Daily Mail, Friday, September 6, 2019
The City
interview
by Ruth Sunderland
T
here is no shortage of
tales of woe from retail-
ers, but Ocado is the
exception. Perhaps
that’s because it isn’treally an online grocer at all,
but that rare beast – a British
tech titan.
It is basking in its status in the elite
FTSe 100 index where it is valued
much more highly than Marks &
Spencer or Sainsbury’s.
Tim Steiner, the co-founder and chief
executive, dressed down in casual trou-
sers and tie-less, is taking this dizzy
ascent in his stride.
Disarmingly, when a tea-tray arrives,
he leaps up to pour and pass the bis-
cuits, declaring: ‘I am in the food deliv-
ery business after all.’
Now 49, he abandoned a promising
career as a bond trader at Goldman
Sachs to set up Ocado nearly 20 years
ago with two friends, Jonathan Faiman
and Jason Gissing.
‘If we had said at the start we would be
in the Footsie, people would have
thought we were smoking illegal sub-
stances,’ he says.
‘When I told my parents I was going to
set up this business, my mother said to
me: “Oh, but you’ve got a very good job.
Why don’t you just do it on weekends?”
‘Now that we are in the FTSe 100 and
employ nearly 16,000 people I sometimes
say: “Look, mum, I do have to work at it
all week,”’ he laughs.
‘I was young and a bit naïve, I was only
- I had done relatively well and had
put a bit of money aside so I felt I could
work a while for nothing. In the first
year, we paid ourselves zero.
‘Then we paid ourselves a tenth of
what we made at Goldman. That went
on for ages.
‘It almost seemed a bit too easy, the
old bond trader thing. I felt I could do
something more interesting.
‘It was definitely a gamble. If we
had understood how hard it was,
we might not have done it.’
Steiner was brought up in north
London and went to haberdash-
ers’ Aske’s Boys’ School in hert-
fordshire then studied economics
at Manchester university.
entrepreneurship is in his blood.
his mother Linda set up beauty
brand elemis.
her father, Sidney Berk, the son
of a teenage seamstress in Lon-
don’s east end, founded a listed
electronics company named Lor-
lin, after Linda and Steiner’s
aunt Loretta.
P
ATerNAL grandfather
herman was the first
celebrity coiffeur in the
UK.
‘he was hairdresser to the late
Queen Mary and they had a royal
Warrant,’ Steiner says.
he is the only one of the original
trio left in the business.
Faiman left shortly before Ocado
floated on the stock market in
2010 and Gissing made his exit
in 2014.
‘I believe Jason has a quite mate-
rial shareholding still and is a
happy camper. I don’t think
Jonathan has had any shares for
many years,’ he says.
‘I used to joke they would take
me out in a coffin but I hope I will
get out before then.
‘People think I am Mr Ocado,
but I don’t have a life tenancy as
CeO. If shareholders don’t want
me, I’m gone.’
Investors have a lot to be happy
about right now – the question is
whether it will last.
Ocado shares have performed
brilliantly in the past five years,
after a series of deals to supply its
robotic picking and packing tech-
nology to supermarkets around
the world.
It hasn’t always been plain sail-
ing, however.
The float nine years ago was
controversial as Ocado was forced
to cut the price.
At the time, many City analysts
were deeply suspicious. One of the
best-known experts declared:
‘Ocado begins with an “o”, ends
with an “o” and is worth zero.’
Sceptics still feel it is hugely
over-valued, even though at this
juncture Steiner seems to be prov-
ing his critics wrong.
The company remains divisive
and one salient point often forgot-
ten is that it is still making losses.
That is not unusual in its sector:
Amazon, for example, was in the
red for many years.
‘We could be making a profit
today but it would mean us mak-
ing significantly less in ten years’
time,’ says Steiner.
‘Our shareholders are quite
happy for us to invest, sometimes
in ways that hits profitability, in
order to create even greater
future value.’
Does he have a view on
when the profits will finally
flow?
‘I don’t, to be honest. It
is one of those weird
things.
‘The more successful we
are, the longer it will take
us to make a profit. I knowthat sounds very perverse to a lot
of people.’
high pay is another sticking
point. Ocado suffered a rebellion
this year after some investors
took exception to a long-term
incentive scheme that could give
Steiner £100m if the share price
triples over the next five years.
he was paid £3m last year and,
according to the annual report, atthe end of last year he owned
shares worth around £314m. A lot
of money, but at least he is a risk-
taking entrepreneur and not a
mere manager. ‘None of the share-
holders I have ever spoken to have
said they resent anything I have
been paid,’ he says.
A major turning point in the
company’s fortunes came when
Ocado switched from trying to be
an online grocer to selling its
intellectual property.
It now has licensing agree-
ments with a string of retail-
ers including Morrisons in the
UK, Sobeys in Canada,
Groupe Casino in France and
most importantly Krogers,
the second largest supermar-
ket in the US.
Steiner has just done a
£750m deal to sell half of its
UK retail delivery business to
Marks & Spencer.
The latter, which this week
was kicked out of the FTSe 100
index after a prolonged shareslump, hopes it will transform its
food sales.
‘We believe our stake in the ven-
ture will grow in value because of
the whole because of the amazing
partnership with M&S,’ he says.
his latest foray is into farming –
vertical farming, to be precise,
which as its name suggests, is the
practice of growing food on
stacked shelves under LeD
lights.
Ocado is investing £17m with
the aim of growing herbs and
salad leaves alongside its distribu-
tion centres.
‘The idea is to replicate the busi-
ness model that worked for us in
grocery in vertical farming,’
Steiner says.
Does he understand why some
people worry that the shares are
too highly priced?H
e says: ‘It is difficult.
It is not my job to tell
people whether the
shares are fairly val-
ued, it is my job to run the busi-
ness and create value.
‘I and my management team
wake up every day to make our
shareholders wealthier and our
stakeholders more secure and
better off.
‘We are a company that changes
a lot, so maybe that is hard to
value. We see ourselves as an inno-
vation house.
‘The biggest risk in business is
not taking enough risk. Most com-
panies are too frightened, but if
you stand still it is a certainty you
are going to be extinct.’Tim Steiner has defied the
critics and his shares are
riding high. But he says...
Ocado was
a gamble.
I had no
idea how
hard it
would be
Page 75Pence
1500125010007505002500
2015 2017 2019share price÷ OCADO’S shares have risen
by nearly 320pc over the
past five years, from 318p
per share to 1331.5p a pop
last night.
Someone who invested
£1,000 in September 2014
would have £4,184.50 now.
Ocado has defied its critics
to become a stock market
darling, with its pioneering
technology earning it
the nickname ‘the Microsoft
of retail’.