Ocado suffers first drop in sales as shoppers turn to Aldi and Lidl
OCADO has reported its first ever annual fall in grocery sales as the cost of living crisis forced shoppers to put fewer items in their baskets.
Ocado Retail, which is a joint venture between Ocado and Marks & Spencer, said revenue fell 3.8pc to £2.2bn last year. The decline came as customers returned to pre-pandemic shopping habits and many tightened the purse strings amid soaring inflation.
The online supermarket’s average basket value slipped 1.3pc to £117, despite inflation putting up prices, as customers bought fewer items and shopped less frequently.
Hannah Gibson, chief executive of Ocado Retail, said customers were buying more of Ocado’s value range, as well as stocking up on chilled and frozen foods to reduce waste.
The decline came despite a record Christmas period for the company, which was buoyed by strong sales of party food and English sparkling wine.
Sales were up 15pc in the five days before Christmas, including the highest level of orders ever recorded on a single day. However, sales growth of 0.3pc in the fourth quarter lagged behind the festive boost enjoyed by rivals such as Tesco and Sainsbury’s.
Ocado is facing increased competition from German discounters Aldi and Lidl as more shoppers switch to cheaper supermarkets to keep their bills down.
Aldi’s market share grew from 7.7pc to 9.1pc in the run-up to Christmas, according to Kantar, while Lidl’s grew from 6.3pc to 7.2pc. Ocado’s market share held steady at 1.7pc. Ocado said it continued to face pressures from rising inflation and further investments in capacity and marketing costs, though it expected to break even for the year.
Overall, Ocado forecast mid-single digit revenue growth this year with “marginally positive” profits. Shares in Ocado Group fell 6pc.
Online grocery peaked at 16pc market share at the height of the pandemic, according to figures from Kantar. It has since fallen back to 11pc, though this remains double pre-pandemic levels.
While Ocado struggled to meet surging demand during Covid, its drive to open more robotic warehouses means it now has surplus capacity. Chris Beckett, head of equity research at Quilter Cheviot, said the update was “disappointing”, adding: “The business is running at about two thirds of capacity, so it will be looking for ways to boost this as online ordering returns to growth following a post-covid normalisation.”
It came as analysis by consumer group Which? showed prices of supermarket staples such as milk and butter jumped by as much as 30pc last year.
Butters and spreads had increased in price the most between December 2021 and December 2022, up 29pc. They were followed by cheese (22pc), bakery items (20pc), water (19pc) and savoury pies (19pc). Lidl and Aldi were named as the supermarkets with the biggest price rises, up by around 21pc on average.