownership of our intellectual property and defend the fact that the products that we sell don’t infringe any valid intellectual property of AutoStore,” he said.

“We are reasonable people, so if somebody wants to realise the folly of their actions and come talk to us about a cessation that means the lawyers don’t continue to make as much money as they do, we’d always be available for a conversation, but we have to we have to defend ourselves against inaction.”

Ocado said “the outcome is uncertain” and several millions of pounds have been spent so far, but they remain “confident in the integrity of our intellectual property portfolio”.