Ocado shareholders to oust founder who planned ‘Tesla of grocery’

Tim Steiner’s 26-year reign at Ocado may be ending. Prodded by mutinous shareholders as the share price slumps to a decade low, the board is openly hunting for a successor to the man who co-founded the company in 2000. He set out to automate the supermarket – and, by common consent, succeeded. His vast grid of robots, shuttling everything from frozen peas to ripe avocados, is brilliant transformational supply-chain reengineering. His ambition was grander still: to build, in his own words, the “Tesla of grocery”.

Yet Steiner will leave a mixed legacy. Ocado’s innovations, first in home delivery and then in automated distribution, arguably created immense value for the world: better online grocery for millions, a robotics blueprint widely copied across an economically huge industry, and, as a supplier of warehouse automation software and hardware to global retailing giants, a rare British tech-export success. But there has been no correspondingly large return for investors. Ocado’s share price sits close to what it floated at in 2010, down nine-tenths from a 2020 pandemic peak that briefly made it worth more than double Sainsbury’s and Morrisons combined.

One explanation is that Ocado’s genius lay in its innovative process, not its product. Process innovations are notoriously hard for their inventor to keep control of through, say, intellectual property rights. Patents notwithstanding, the gains come mostly in lower prices and better service that customers enjoy and rivals copy. Add to that the brutal economics of capital-hungry physical automation and dependence on a few big clients – who are now wobbling. Kroger, its most important American partner, shut three of its eight US warehouses last year. (Ocado was “naive”, Steiner conceded, in how it structured its North American contracts.)

At home, Ocado is locked in a £190m dispute with Marks & Spencer, its retail joint-venture partner, over the final instalment of M&S’s 2019 deal to buy half its UK business. Increasingly, Ocado looks like a manufacturer of value that captures too little of it for itself.

Can a new boss disprove this gloomy analysis? The favoured candidate, Vonage’s Niklas Heuveldop, is an operator, not an inventor, wired to wring cash from a business. How Steiner’s successor fares will be revealing. Is Ocado’s problem the type of innovation it does, or the innovator’s lack of the necessary business skills to properly monetise that innovation?

Photograph by Chris Ratcliffe/Bloomberg via Getty Images