Ocado brushes off Amazon Fresh and Brexit fears
Ocado's chief executive has downplayed the threat of Amazon Fresh and said that Brexit could actually boost its chances of securing an international tie-up.
Tim Steiner, the boss of Ocado, said that he had seen "absolutely no impact so far" from Amazon Fresh's highly anticipated grocery launch in 69 London postcodes earlier this month.
Mr Steiner brushed aside the threat from the US giant and referred toAmazon Fresh as a "small business" that could lead to the wider online food market growing, which would benefit Ocado. "We will be keeping a close eye on them but we think that they will propel the channel shift of consumers to online," he said.
The City has endlessly speculated that Ocado could be snapped up by Amazon as a way for the US giant to seize Ocado's established software and infrastructure.
"I don't think Amazon launching on their own makes us any less attractive, but we don't want to be bought either, we want to remain an independent British business with global growth", Mr Steiner said.
Ocado has repeatedly disappointed investors by keeping them waiting for a much promised international tie-up. The grocer claimed an international tie-up was “imminent” last September and set a deadline of the end of 2016.
However, Mr Steiner gave investors a glimmer of hope and said that the falling value of sterling following the UK's vote to leave the EU could boost negotiations with international parties as the cost of Ocado's services contract has fallen dramatically.
Mr Steiner said that he was confident Ocado could sign a deal with "multiple parties in the medium term".
The online supermarket has been linked to deals with France’s Carrefour and US group Safeway, but no agreement has yet been struck. In the meantime, Ocado is focusing on renegotiating its existing contract with Morrisons.
Ocado's Pre-tax profits rose by 18pc to £8.5m in the six months to May 15, a slowdown on the 65pc growth the online supermarket enjoyed over the whole of 2015. Retail revenues grew 15pc to £584m, boosted by Ocado's tie-up with Morrisons.
“We have been gaining share in the online grocery market and expect this to continue,” added Mr Steiner. “British shoppers are choosing the benefits of grocery shopping online and we believe that the momentum of channel shift away from bricks and mortar stores will continue.”
Shares in Ocado slipped 12pc following the EU referendum and are down 37pc since early April.
FTSE 250-listed Ocado said it now delivers 225,000 orders a week, an 18pc increase on last year, which has helped to offset food price deflation. Customers now spend £108 on a basket of goods on average, compared with £112 the previous year.
Meanwhile, fresh industry figures have revealed the four major supermarkets suffered a decline in sales and market share the 12 weeks to June 19, while discounters Aldi and Lidl seized record market share.
The German chains now control 10.5pc of the UK grocery market after Aldi’s sales increased by 11.5pc year-on-year and Lidl’s by 13.8pc. The discounters now have market share of 6.1pc and 4.4pc respectively.
More than half of Brits surveyed by Kantar Worldpanel said that they had visited one of the two cut-price supermarkets during those 12 weeks.
Tesco sales fell by 1.3pc during period, Morrisons by 2.4pc, and Sainsbury’s by 1.4pc. Asda continued to underperform its rivals with a significantly heavier 5.9pc slide in sales.
However, the Co-op's turnaround showed signs of bearing fruit with a 2pc rise in sales, helped by the recent launch of its retro branding.
Waitrose was also boosted by the recent launch of its premium 1 brand, its first own-brand range in seven years, with items such as Tanzanian chocolate ice cream and slow-cooked duck leg laska lifting sales by 1.3pc during the 12-week period.
"Waitrose has now had an unbroken period of growth dating back to 2009 – the best run of any retailer outside of the discounters," said Fraser McKevitt, head of retail and consumer insight at Kantar.
Total grocery sales in the UK fell 0.2pc during the 12 weeks - the first decline since January - partly because of the ongoing supermarket price war.
“It is difficult to anticipate anything but a worsening retail scenario along the same lines as what has come before,” said Jon Copestake, retail and consumer goods analyst at the Economist Intelligence Unit, on the impact of the UK's vote to leave the EU.
"Discounters remain best placed because their limited product lines and deep buying practices will keep costs down, enabling their low-price offering to attract more share from consumers suffering from the economic impact of Brexit.
"Mainstream retail will remain hardest hit, although Morrisons may see some benefit from its Amazon tie-in. Sainsbury's may find itself ruing its Home Retail Group takeover, if falling house prices and a tightening of discretionary spending hit non-food sales hard."
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