Ocado’s First Fully Automated Distribution Center Destroyed by Fire, Threatening Confidence in Its Robotics Offering

Executive Summary

A fire devastated U.K. online grocery retailer and technology provider Ocado Group’s first robotic distribution center in Andover, England.

• Ocado said the Andover center handled only 10% of total capacity, but acknowledged the lost capacity would slow sales growth until the company increases capacity elsewhere.
• Ocado’s existing retail partners are likely to seek reassurances over safety and designs for ongoing customer fulfilment center (CFC) construction could be reviewed. These projects are typically not set to come onstream for a couple of years or more.
• The fire highlights the risk of the centralized distribution model, which is virtually unique to Ocado in the U.K. online grocery space; most of Ocado’s online grocery rivals in the U.K. rely heavily on in-store picking, dispersing risk of disruption among hundreds of local stores.