Ocado CEO Still Believes Robots Can Make It the Tesla of Grocery

European e-grocer Rohlik to install Brightpick robots at ‘multiple warehouses’

Despite facing criticism and challenges from both sides of the Atlantic, Tim Steiner, the founder of Ocado Group Plc, remains steadfast in his belief in the value of robot-operated warehouses. Steiner is convinced that these automated facilities are worth the investment, even though customer adoption has been slower than anticipated.

Steiner recently traveled to Ohio to meet with Kroger Co., Ocado’s largest customer, which had paused the rollout of new warehouses earlier this year. Ocado is now working closely with Kroger to improve the performance of its existing facilities.

While the adoption of these robot-operated warehouses has been slower than hoped, there is potential for “insane margins” when they are fully operational, according to a bondholder who preferred to remain anonymous.

Ocado has faced financial challenges, despite raising more than $4.5 billion since 2017. The company’s current spending rate, coupled with looming debt maturity, requires a more prudent approach to cash burn, according to industry experts.

Steiner, however, remains confident in Ocado’s financial position, stating that the company probably has enough cash to pay down a £600 million convertible bond due in 2025. Furthermore, Ocado anticipates improving its cash flow by £200 million by the end of the current fiscal year.

While Ocado has faced criticism and skepticism, its founder believes that shareholders would readily provide additional funding if the company secures more warehouse orders. The success of the ongoing project with Kroger, known as ‘Project Endeavour,’ is crucial to Ocado’s future.

Ocado must continue to focus on improving efficiency in Kroger’s warehouses, and convincing Kroger to order more warehouses in the coming year is key to achieving long-term growth.

Despite the challenges, Steiner remains resolute about Ocado’s future and the transformative potential of its technology in the online grocery sector. Relationships with Ocado’s partners remain strong, and the company is optimistic about future opportunities.

While some have criticized Ocado, it still has a strong support base among investors and industry experts. The company recently won a significant patent dispute against Autostore Holdings Ltd., securing a £200 million settlement.

Ocado’s path forward involves prioritizing profit, particularly as rising interest rates make it more challenging to finance new warehouses. However, for now, the focus is on working closely with Kroger to ensure the success of its robot-operated warehouses.

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