Robot army helps Ocado to profits: how ‘food geek’ boss Hannah Gibson is mending relationship with M&S

The sight of a purple Ocado van delivering orders is a clear sign of a smart neighborhood.

Founded in January 2000, the online grocer knows what its affluent, middle-class customers like to eat when they choose healthy options – and when they treat themselves.

But Ocado Retail’s other key relationship, with Marks & Spencer, hasn’t always been so happy.

The joint venture between the High Street giant and the tech group’s supermarket arm, a deal struck in September 2020, should have been a match made in Heaven.

Instead, M&S was for some time vocal in its criticism of Ocado’s inability to exploit the knowledge of its customer base.

Archie Norman, chairman of M&S, said he was ‘not happy’ at the 2023 annual meeting.

But as Ocado prepares to celebrate its 25th anniversary, the dispute is coming to an end, says Hannah Gibson, the chief executive of Ocado Retail.

The attention surrounding M&S’s recent comeback, based on clothing and food, is contributing to Ocado Retail’s revival.

As WE tours the Luton hub, Gibson, 41, says Ocado Retail recently reached a record 500,000 orders per week. The trading review expected next Tuesday may show this total increased before Christmas.

Ocado shoppers bought M&S ​​clementines, white mulled wine and a ‘build-your-own’ charcuterie board (with cheese and sausage) in the shape of a Christmas tree.

The progress was underlined when Stuart Machin, CEO of M&S, described sales on the Ocado platform as ‘particularly strong’. “The M&S range has certainly supported Ocado’s growth,” he added.

Figures from market insights firm Kantar show Ocado’s sales rose 9.6 per cent in the three months to December 29, outpacing rivals’ growth.

Ocado Retail competes with Sainsbury’s and Tesco and appeals to customers with attractive prices, improved ranges and some quirky additions such as chocolate wine.

The range includes M&S food, Ocado’s own brand and a wide choice of specialty foods.

The robots glide silently around us, connected by a 4G network, busy packing family orders, but never encounter each other, people or storage boxes thanks to a system of sensors. At Luton, an order of 50 items can be picked and ready within ten minutes.

This technology helped Ocado Retail thrive during the pandemic, with shares in the group which also makes robots for other online grocers such as US giant Kroger reaching a high of 2,777p in January 2021.

But as lockdowns ended, consumers turned to cheaper rivals. Shares are now at 279p, down 65 per cent since Christmas 2023, and the lowest since 2017, which wasn’t helped by a 4 per cent fall yesterday.

“Our customers say we are offering more value than ever before,” Gibson emphasizes.

“We knew coming out of Covid that we were too expensive. We have taken many measures over the past eighteen months to bring prices down.’

For some shoppers, Ocado was a treat. But now they have switched to their weekly shop.

There are indications that some customers among the customer base of German discounters Aldi and Lidl are now choosing Ocado Retail.

In September, the company raised its sales expectations to “low double-digit” growth after “strong performance.”

“As Archie (Norman) said, we are on a path to profitability,” Gibson explains. ‘That is a medium-term trajectory and we are absolutely on track for this year.

“When I talk to both of our shareholders about where we are, what we’ve accomplished, they both support the direction we’re going.”

I ask Gibson whether her conversations with both Stuart Machin and Ocado Group boss Tim Steiner are like having a conversation with your parents about whether you’ve done your homework.

“I think of it as having one of the best food retailers in Britain on the phone and one of the best technology companies on the phone,” she says.

“That’s a pretty privileged position to be in.”

IN JULY Steiner urged disgruntled shareholders to maintain confidence as the group trimmed its half-year losses.

“We expect a lot of growth in the long term,” he said.

Gibson is diplomatic – a skill she may have learned while studying politics and economics at Cambridge University.

But she oozes with confidence when she talks about food. Gibson, a ‘food geek’, says she enjoys talking to her chefs at Ocado and M&S to test recipes.

However, these are difficult times for retailers. Gibson signed a letter from the British Retail Consortium in a row over the budget, warning Chancellor Rachel Reeves that her tax return would weigh heavily on prices and undermine jobs.

“There is more pressure now than we saw a month ago in terms of costs,” she says. “Everyone has been affected by it.”

Gibson thinks inflation will be higher than expected a few months ago. This is mainly due to wage pressure

the increase in the National Living Wage represents a £2.73 billion blow to retailers.

Many brick-and-mortar retailers have warned they will be forced to replace their staff with robots to absorb costs.

Still, Gibson is confident the group will continue to create jobs. This includes more drivers – the group already employs hundreds of drivers.

As Gibson explains, these workers don’t just get food from A to B. ‘Customers say to us, “I’ve literally never had a grumpy Ocado driver, they’re always nice.”

Gibson hopes that by 2025, more customers will discover that they enjoy service with a smile and login.