Good morning, and welcome to Ocado Analyst Call. I will hand over to Chief Executive Officer, Hannah Gibson. Please go ahead.
Good morning, everyone. This is Hannah Gibson, CEO of Ocado Retail. I am joined this morning by Matt Ankers, CFO of Ocado Retail. The key message from today is that we're back to strong volume growth, as our strategies continues to deliver and lead to results that underpin our guidance for the year ahead, and more on that shortly. This growth has meant that by the end of February, Ocado Retail's market share of the online channel was 13.5%, plus our range with the continued expansion and growth of the M&S core grocery lines. We also launched our Makers Market, spotlighting incredible small suppliers, and our model means we can do this uniquely well, given our large range, since we are less limited by shelf space than store retailers.
We improved both stock availability and also product availability, excuse me, including implementation of the Ocado Group's new OSP forecasting engine. And we continued to invest in value, which remains a top priority for our customers right now. That investment included lowering the price of another 1,700 products as part of our big price drop at the start of January, our fifth round of price cuts since last June. We've also further built out our Ocado Own Range and maintained our Ocado Price Promise, which price matches an industry-leading 10,000 products to Tesco. As a result, our average sales price growth remained significantly below the market, up just 2.2% year-on-year. Due to these ongoing efforts on price, our customer perceptions of value have improved materially over the same period.
Overall, our performance in quarter one shows a laser focus on our strategy is leading to progress, and as we move through the rest of the year, we look forward to building on this progress, while acknowledging the fact that in later quarters, we'll begin to lap the initial period of acceleration achieved through our Perfect Execution program last year, and we'll continue to invest in price. With this in mind, today, we reiterate our full year guidance for mid-high single digit revenue and an underlying EBITDA margin of around 2.5%. We've made a strong start, and we're looking forward to driving further improvements and continuing to deliver for our customers this year. Now, let's go to questions.
As a reminder, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. We'll take now the first question from Luke Holbrook, from Morgan Stanley. Your line is open now.
In terms of basket sizes remaining pretty stable year on year, and we're starting to see actually, you know, in terms of our basket mix and what's going on, we're seeing consumers see a lot of growth in terms of kind of core grocery areas, you know, whether it be chicken, whether it be salads, whether it be, you know, ingredients, et cetera. So actually, consumers going back to a lot more kind of core grocery lines back in their basket again, which is good to see. We're also seeing, you know, given the large range we've got, is then what's been interesting, especially in this period, you know, health and wellness continues to be a, a big theme for our consumers. And actually, you know, we know that means different things to different people.
Seeing whether low alcohol, you know, we do have a much bigger range than elsewhere, and that allows us to play into all those different missions, irrespective of, of, of who you are as a consumer. So I think, you know, we're continuing to see in pretty confident. And that said, there's always kind of a level of caution in terms of consumers still coming out of cost of living crisis, and we're continuing to see consumers wanting to shop from the, the broad range that we've got. In terms of new customers, it's a good question. As you know, you know, we did turn away a lot of consumers as, as we went through kind of March, April, May of 2020. We saw...
We definitely kind of probably, you know, 2 years ago now, almost, you know, 2 years ago, 18 months ago, really kind of went back to those customers. We, as we were opening more capacity. I'd say where we're at now, though, is actually about getting more new customers into the business. It's less about reactivating those previous ones. We've obviously kind of gone after those earlier on in our journey. Now, it's about encouraging new customers to Ocado, and actually what you see in terms of switching data, this is no longer just about switching consumers who are already shopping elsewhere online, it's consumers who will be shopping from a mix of different other retailers, some of them shopping in store. It's pretty unusual these days to find a consumer who's never shopped online, is totally new to online.
That's not really a thing anymore, but it's a question of, are they a frequent customer or not? And what we're seeing is that, you know, more than ever, we're getting, you know, we're back to getting high numbers of customers getting through to that first shop, getting stickier. So it's not just about converting them, it's about converting them to a loyal customer as well, and we're seeing improving trends from that perspective, too. I hope that's helpful.
Yeah, that's very clear, and actually just to connect the two, do you think they're connected, so, as consumers feel a bit more confident, less need to shop around, and therefore, a bit more inclined to do some online shopping?
One of the, I mean, I think one of the things that we hear again from customers is because we've got this larger range, you'll literally hear them say things like, "I can get everything under one roof." And that's why they'll continue shopping with Ocado, and we actually see that, "I'll, I'll shop with you at Ocado." I was listening to a customer listening group the other day, and someone's literally saying this, "I shop with Ocado because it means I don't have to go to multiple different places to get everything that I need. I can get it all in one go. It's super convenient for me." So we do find that that, you know, that helps consumers in terms of our broader offering.
As we improve our value perception, as we improve the value we're generally giving to customers as well, that only improves as well.
Very clear, as always. Thank you so much.
Thank you, Andrew.
We'll take now the next question from Wassachon Udomsilpa, from RBC, sorry. Your line is open now.
Hi, good morning. Thank you for taking my question. So, yeah, in the release, you talk about effort enriching product range, and could you perhaps provide us with more color on that? Is there room for further increase from M&S range to the platform, including more from M&S fresh categories? Any update on that would be appreciated. Thank you.
... Yeah, thank you. So, just as a starting point, you know, we have the largest range of any online grocer, now the question is kind of what you do with that range of almost 50,000 items. Exactly, as you point out, over the course of last year, we've been improving our M&S range. And as we reported at the end of the full year results in January, we're up to about 90% of the addressable range online. We're continuing to add to that, and that is everything from, you know, ingredients, whether it be kind of Asian cooking ingredients to their new range. So Taste of Asia range from M&S came out last week. Literally last week, I also got the freshest, newest Jersey Royal potatoes as well.
So good to kind of lead into what is fresh and what is seasonal, and what is British too. So we're continuing to add to that M&S range. We've got almost vast majority now of the core lines, and actually the focus on the teams across M&S and Ocado is making sure that we're launching, you know, with a bang, with those new amazing ranges that come online or come in store, we're getting them online as well. And so really kind of that's now the more the ongoing focus, is how can we make sure that the customers and M&S fans that are shopping online, get access to and can see those amazing new products, those new ranges coming out, so we're continually working with the teams on that.
So there's an M&S perspective there as well, but also more broadly, in terms of our overall commercial strategy, we're definitely focused on those challenger brands. And you will have seen that we launched our Makers Market about a month ago, which is really showcasing and highlighting some of our new brands coming through. And just to name a couple, Tom Parker Creamery, amazing dairy products. We've got Leaf, which is grown in vertical farms, which are fantastic, super fresh salads as well. So we're really getting those, you know, M&S products, which are both the core, the M&S, you know, innovation, which is fantastic to see as well, but also that innovation and new products from the challenger brands as well.
And we know that when customers find these specific items that they cannot get anywhere else, that's what really drives loyalty to Ocado. So it's, it's finding and discovering those new items as well as hero-ing the fantastic M&S new items, too. It's a combination of those things that really kind of drive loyalty.
Super clear. Thank you.
We'll take now the next question from James Lockyer from Peel Hunt. Your line is open now.
Hi. Thank you, and morning, Hannah. Three questions from me, please. Just firstly, I did some math from the numbers. It looks like the average orders per customer increased by 2% year-over-year, but were flat quarter-on-quarter. As I understand, new customers obviously tend to shop less frequently than mature customers. So I guess, can you give us some color on how your mature customer profile moved, changed within Q1? And also if there's any seasonality, say, with Christmas, if there's a spike of new customers as a percent of actives, for example. Second question, this time last year, you signed a retail media deal with The Trade Desk. Could you provide any insights on how that deal's gone so far?
Any update on how you see retail media playing out as part of your model, given third-party cookies are starting to disappear? Then finally, a specific question on chocolate, please. For the longest time, the price of cocoa has remained about $3,000, but over your first quarter, it's tripled to nearly $10,000. Looks like a bad harvest. How should we think about this, and when do you think this might start to reverse? And if you can provide color, what proportion of your sales are chocolate-based? Thanks.
A topical week for that question. Thank you. Okay. So let's go back to, your, your first question there in terms of, customer frequency. Look, overall customer frequency, and actually, if we think about mature, our mature base is actually pretty stable year-on-year. So that's a, that's a, that's a good trend. That's, that's exactly what we want to see. As you grow your base, as you grow your mature base, to maintain that frequency is, is exactly what we're going after. So actually, in terms of consumer shopping behavior, that remains pretty static. In terms of our newer customers, we're seeing slightly improvement in terms of frequency, slight improvement in terms of basket size as well from a year-on-year perspective.
So actually, we're starting to see a good cohort of customers kind of continuing to come through into our mature base. So, I think we're happy with the trends from that perspective. From your second question, in terms of retail media, it's a great one to ask about. So as you pointed out, we did a deal with The Trade Desk. In terms of retail media, there's a couple of different buckets in terms of how we think about this. There's on-site retail media, there's off-site retail media, and The Trade Desk is obviously part of our off-site proposition. But it's only one part of it, so we're continuing to work with them in terms of offering opportunities for other brands to utilize our data to advertise elsewhere.
We've got a few different strands to this, that we're starting to ramp up further in this space. I'd still say it's early days, but there's definitely opportunities available. And in terms of the broader retail media proposition, it's an interesting one because although, people think about retail media sometimes as a buzzword, we've actually been doing it for the last 15 years or so. It's not necessarily new to us, and we work, you know, with some of our largest brands and actually across the whole suite of our suppliers to offer a unique range of tools actually. Although we've got, you know, usual things like sponsored products, like banner ads, we also have a whole range of tools that we've developed over the years to target customers, whether that be coupons, whether it be gifts at checkout look.
So there's a huge suite of offering that we provide to our customers. I think about it less as retail media, I think about it more as tools to grow your brands. And that's absolutely our focus. We're working with lots of our suppliers on, you know, how we can optimize that for them, sharing more data, et cetera, to make sure that we're upfront on this as well. Then to your third question, on chocolate. So yeah, cocoa, we've definitely seen a lot of price increases in terms of cocoa for exactly the reasons that you call out. Look, I'm not an expert in the world of cocoa. As everybody thinks, we'll expect to see it peak at some point. Is it at that peak yet? Probably not entirely clear, if I'm honest.
I think we'll continue to see challenges in this area. I expect it will remain high for some time. Heading into the Easter weekend, though, we've actually been really focused on pricing, making sure that we are competitively priced for our consumers on those Easter chocolates. But I just don't think it's likely to go away anytime in the short term.
That's great. Thanks for the time.
Thank you.
We'll take now the next question from Tim Barrett from Deutsche Numis. Your line is open now.
Hi. Hi, good morning. It's Tim Barrett. Just a one question for me, actually. Hannah, you mentioned that customer perception of value has improved markedly, for your customers. Could you just share how ... more color in that and sort of, kind of how you track that?
Yeah, absolutely. Thanks for the question. So, we track net promoter score across the business more generally. So we're really focused on our overall customer net promoter score, and, you know, across the whole, all our teams look at that week on week. But within that, we look at the core drivers. So where are we doing in terms of NPS from a range perspective, from a service perspective, and clearly from a value perspective? I mean, in value, there's a few different buckets. Obviously, there's overall value, which is both in terms of service, but also the price we're charging. But we also look at the underlying NPS of the price, the customer, the prices that we charge our customers as well, and perceptions of that, too.
We've seen that increase 10 percentage points year-on-year. So, you know, and we can see that being driven. You know, initially, we introduced the Ocado Price Promise. We definitely saw it improve at that point. We've continued to reaffirm, to tell the story about Ocado Price Promise to customers. As we've done that, that has improved it, but also we see with every price drop that we do, as we're adding value back to our consumers as well, that this continues to improve the price perceptions as well.
Great. Thanks for that color.
We'll take now the next question from Emily Johnson from Barclays. Your line is open now.
Morning. I've got two questions, please. The first one is just, you touched on the new OSP forecasting engine. Can you talk a bit about your early experience of using that? Are there any KPIs that you're able to share in terms of what sort of impact you've seen, like delivery slot availability, et cetera? And then the second question is, can you just touch on how growth is developing among the Zoom offering? Are you seeing similar trends to the overall Ocado retail group, i.e., growing active customers and expanding range, or is there anything different to call out there at the Zoom sites? Thanks.
Yeah, absolutely. So happy to expand on that. So your first question on OSP forecasting, so I'll just separate out two aspects of availability just to make it clear. So the first is around product availability. So, you know, we're selling, making sure we've got enough chicken, enough vegetables, et cetera. And the second is slot availability, so have we got enough slots? So the OSP forecasting engine that we've rolled out was focused on product availability. We've been focused on product availability a lot over the course of last year, and we've seen definitely an improvement, I'm gonna say, around the kind of 3-4 percentage point mark over the last year or so. And that was driven by a number of factors, definitely improvement in terms of forecasting.
As we grow, as we rebalance our network, we've been able to focus a lot in terms of improving it, working with our suppliers on improved inbound service levels as well. So there's a number of factors there, but absolutely rolling out the new forecasting engine has helped us improve that balance between availability and waste as well. So we've seen availability go up, waste come down. So that's actually kind of the exactly where we want to be. As I said, I think there's more to go after, so we're gonna be continuing to work with our suppliers on how we can continue to improve that as well. We've also been working on slot availability, less to do with OSP forecasting, but working really closely across Ocado Retail and Ocado Logistics to improve that slot availability to help drive growth as well.
But in terms of Zoom, so yeah, good question in terms of what we're seeing. We're continuing to see. We've refocused our Zoom strategy around London, and we've continued to see in the sites that we've got, i.e., the geographies that we operate, we've seen, you know, really strong growth, you know, well beyond double-digit growth in our Zoom areas. The trend more broadly continues to be pretty consistent with what we've seen early on, which is we're continuing to attract new customers, who are not necessarily Ocado customers on the platform. That said, we also have a number of Ocado customers who we see using Zoom and Ocado, and they will spend more if they are using both platforms than if they are just using the one. So, we're continuing to focus on growing it.
We're continuing to focus on optimizing our costs in this space, and we'll kind of update you later when we've got further growth plans across the Zoom network.
We currently have no more questions. Sorry.
Okay.
Yes, I was going to go back to you, Hannah.
Obviously. Okay. Well, thank you very much for the questions, everyone. That concludes our call. I will next be giving a trading update alongside the Ocado Group half year results, and that is on the 16 of July. Thank you very much.
Thank you for joining today's call. You may now disconnect.