Ocado seeks £1bn to exploit online grocery boom sparked by Covid-19

Online retailer Ocado said it was raising £1bn as it sought to exploit the rapid change in internet grocery shopping habits sparked by the coronavirus crisis.

In a statement released on Wednesday, Ocado said it would raise £657m through a placing and £350m via a debt issue of unsecured bonds due to mature in 2027.

The company cited industry data from Nielsen revealing online penetration of the UK grocery market had almost doubled to 13% in recent months compared with 7% before the pandemic broke out.

“Surveys indicate that many customers who have purchased groceries online in recent months, will continue to do so, resulting in a both a new baseline for online penetration, and expectations for a sustainable step up in growth from this new baseline,” the company said.

Ocado said surveys in Europe showed that an average of 47% of existing shoppers who have increased their online grocery purchasing since Covid-19 expect to continue doing so once the outbreak is over.

“Online grocery is experiencing an inflection point,” said chief executive and founder Tim Steiner.

“The current crisis is proving a catalyst for permanent and significant acceleration in channel shift globally which we believe will redraw the landscape for the grocery industry worldwide.”

Ocado and Marks and Spencer last year agreed to create a joint venture in a move that saw M&S acquire a 50% stake in Ocado’s retail business for £750m.

On May 6, the company said that Ocado Retail had seen a 40% jump in sales in its second quarter, which ended on 1 June. It reported that current trading remained consistent with those trends.

Calling itself “the only end-to-end solution provider for online grocery fulfilment globally,” Ocado said that the financial firepower from raising would allow it to adapt and improve its position in the market.

“The group believes that that the capital raise will give Ocado Group the flexibility to move fast and capitalise on increasing opportunities arising from the acceleration in online penetration to expand and establish leadership positions in its existing as well as new products and markets,” the company said.

Ocado's order fulfilment technology had also driven growth as the group reported “a high level of activity” with all its partner supermarket chains throughout the pandemic, including Morrisons in the UK, Casino, in France, Sobeys in Canada and Kroger in the US.