Ocado struggling to meet M&S demand, Archie Norman admits

Ocado

The chairman of Marks & Spencer has admitted that Ocado is still struggling to meet demand from customers, almost a year after the two businesses signed an online delivery tie-up.

Archie Norman told investors that large parts of Britain are not covered by Ocado’s network and more work is need to scale up.

Speaking at M&S’s annual meeting, he said that although the retailer is pleased with “where we are, I’m not saying there aren’t issues”.

Mr Norman added: “Working in a joint venture, you have to put a bit more work into it to make sure you’re aligned.

“We have to position our [food] business right for [online], and make sure that Ocado has the right growth in place.

“It doesn’t cover a lot of the country, there is a lot of investment due to it.”

The remarks came a day before Ocado said it was adding more capacity to take on customers, including Marks & Spencer shoppers, who were turned away during the Covid pandemic as a result of a boom in demand.

M&S paid £750m for half of Ocado’s food delivery operation in 2019. As a result, Ocado ended a deal with Waitrose in September last year and now sells M&S food instead, giving Mr Norman’s business a large-scale online grocery presence for the first time.

Ocado picks and packs goods at robotic warehouses that cannot be built rapidly, meaning it is relatively inflexible compared with traditional supermarkets where staff pick orders from shelves.

Mr Norman said: “Ocado can’t serve a lot of Marks & Spencer customers - they are still building more capacity.”

Steve Rowe, chief executive, told investors that the transition was “the biggest in food retail probably ever” and that both businesses had “committed [to it] in a first class way”.

Mr Norman added: “We’re very confident that the value has improved substantially since we purchased it, it’s generating good profit, it’s growing fast, we’re investing in it, the transition from Waitrose to Marks & Spencer products has gone well.”