Ocado slows expansion as online grocery demand eases

Ocado is halting its expansion plans as the demand for online grocery slows down.

The online grocer informed investors of its plan and that the construction of more automated distribution centres scheduled to open in 2024 and 2025 would be delayed.

“We’ve taken the decision to pause the north-west and south-east CFCs,” Financial Times quoted chief financial officer Stephen Daintith, as saying.

“That may change, it’s a pause not a stop, but we think it’s a sensible thing to do given the surplus capacity we have today.”

The decision means the sales capacity of Ocado Retail, the joint venture with Marks and Spencer, will now reach £3.9bn in the medium term, rather than the £4.5bn previously planned. Its sales last year were £2.3bn.

The company had already warned it might not accelerate a capacity expansion programme put in place after its existing facilities could not be ramped up quickly enough to capitalise on booming demand during the Covid-19 pandemic.

Now the pandemic has waned and many shoppers have returned to stores, it has the reverse problem. It expects sales to fall this year for the first time in its history and having opened new warehouses in Essex, Bristol and Luton, it has more capacity than it needs.

The news comes weeks after its its chief executive said that Ocado is deepening its push into south-east Asia as the UK company aims to become the Tesla of grocery ecommerce technology.