Robot army is helping Ocado turn a profit: how ‘food geek’ boss Hannah Gibson is repairing relationship with M&S

Seeing a purple Ocado van delivering orders is a sure sign that this is a smart neighbourhood.

The online grocery store, founded in January 2000, knows what its wealthy, middle-class customers like to eat when they choose healthy options and when they indulge.

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

The joint venture between the High Street giant and the technology group’s supermarket division, a deal struck in September 2020, should have been a perfect match.

By contrast, M&S was for some time openly critical of Ocado’s failure to exploit its customer knowledge.

Archie Norman, chairman of M&S, declared himself “unhappy” at the 2023 annual meeting.

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

The attention around M&S’s recent clothing and food-based comeback is helping Ocado Retail’s revival.

As WE tours its Luton centre, Gibson, 41, says Ocado Retail recently hit a record 500,000 orders a week. The trade report due out next Tuesday may reveal that this total grew before Christmas.

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

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

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

Ocado Retail is competing with Sainsbury’s and Tesco, attracting customers with attractive prices, improved ranges and some quirky additions such as chocolate wine.

The offer includes M&S food, own brand Ocado and a great selection of specialty meals.

The robots glide silently around us, connected by a 4G network, busy packing family orders but without colliding with each other, humans or storage boxes, thanks to a system of sensors. In Luton, an order of 50 items can be picked up and ready in ten minutes.

Thanks to this technology, Ocado Retail grew during the pandemic and shares of the group that also makes robots for other online grocers, such as US giant Kroger, reached a high of 2,777 pence in January 2021.

But when lockdowns ended, buyers turned to cheaper rivals. The shares are now at 279p, a 65 per cent drop since Christmas 2023 and the lowest since 2017, not helped by a 4 per cent drop yesterday.

“Our customers say we offer more value than ever,” Gibson insists.

‘Coming out of Covid, we knew we were too expensive. “We have taken many steps over the last 18 months to lower prices.”

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

There is evidence that some customers of German discounters Aldi and Lidl are now choosing Ocado Retail.

In September, the company raised its sales forecast to “low double-digit” growth following a “strong performance.”

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

“When I talk to both of our shareholders about where we are and what lies ahead, they both support the direction we are taking.”

I ask Gibson if his conversations with Stuart Machin and Tim Steiner, head of Ocado Group, are like a conversation with your parents about whether you’ve done your homework.

“I think it’s like having one of the UK’s best food retailers and one of the best technology companies on the phone,” he says.

“Being in a pretty privileged position.”

In July, Steiner urged disgruntled shareholders to keep the faith as the group reduced its half-year losses.

“We expect to see great long-term growth,” he said.

Gibson is a diplomat, a skill she perhaps acquired when she earned her degree in politics and economics at Cambridge University.

But he exudes confidence when he talks about food. Gibson, a “food geek”, says she loves chatting to her chef counterparts at Ocado and M&S to try out recipes.

However, these are difficult times for retailers. Gibson signed a letter sent by the British Retail Consortium amid the budget row, warning chancellor Rachel Reeves that her tax-raiding budget will weigh heavily on prices and stifle jobs.

“There are more cost pressures now than any of us saw a month ago,” he says. “Everyone is affected.”

Gibson believes inflation will be higher than expected a few months ago. This is mainly due to wage pressures, with

The increase in the national living wage represents a £2.73 billion impact for retailers.

Many traditional retailers have warned they will be forced to replace staff with robots to absorb costs.

Still, Gibson is convinced the group will continue to create jobs. These will include more drivers – the group already employs hundreds.

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

Gibson hopes more customers will find they enjoy service with a smile and log in by 2025.