(qlmbusinessnews.com via theguardian.com – – Mon, 10th Feb 2020) London, Uk – –
Supermarket will launch thousands of new and revamped products aiming to retain online customers
Waitrose is to launch thousands of new and revamped products in the coming months as the battle for the hearts and minds of Ocado shoppers moves up a gear.
The supermarket’s deal with the online grocer will finish at the end of August, when it will be replaced by Marks & Spencer. The switchover is high risk for all the brands involved: Ocado risks losing loyal Waitrose shoppers while the supermarket, which is part of the John Lewis Partnership, will have to persuade shoppers to use its own website instead.
Last year, Ocado fired the opening salvo stating its product range would be bigger, cheaper and better quality under the M&S deal. The online grocer will stock 6,000 M&S products, compared with the 4,000 it sells as part of its supply deal with Waitrose. The alternatives would be the “same price or lower, and of the same quality or better” than the Waitrose ones, Ocado said.
Waitrose on the other hand says it is working on 5,000 new or reformulated products – a figure that equates to nearly a third of the 17,000 own-label products sold under house brands such as Duchy, Essential Waitrose and No.1. To come up with more distinctive products the retailer has made a multimillion-pound investment in the kitchens at its Bracknell headquarters in Berkshire.
The supermarket is also running a “you can taste when it’s Waitrose” advertising campaign to underline its foodie credentials. With short ads focused on “hand-rolled white sourdough bread made in London” and “100% Italian” olive oil produced in Umbria, the marketing push aims to claim the high ground as the UK’s “leading quality food retailer” selling products “unrivalled on quality and taste”.
The charm offensive comes ahead of Ocado’s full-year results on Tuesday when an update on the M&S joint venture is anticipated. After nearly a decade as an unloved listed company, Ocado has become a stock market darling after its chief executive, Tim Steiner, sold its grocery-picking expertise to several foreign supermarkets.
Ocado’s shares have risen 40% over the past 12 months with the company worth more than £8bn, primarily thanks to the overseas deals banked by its tech arm Ocado Solutions (M&S paid £750m for 50% of Ocado Retail, the subsidiary that operates robotic warehouses in the UK). The year was not without its setbacks: its hi-tech warehouse in Andover, Hampshire, was destroyed in a fire. Analysts at Bernstein expect pre-tax losses to have widened to £204m on sales of £1.8bn in 2019.
Waitrose had enlisted Today Development Partners, a technology business run by Ocado co-founder Jonathan Faiman, to help grow its online operation without Ocado. However, the deal ended after just four months and it subsequently emerged Faiman, who left the online business in 2009, was being sued by Ocado.
Thomas Davies, a retail analyst at Berenberg bank, expects some Waitrose shoppers to defect but suggests they will be replaced by M&S customers who can’t buy its food online at the moment. Ocado owns the customer data so “will be able to target those customers that it views to be most at risk from switching”, he suggested.
“While everyone is looking at the potential impact from Ocado’s perspective, we believe investors are failing to acknowledge the negative impact on Waitrose, from ending the Ocado contract,” continued Davies who said the tie-up generated 6% of Waitrose’s sales. “This will have a material impact on Waitrose’s owner, the John Lewis Partnership, which is already struggling with margins that have fallen.”
By Zoe Wood