It took a mega deal with a US grocer for Ocado to prove that it’s no basket case.
The online grocer saw shares soar more than 80 per cent during trading yesterday after it announced that Kroger, one of the world’s biggest grocery chains with annual sales of $122bn (£90bn), will now use Ocado’s technology to automate grocery orders.
Bearish hedgies ate humble pie, with those shorting Ocado registering as much as a £282m paper loss at one point in the day, before shares eased back.
The Kroger deal is definitely Ocado’s biggest yet but certainly not its first. Just earlier this month, it signed a deal to build Swedish supermarket ICA’s online grocery business, following tie-ups with Canadian grocer Sobeys and French supermarket operator Groupe Casino.
Ocado has long been considered a weak link in the supermarket sector by some analysts who brand it grossly overvalued. However, Kantar Worldpanel’s data for the 12 weeks to 22 April show that Ocado saw the strongest sales growth of 12.7 per cent, ahead of even German discounters with Lidl at 9.1 per cent and Aldi at 7.3 per cent. Over the years, Ocado’s technology and logistics prowess has been seen by certain bears as an expensive distraction in the UK, despite the likes of Morrisons knocking on its doors to operate an online business.
Perhaps the string of tie-ups with big international retail players and yesterday’s blockbuster response will force Ocado’s critics to acknowledge the online grocer’s potential. The scepticism around Ocado’s focus on technology just goes to show the pressing need for game-changing companies to be celebrated in Britain.
Here’s a disruptive British company boasting an army of robots that can pack a 50-item grocery order in a matter of minutes yet it takes not one but four big international partnerships for the company’s potential to be truly noticed.
Britain is no doubt one of the leading tech hubs in the world with an army of tech stars like Ocado and Deliveroo helping it rival Silicon Valley. But British investors need to show more faith in disruptive businesses that are going against the grain and challenging traditional ways of doing business in their sectors.
Fast-growing companies like Ocado need to be celebrated and not penalised for their ambitious visions for they truly have the potential to become billion-dollar tech companies like Facebook and Google.