Online grocer woes imply fresh price wars

An Ocado delivery van seen driving in Hatfield
An Ocado delivery van is seen driving in Hatfield, Britain February 26, 2021. Picture taken February 26, 2021. REUTERS/Matthew Childs

LONDON, March 17 (Reuters Breakingviews) - The post-pandemic return to normal is hurting online vendors. On Thursday Ocado (OCDO.L) reported a 6% plunge in its revenue for the three months ending Feb. 27, while food and grocery delivery company Deliveroo (ROO.L) said it wouldn’t break even until the second half of 2023. Ocado Chief Executive Tim Steiner also warned that full-year sales growth would only reach 10%, down from a previous forecast of mid-teens growth. Little wonder the company’s shares fell 8.5% on the news.

Cost-cutting and competition will make matters worse. British shoppers are increasingly looking for bargains as inflation and energy prices soar. Since the beginning of the year, German discounters Aldi and Lidl have grown their market share by nearly a full percentage point and now control 14% of the UK market. Meanwhile, industry titan Tesco (TSCO.L) is also holding onto its 28% market share while its smaller rivals J Sainsbury (SBRY.L) and Wm Morrison Supermarkets have lost ground. Buyout houses, which have eyed Sainsbury’s already, may want to hold fire. For online-only players like Ocado, competition and penny-pinching customers will make it difficult to pass on extra costs without losing business. (By Aimee Donnellan)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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