Shownotes
Ocado co-founder and CEO Tim Steiner is stepping down after more than two decades leading one of retail's most ambitious grocery automation companies.
Chris Walton is joined by Shelley Huff, CEO and Co-Founder of The Interval, and Chris Niesen, Founder of Peloton One Consulting, to discuss whether this leadership change signals trouble for automated grocery fulfillment or simply marks the next chapter in its evolution. They share their perspectives on warehouse robotics, grocery economics, and why automation still has an important role to play in retail.
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Transcripts
Wow.
Speaker A: founder advisory role through: Speaker A:Reports indicate chair Adam Warby and board member Jorn Rousing pushed to accelerate Steiner's exit.
Speaker A:Yeah, I can imagine.
Speaker A:Following a prolonged share price slump, triggering pushback from other shareholders who wanted more continuity.
Speaker A:Ocado shares are down nearly 25% year to date and more than 90% off their pandemic era peak as its core business of licensing giant automated fulfillment centers to grocers has lost momentum.
Speaker A:Shelley, going to start with you.
Speaker A:What do you think Steiner's exit says, if anything, about the future of automated grocery delivery?
Speaker B:Well, this is a big one.
Speaker B:And I like the fact that the board has a long off ramp for you do Tim Steiner.
Speaker B:He's an incredible founder and a visionary, and an abrupt transition could create unnecessary risk, obviously.
Speaker B:At the same time, boards have relatively few levers when the business isn't performing, and so replacing a CEO is one of them.
Speaker B:So I think that there's obviously some things happening within this business that has prompted this transition, but I want to decouple that from what's happening with automated grocery fulfillment.
Speaker B:I think it's.
Speaker B:We're actually having two different conversations here.
Speaker B:So I think automation is absolutely part of grocery future.
Speaker B:It's, you know, one lever.
Speaker B:And I think the industry is learning.
Speaker B:There's not one fulfillment model that actually works.
Speaker B:It's a combination of them.
Speaker B:And I think Ocado solved like a huge engineering problem.
Speaker B:I think, you know, whether that technology can translate into an economic position is, you know, for its retail partners is, is the big question.
Speaker B:So I think a few key customers pulling back like Kroger doesn't necessarily mean the technology failed, but it does mean there's an economic question that's happening and potentially that Okada was really early where there's not necessarily the density to support the business.
Speaker B:When you have huge investments in facilities like this that may be operating at 60% capacity, for instance, that's an economic drain and an economic killer.
Speaker B:And so I think, you know, automated fulfillment, again, I think, has a future.
Speaker B:I Think it's, what is the size of the facility, what is the density of population, what is the use case?
Speaker B:All of those things, you know, come into the conversation when we talk about these things.
Speaker B:But I absolutely think it has a place.
Speaker B:So the challenge is improving that robotics can pick groceries at this point.
Speaker B:It's proving that retailers can actually make money doing this.
Speaker A:Yeah.
Speaker A:And that they have the demand to utilize the capital to the extent that is required to write that.
Speaker A:Which.
Speaker A:That being a key piece of the, of the Kroger situation, too, from my understanding.
Speaker A:Shelley, I want to go back to something you said at the beginning, though.
Speaker A:You said you like the long off ramp.
Speaker A:Is that because Tim Steiner is.
Speaker A:I mean, he's been there 26 years, give or take.
Speaker A:I think that's the right math.
Speaker A:But is that because, you know, he's such a.
Speaker A:Such an important piece of that organization culturally, that it's going to be hard to replace it so quickly?
Speaker A:Is that why you like the lengthy succession plan here?
Speaker B:I do.
Speaker B:I think it shows a level of thoughtfulness with the board because basically it's giving him an off ramp that says, here's how long we'd like you to stay in the business.
Speaker B:And he probably was part of this conversation, obviously, in terms of what his willingness is.
Speaker B:And it also ensures some continuity within the organization.
Speaker B:And Tim is a visionary leader.
Speaker B:It's.
Speaker B:It's going to be very difficult to replace somebody like that culturally.
Speaker B:He's built this business, and so I think it gives them time to potentially find somebody who is operationally the person to take the business to the next level and, you know, is a commercial leader that could potentially come in and build, you know, bigger relationships, bigger B2B relationships.
Speaker B:But I absolutely think that that shows some.
Speaker B:Some patience and some thoughtfulness into how this organization has transitioned and gives them time to.
Speaker B:To really do a proper search globally for the right person to come in and lead this business.
Speaker A:Yeah, it's going to be a tough task for whoever comes in to replace them.
Speaker A:You know, I almost wondered too, Shelley, as you're talking, like, do we get into, like a Steve Jobsian situation here, too, where we see Tim start, you know, come back at some point in time, because, yeah, maybe they just need a change in leadership right now, but you never know, you know, where things are going to go.
Speaker A:Particularly as you described and discussed the evolution of automation in grocery, too.
Speaker A:Because I think.
Speaker A:I mean, I know you and I believe.
Speaker A:And I think Chris thinks.
Speaker A:I'm curious to see what Chris thinks, too.
Speaker A:It's not like that conversation is really dead.
Speaker A:It's going to happen at some time.
Speaker A:We just got to get everything right and figure it out.
Speaker A:But Chris, what's your take on this situation?
Speaker C:So I'm starting with a story from a visit that I had last week to Boston.
Speaker A:Okay.
Speaker C:I was walking the streets of Boston and I saw a food delivery robot on a busy sidewalk.
Speaker C:Okay.
Speaker C:And most people were navigating it incredibly fine until I saw an old man on his phone almost fall to the ground.
Speaker C:The point that I start with is that this is genuinely hard.
Speaker C:First mile to last mile, real time, inventory, logistics, you name it.
Speaker C:On top of that, yeah, there's a huge investment here.
Speaker C:And I think what we're starting to learn is that the store network is beginning to prove itself in a way that the large fulfillment centers have not yet done.
Speaker C:From a volume perspective, you think about speed, density, and the built in labor.
Speaker C:There's a lot of things there that are hard to beat.
Speaker C:And we're talking about an environment right now where organizations are really thinking about where they place their bets from an investment standpoint.
Speaker C:AI is there, but there's also a lot of sure bets when it comes to return on investment things like store remodels and other things.
Speaker C:So what I would say is we're a lot further away from automated grocery delivering at the at scale than we've been told for years.
Speaker A:Okay, interesting.
Speaker A:What makes you say that?
Speaker A:Like why?
Speaker A:Just because it's harder than we think?
Speaker C:Yeah, I think it not only harder, but I think it's a huge expense.
Speaker C:Right.
Speaker C:And so in organizations are thinking about where do I get the most return on my investment?
Speaker C:And right now it's not in these large fulfillment centers.
Speaker C:Right.
Speaker C:Stores are underutilized when it comes to delivering grocery.
Speaker A:Yeah, right.
Speaker A:And that I think you're hitting on something too, which is if you had to, if you had to place your bets in terms of the timeline by which this rolls out, particularly here in the United States, you're gonna see more people go to the store fulfilled model.
Speaker A:They're gonna optimize their pick rates in the store first before they start investing in the technology.
Speaker A:But meanwhile though, I think we have to keep in mind Amazon is on the other side of this equation where they're going in the opposite direction because they don't have the stores and they're putting those micro fulfillment centers and they're putting the automation into them.
Speaker A:So the last thing I'll say here before we move on, this has been a great discussion.
Speaker A:Wow, what a great discussion to start out the show.
Speaker A:I've interviewed Tim twice in the last year.
Speaker A:I've been lucky enough to interview him twice.
Speaker A:Once at Grocery Shop, once at wrc.
Speaker A:And every time I sit and listen to him, I just think, my God, I'm talking to an icon.
Speaker A:This guy knows so much about things, and he always leaves me with something that I had never thought about before.
Speaker A:And the one point I just want to mention to everyone, because it kind of goes into what both Chris and Shelley have both been saying is I asked him on stage at Grocery Shop, I said, what's your one prediction for the industry in the next 10 years?
Speaker A:And he said, he predicts there will be a day in the future in which E Groceries is the most profitable way to run a grocery operation.
Speaker A:It'll be more profitable than stores.
Speaker A:And so if he's right, a lot of people thought he was crazy.
Speaker A:Like, people in the audience were like, you're nuts.
Speaker A:But if he's right, what's it going to take to get there, and what does that mean for the industry?
Speaker A:So that's something I just love thinking about.