Ocado won over the South – now it wants Northerners

Ocado is accelerating its drive to win over Northern shoppers to maintain its market-leading growth.The online supermarket, which has a firm hold on the middle class in the South of England, is seeking a new warehouse near Manchester as it races to keep up with surging demand for grocery deliveries.According to property sources, Ocado Retail is looking at taking between 150,000 and 250,000 sq ft of warehouse space in the North West of England. It is expected to find a location within the first half of next year.The hunt for the new facility comes as the online grocer races to offer more speedy delivery slots across the UK. Currently, Ocado offers only same-day delivery in London, although it has been bolstering its next-day delivery slots.It has also been attempting to reach new customers. The company delivers to around 82pc of the UK population from its seven customer fulfilment centres, which use robot warehouse technology from its co-owner, Ocado Group, as well as a cluster of smaller delivery sites across the country.The online grocer is expanding its warehouse capacity as demand for home grocery deliveries booms. Ocado Retail, jointly owned by Marks & Spencer and Ocado Group, has been the fastest-growing supermarket for more than a year, according to figures from industry tracker Worldpanel. This has been helped by an expansion of the range of M&S products stocked on the website.Sales at Ocado Retail were up 15.8pc in the latest 12-week period to the end of November, although it still holds just 2.2pc of the grocery market – putting it just behind Iceland in terms of market share.Ocado’s robot warehousesRecent strong growth has come despite mounting pressure on its co-owner, Ocado Group, which has struggled to demonstrate that its robot warehouses can succeed outside the UK.In November, US supermarket giant Kroger announced it was shutting down robot warehouses built using Ocado’s technology, a move analysts described as a “knock-out blow”.Kroger pulled plans for a fourth warehouse and agreed to pay Ocado £260m in compensation for scrapping the sites.Clive Black, from Shore Capital, warned the move shows the robot warehouses “do not work economically in the USA or the mass-market first world, in truth”.Analysts at Moody’s said the Kroger decision came at a time when Ocado Group was already wrangling with “double-digit gross leverage, low interest coverage and sustained negative free cash flow”.Last year, a debt refinancing meant its interest bill rose from £27.3m in 2024 to £100m.A spokesman for Ocado Retail said: “Over the next few years, we’ll be continuing to maximise the capacity of our current sites to support our growing customer base.“We’re also looking at longer-term options, including the possibility of a customer fulfilment centre in Manchester.”The spokesman said the retailer was “working hard to expand the number of same-day slots available across as many UK locations as possible”.