Ocado Overtakes Tesco as Most Valuable Retailer.
Tesco is worth £21.06 billion despite controlling nearly 27% of the UK grocery market. By comparison Ocado, which is already worth more than double the combined value of Sainsbury’s and Morrison’s, sells just 1.7% of the UK’s groceries.
Tesco have referred to Ocado as ‘a charity’ in the past (presumably not meant to be a compliment) but Ocado today is eclipsing Tesco. Tesco have their own problems, grappling with recession, running supermarkets during a pandemic and a potential no-deal Brexit, which may explain their difficulty in attaining the valuable retailer top spot.
‘Investors have fallen in love with Ocado’
The Tesco board is painfully aware of the march of the Ocado share price. In the summer the company suffered one of the biggest-ever shareholder revolts over executive pay. Shareholders objected to a late change to part of an executive pay plan. The change involved removing online grocer Ocado from a comparator group against which Tesco’s share performance was measured.
Investors have fallen in love with Ocado on the back of the success of its tech business Ocado Solutions, which sells its grocery-picking expertise to foreign supermarkets. The coronavirus pandemic has also triggered a boom in online shopping. At the height of the pandemic online food sales nearly doubled but, despite the recent slowdown, they now account for 12.5% of total grocery sales versus about 7% pre-crisis.
Ocado have shown that having a smaller share in market doesn’t mean that you can’t still be extremely valuable to the industry.