Britain’s Ocado Retail pauses new sites for two to three years

By James Davey

LONDON (Reuters) – British online supermarket Ocado Retail is operating at about 75% of its capacity and does not expect to open any new robotic warehouses in the UK for two to three years, its boss said on Tuesday.

Ocado Retail, a joint venture between Ocado Group and Marks & Spencer, did not have enough capacity to meet consumer demand at the height of the COVID-19 pandemic. Now, by contrast, surplus capacity represents a short-term cost to the business.

“We’re not expecting to open, or close, or change any sites in the near term,” CEO Hannah Gibson told reporters, adding she expected growth in volume, or number of items sold, to continue to fill the excess capacity.

The share of online purchasing in Britain’s grocery market peaked at about 15% during the pandemic, and has fallen to 11.6%, according to data from researcher Kantar.

Before COVID-19 took hold in 2020, the share was about 7%.

“The post-Covid normalisation appears to have settled and structural growth has returned to online once more,” analysts at Peel Hunt said.

Gibson, speaking after Ocado Retail updated on trading, said capacity utilisation had improved from 60% earlier in the joint venture’s year to Nov. 26, during which it closed its oldest site at Hatfield, north of London, and opened a modern site at nearby Luton.

It operates seven highly-automated warehouses, or customer fulfilment centres (CFCs) as it calls them, in the UK.

In November 2022, the venture said it had paused the planned build of two CFCs in the northwest and southeast of England, reflecting “a more prudent and disciplined approach to capacity roll-out”.

In the long run, there may be opportunities to get more out of existing sites, Gibson said.

“We’re looking at that, trying to understand that better today and that will change the view of as and when would we need a new site, but we’re not expecting anything for the next two or three years,” she said.

(Reporting by James Davey; editing by Sarah Young and Barbara Lewis)