Ocado to Cut 500 Technology and Finance Jobs
Ocado, the online grocery specialist, is set to eliminate 500 roles across its technology and finance divisions. The move is part of an effort to reduce costs by leveraging artificial intelligence (AI) to improve efficiency, particularly among its engineering teams.
Automated picking machines at the Ocado distribution warehouse in Luton, Bedfordshire.
The company, which employs roughly 20,000 people, stated AI has significantly improved its engineering team’s productivity, prompting a reduction in staff. This follows a previous headcount reduction of 1,000 employees during the last financial year.
The technology group is responsible for developing robotic picking and delivery systems for online retailers globally. Ocado co-owns the British grocery delivery service, Ocado Retail, with Marks & Spencer.
According to CEO Tim Steiner, the job cuts are necessary to meet cash flow targets. “We are taking advantage of AI-type tools that drive up the productivity of our engineering teams and are spending less going forward on research and development,” Steiner said. He acknowledged the difficult nature of these cuts.
While Ocado continues to roll out its new robot-led technology to clients, including Kroger in the US and Casino in France, much of its current development focuses on software, which requires fewer staff. Steiner also noted that AI is enhancing the productivity of robots within their warehouses, allowing them to manage growing sales with fewer new hires.
At Ocado’s advanced warehouse in Luton, over a third of individual items are now robotically picked, with the group anticipating that 70% of product types will be handled by robots in the near future.
Ocado’s shares experienced a 17% drop, reflecting investor disappointment at the predicted 10% growth in technology sales this year, down from 18% last year. The decline is attributed to delays in the completion of two new warehouses for its US partner Kroger, as the company integrates additional technology.
Steiner emphasized the importance of the US market for Ocado. He stated that the construction of the two Kroger warehouses would be unaffected by potential tariffs, as most necessary equipment is already in the country. Regarding possible long-term changes to import taxes, Ocado has explored the possibility of moving production to the US.
In its financial report for the year ending December 1, Ocado revealed a pre-tax loss of £374.5 million, a slight improvement from the £394 million loss the previous year, despite a 14% increase in sales, reaching £3.1 billion. Gains in technology and retail profitability were offset by the cost of writing down aging equipment.
The company also completely wrote off the remaining £29.1 million of a hoped-for final payment from the sale of a stake in its retail business to Marks & Spencer. Steiner noted ongoing negotiations, but M&S has stated it will not pay the fee because performance targets were not met. Ocado had spent £1.3 million engaging specialists to argue for adjustments to the targets.
The grocery sector has recently experienced a wave of job cuts. Aldi is consulting on a head office restructuring that could impact up to 350 roles, focused on finance and some buying positions. Separately, Sainsbury’s announced the elimination of 3,000 positions due to the closure of hot food counters and in-house cafes, while Tesco is cutting 400 roles across its head office and stores.
