British online food distributor Ocado has reported a 79 % profit increase in its first semester thanks to a successful Morrisons collaboration. To achieve further growth, Ocado is contemplating international expansion.
Further expansion in United Kingdom
It still is highly unlikely that Ocada will have profitable full-year results, despite these excellent half-year results, for the first time ever in its 14-years existence as the company has announced to invest in a third distribution center allegedly worth 250 million euro.
Ocado also aims to invest another 100 million pounds (125 million euro) in the next three years to further expand its UK operations. It will not only build a new customer fulfillment center, but also expand the current Dordon center.
Its operational result in the 24 weeks leading up to 18 May 2014 prove that these investments are solid as its 7.5 million pound profit (9.4 million euro) is a sizable increase compared to 2013's first semester with its 1 million pound (1.25 million euro) operational loss.
Ocado revealed a 2013 loss of 12.5 million pound (15.6 million euro) loss in February, while 2012 had almost been a profitable year with a mere 0.6 million pound (750,000 euro) loss. Back in 2013, the company had invested quite a lot in capacity-increasing measures, mostly to get the Morrisons collaboration going. Morrisons was the only one of the four major British supermarket groups that still had to launch its online project.
More turnover, more products
The collaboration started on 10 January 2014 and has resulted in a 15.6 % turnover growth in the first half of the year, reaching 442.4 million pounds (552 million euro). It has also expanded its product range from 31,000 in 2013 to 35,000 now, on top of a new animal food and accessories web shop carrying 8,000 products. In the second part of 2014, Ocado intends to open a special web shop for grocery products as well.
"The online grocery market continued to outperform the traditional bricks and mortar supermarkets, Ocado CEO Tim Steiner said, even though he realizes that the online growth is under pressure. "The overall rate of growth [is] currently impacted by subdued and cautious consumer spending. At the same time, Ocado outperformed its key online grocery competitors."
Steiner has even suggested the Ocado system could be expanded internationally. The successful launch of Morrisons.com was particularly encouraging and paves the way for future agreements to commercialise the value of our intellectual property. We continue to invest to take advantage of partnership opportunities in the future as the demand for online grocery shopping increases internationally."