Ocado and Carrefour form entente d'épicerie

Ocado has announced a deal to sell groceries supplied by French supermarket giant Carrefour. But is that enough?

by Dave Waller
Last Updated: 06 Nov 2012
The online grocer’s new mid-priced Reflets de France range of ‘authentic French produce’ will launch on Bastille Day (14 July) – presumably with a string of onions and a range of berets – and will sit alongside its current line of high-end Waitrose goods. CEO Tim Steiner reckons that will help it offer the ‘broadest and most diverse grocery range to all our customers in the UK’.

Basing a future strategy on goat’s cheese, paté and cured meat may seem a baffling move, but it looks as if it’s Ocado’s chosen defence against what promises to be a highly challenging period. The market has long raised a quizzical Gallic eyebrow over how it’ll cope in the face of competition from the major supermarkets – all of which are developing rival delivery services, and with the kind of muscle that suggests they’ll be the ones to succeed. Now even old pal Waitrose has announced it’s expanding its own deliveries – for the first time taking goods direct to its customers from any store within the M25. This marks a direct attack on one of Ocado’s key markets.

But while it’s no surprise that Ocado should cast its net further afield for back-up, it’s looking increasingly like it’s heading across la Manche sans paddle. Its share price has been famously erratic since its £800m flotation last year, and it fell again today, despite posting comparatively decent half-year figures. Why? Beyond the Waitrose challenge, Ocado’s directors will soon be free of their lock-up period, which was set in place at the time of the £800m flotation and put a year-long block on them selling their shares. The suspicion must be they’ll start offloading them as soon as they can, which will have further implications for the share price.

It’s not all bad news. Ocado has just announced its half-year profit, which turns out to be a damn sight sharper than what was going on a year ago. In the six months to 15 May, it made a pre-tax profit of £200,000 – compared with a crippling loss of £6.7m a year earlier. The group now says it’s planning to spend £80m over the next two years to increase its capacity up to 180,000 orders a week. But its doubters are still unlikely to be convinced by its long-term growth strategy. With its old mate Waitrose looming large in the wing mirrors, Ocado will need more than a little help from new ami Carrefour if it’s going to continue to deliver.

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