Ocado says groceries price war is easing off

Online grocer Ocado has confirmed the sector's fierce price war is beginning to ease off as the Brexit-hit pound starts to push up prices.

Tuesday, 14th March 2017, 8:26 am
Updated Friday, 24th March 2017, 10:53 am
File photo issued by Ocado of their chief executive Tim Steiner, as the online grocer confirmed the sector's fierce price war is beginning to ease off as the Brexit-hit pound starts to push up prices. PRESS ASSOCIATION Photo. Issue date: Tuesday March 14, 2017. Photo: Ocado/PA Wire

Chief executive Tim Steiner, said the group was seeing the “first signs of a change in market pricing” after years of food price deflation sparked off by competition from German discounters Aldi and Lidl.

Ocado saw its average order size fall 1.6% to £110.84 in the 13 weeks to February 26 in what marked a far slower rate of decline than in previous quarters.

It had seen average orders drop 2.7% in the year to November 27.

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Supermarket inflation doubled in February as shoppers had to pay more for butter and tea as well as fruit and vegetables, according to figures last week from Kantar Worldpanel.

Kantar said grocery inflation jumped to a near three-year high of 1.4% in the 12 weeks to 26 February, from 0.7% in the 12 weeks to 29 January.

Mr Steiner said: “While the market remains very competitive, there are the first signs of a change in market pricing dynamics coming through.

“However, it remains too early to predict how this will unfold throughout the year, and in particular is dependent on any future currency movements.”

The pound’s fall is pushing up the cost of ingredients for many supermarket suppliers, leading many to increase their prices.

The impact of a slump in sterling since the EU referendum came into sharp focus last October when Tesco and Marmite firm Unilever became locked in a stand-off over the cost of key products, before the dispute was resolved.

Ocado said it held retail sales growth steady at 13.1% in its first quarter, the same level of growth seen in the previous quarter.

Average weekly orders grew 16.7% to 252,000, driven by both new and existing customers.

The company said it continued to see its basket size fall as it slashed the number of multi-buy deals, in line with the trend across the wider industry, while it also had further take-up of its Smart Pass membership scheme.

But Ocado remained tight-lipped on progress for its much-anticipated international deal, with finance boss Duncan Tatton-Brown saying only that the group remains “as confident as ever”.

It has previously confirmed that it is holding discussions with a number of international retailers.