Grocery delivery service Ocado was forced to temporarily suspend parts of its online service last month due to coronavirus (Covid-19). The panic buying induced by the virus resulted in a tenfold increase demand. However, even before this unprecedented surge Ocado has been steadily growing over recent years. A quick Google search shows the impressive growth of Ocado’s share price since its initial public offering. Investment in technology and intellectual property (IP) have played a major role in this growth.
Figure 1: Ocado’s share price between 2010 and 2020. (Source: Google)
At this point you may be thinking, what does an online supermarket delivery service have to do with IP? In fact, unbeknown to many, Ocado is often viewed as the UK’s biggest listed tech company. Ocado’s value comes from its technology as much as from its market share or profit selling groceries themselves.
Ocado has invested heavily in developing automated warehouse technology, which it utilizes in its customer fulfilment centres. The result is the robotic warehouse shown in this video, where packing robots speed around a warehouse collecting the variety of items ordered by the customer. In addition to the physical robots themselves, substantial research and development has been undertaken in fields such as artificial intelligence (AI), big data, machine learning (ML) and internet of things (IoT). Ocado’s grocery picking technology is considered as some of the most advanced in the world.
As well as developing this technology, Ocado have obtained intellectual property rights to protect their investment. A search using TotalPatent One reveals over 350 patent applications have been filed by Ocado in the UK and Europe alone. The graph below shows the increasing trend in the number of these applications published per year between 2012 and 2019.
Figure 2: The number of EP and GB patent applications under the name Ocado published per year between 2012 and 2019. (Source: TotalPatent One)
Over half of these applications relate to the CPC classification code group B65G1 (Storing articles, individually or in orderly arrangement, in warehouses). The next most common classification was unsurprisingly G06Q10/08 (systems and methods including data processing systems and methods relating to logistics, e.g. warehousing, loading, distribution or shipping; Inventory or stock management, e.g. order filling, procurement or balancing against orders).
One of the reasons that Ocado has been highly regarded by investors is that by protecting its IP, Ocado has gained an additional asset it can sell as well as groceries. Through the Ocado Smart Platform, Ocado provides its protected warehousing solutions to other companies. This has started to provide income for Ocado, and this is predicted to increase in the future. Supplying services and solutions to other business could prove more lucrative than simply selling the warehouse products themselves. A similar strategy was used by Amazon with their Amazon Web Services platform.
Indeed, Ocado has signed a number of significant deals following this approach. Most notably, in 2018 Ocado signed deals with the Canadian supermarket chain Sobeys and US retailer Kroger to provide warehousing solutions using Ocado’s technology. Closer to home, Ocado is due to switch to fulfilling online food orders for Marks & Spencer, after leaving its long term partnership with Waitrose.
In the future, supermarkets will undoubtedly continue to see an increase in demand for an online delivery based model. With Ocado’s technology being far ahead of any of the more traditional high street supermarkets, the larger players may find themselves in need of Ocado’s intellectual property. Ocado’s technology could perhaps even become the standard for supermarket logistics. Provided they keep innovating, the future looks bright for Ocado.
If you would like to learn more about how protecting your intellectual property could help your business, please don’t hesitate to contact us.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.