Ocado puts up prices as costs soar and warns Ukraine war adding to inflation worries

Ocado said it has “moved certain retail prices” to reflect soaring costs faced by the grocery industry across the UK and warned that the scale of food inflation this year is “difficult to predict”.

The online delivery specialist said there had been “significant” rises in the costs of raw materials and products as well as energy and the dry ice used to keep frozen products cool.

It added that uncertainties over inflation had “increased significantly in recent weeks due to the war in Ukraine”.

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Why commodities surge is driving up inflation pressures

Commodity prices from oil and gas to wheat and nickel have soared since Russia’s invasion last month and look set to add to the cost of living squeeze on British households.

Th company said: “Ocado Retail has been working closely with suppliers where appropriate to actively manage this level of inflation.

“The business has moved certain retail prices, where costs could not be mitigated, in line with the rest of the market and will continue to monitor the market to ensure alignment on prices and delivery of fair value to customers.”

Ocado also revealed, in a first quarter trading statement for its retail arm – a joint venture with Marks & Spencer – that sales had fallen by 5.7% in the 13 weeks to 27 February compared to the same period a year ago.

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Order volumes were up by 11.6% but the average basket size of £124 was 15% lower as customers returned to pre-pandemic behaviour as restrictions ended and more returned to the office.

Ocado Retail chief executive Melanie Smith said the figures were encouraging “despite the clearly evident challenges the industry and consumers are facing”.

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Why Russian invasion will make your bread more expensive

She attributed the sales fall to the fact that it was in comparison with a period in lockdown, which boosted home deliveries, as well as a “softening market overall”.

“Long term, we are confident that the trajectory of growth remains positive,” she added.

The company added: “The scale of food price inflation over the course of this year, coupled with the overall level of market demand as the cost of living increases, particularly rising energy costs, is difficult to predict.

“We intend to continue to offer the best possible value to customers while recognising the overall level of pricing in the market.”

Ocado said it expected to notch up revenue growth “in the high-teens” by the end of its full financial year but given uncertainties over inflation, the overall level of demand and the continued return to pre-COVID shopping patterns, it would be “closer to 10%” for the year as a whole.

That was lower than previously guided, prompting shares to fall 8% in early trading.

The company had previously been wrestling with a shortage of lorry and delivery drivers – which weighed on its ability to add delivery slots in the early part of the first quarter.

Ocado revealed last autumn that it was spending up to £5m to offer higher hourly rates and signing-on bonuses to recruit drivers.

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