David Prosser: Ocado needs to put its foot down on new deliveries

(BLOOMBERG)

Outlook Ocado had better get a move on getting its new distributioncentre, the site for which was secured yesterday, up andrunning. The attraction of the new Warwickshire depot is not just that it will expand the online grocer's coverage to about 85 per cent of UK households, from 65 per cent today, but also that it will free up resources at its existing Hatfield centre. Some of the capacity there is currently used to serve thegrocer's northern customers and once Warwickshire is operational, Ocado will be able to reallocate this to customers in the South.

That's important because of an emerging threat to Ocado: the online groceries service Waitrose, its long-time partner, is now intent on expanding. The current plan is to have Waitrose Deliver competing head-on with Ocado in London, its most lucrative market, from early in the new year. Further roll-out, as yet unspecified but likely to be centred on the South-east, is planned thereafter.

There is little sign Waitrose is suffering from the dip in consumer confidence that the run-up to the Comprehensive Spending Review has prompted. Mark Price, the supermarket's managing director, confidently predicted yesterday that he would be able to grow its sales by double-digit percentages for several years to come thanks to expansion. Most of that will be delivered by new convenience stores, but some growth will come from online.

One of Ocado's successes over the past decade has been to build a strong brand. But Waitrose's brand is even stronger and Ocado should be worried. It has already sought to lessen its exposure to Waitrose through the launch of its own-brand lines and the new distribution centre will give it extra firepower if a full-scale battle breaks out. Still, this is yet another worry for those who wonder when – or even if – Ocado might finally start making a profit.