Lately, though, Tim Steiner has been doing most of the laughing.
Having wriggled free from the straitjacket of Ocado’s struggling core retail business by turning it into a technology licensing enterprise, the co-founder and chief executive hit pay dirt in May with a blockbuster deal to build at least 20 robotic warehouses for US supermarket giant Kroger.
The announcement sent Ocado’s shares flying, propelling it into the 100 index and putting Steiner among an elite group of founders — including Peter Hargreaves and Stephen Lansdown of funds platform Hargreaves Lansdown, and Sir Martin Sorrell of advertising conglomerate WPP — who have created a blue-chip company from scratch.
Steiner, who has earned more than £15m in pay and bonuses since Ocado listed, has a 3.4% stake that is now worth £179m.
For the dogged efforts that have driven up Ocado’s market value from £2.4bn to £5.2bn over the past 12 months.
If belated victory over his tormentors tastes sweet, he isn’t showing it. Steiner was once said to have named his dog Rupert after a particularly irritating journalist. “That’s a little bit of a myth, actually,” the Ocado boss says from his ski chalet in the French Alps. “The dog was purchased while I was on holiday and was already named, so it was a coincidence.”
Likewise, he passes up the opportunity to settle scores with the City. “They [analysts] wrote rude things about us; we carried on working,” he says. “I think some of them love to be controversial. They either need to be controversially bullish or controversially bearish, and in our case, they happened to be the latter. And it’s our job to wake up every morning and try and create value . . . and here we are.”
Short and intense, with a nasal voice and a manner that can flicker between prickly and warm depending on the questioner and the question, Steiner — like Ocado — has always divided opinion. His belief in his creation has never wavered — which is just as well, given how many times it has teetered on the brink during its journey to success.
“Globally, people weren’t sure that automation and technology was what was going to drive [grocery retailing],” he says. “And, therefore, we were in a fairly lonely space — but, of course, during those lonely years we were trialling and experimenting, learning, investing and so now, when this is quite a popular space, we’re the world leader.”
Steiner, 49, comes from entrepreneurial, middle-class stock. His paternal great-grandfather, Henry, was a hairdresser in Muswell Hill, north London. His grandfather, Herman, inherited the business, later gaining royal warrants as hairdresser to Queen Mary and cosmetician to the Queen Mother. His maternal grandfather, Sidney Berk, floated electronics company Lorlin on the Unlisted Securities Market. His mother, Linda, founded a beauty brand, Elemis, which was bought by the family business, Steiner Leisure, now the biggest operator of cruise ship spas in the world and owned by the buyout firm Catterton. Steiner went to Haberdashers’ Aske’s Boys’ School in Hertfordshire, and then studied economics at Manchester University before landing at the investment bank Goldman Sachs in 1992.
He moved through various senior roles in Goldman’s bond trading division, and remains well-connected with the Vampire Squid’s alumni: his cousin, Melanie, is married to Michael Sherwood, who was joint chief executive of its European business from 2005 to 2016.
Steiner quit to start Last Mile Solutions, as Ocado was originally known, in 2000 with two Goldman colleagues — Jonathan Faiman, a friend from nursery school, and Jason Gissing. Faiman later admitted they were “arrogant and naive” about the complexity of the grocery market, but their timing was lucky: amid the optimism of the first dotcom bubble, Charlie Mayfield — then development director of the John Lewis Partnership and yet to be knighted — approached and negotiated a seed investment of £35m in return for a 40% stake. Ocado would be the online distribution arm of Waitrose, John Lewis’s supermarket brand. Further funding rounds brought investments from Jorn Rausing, the Tetra Pak billionaire, and Swiss bank UBS.
Faiman stood down as an executive in 2008 and left as a non-executive in March 2010, four months before Ocado’s controversial listing. Despite having ramped up weekly orders from 50,000 to 70,000 and made £1bn of sales, the business had racked up cumulative pre-tax losses of almost £100m over the previous three years. Steiner and Co hired eight investment banks, leading to accusations that they were buying off the potential for negative analyst coverage.
Ocado planned to float at £1.2bn, a valuation that Shore Capital analyst Clive Black said had “no bearing whatsoever to a sensible earnings multiple”. It was forced to cut the price to 180p a share, or £937m, and endured a rocky first couple of years, almost going bust before an emergency £36m cash call in 2012.
The former Marks & Spencer boss Lord (Stuart) Rose replaced the theatre impresario Lord (Michael) Grade as chairman in March 2013. Three days later, Ocado confirmed it was in talks over what turned out to be a transformative deal — a technology licensing partnership with the beleaguered chain Morrisons. It came about due to a shift in mindset.
“For the first maybe 10 or so years, in the run-up to the IPO [initial public offering] and just beyond, we were very secretive about what we were doing,” says Steiner. “A lot of people asked to see it and we wouldn’t show them . . . I used to say, ‘We’re not the Open University of online grocery retailing — we’re not here spending our shareholders’ money, learning as the person at the front, the innovator, so that everybody else can copy us more cheaply.’ Right? [But] shortly after the IPO we hit a few roadblocks that basically proved to us how complex what we were doing was.”
Faced with continuing losses and slow sales growth, Steiner decided to change tack and open Ocado’s first two distribution centres to tours by other retailers. About 60 supermarket operators traipsed around Hatfield in Hertfordshire and Dordon in Warwickshire. Towards the end of the glasnost process, Morrisons’ under-fire boss, Dalton Philips, said he wanted to take the Bradford-based grocer online with “something that looked and smelled a bit like Ocado”, Steiner recalls.
When the terms were announced in May 2013, even critics such as Shore Capital’s Black applauded. The generous £216m deal — later trimmed by Morrisons after it sacked Philips — saved Ocado from another cash squeeze. “We executed that and the City was onto us, saying, ‘Try to do another one,’ ” Steiner says.
There were two obstacles. Ocado had developed software for its own use rather than for resale. “The resilience of it, the security, the usability, the online help and the documentation ideally need to be at another level if you are selling software to major global companies,” Steiner says. And many of the 60 retailers that had visited Hatfield and Dordon had asked whether Ocado could build smaller distribution centres.
“You could build a smaller one, but the economics changed. If you built a smaller one, the capital-to-sales ratio kept growing as it got smaller,” Steiner says.
So Ocado set about adapting its software platform and creating a more efficient warehouse format where robots zip across an aluminium grid containing stacks of grocery crates, picking items.
Gissing left in May 2014, leaving Steiner as the sole remaining founder at a time when euphoria over the Morrisons tie-up was subsiding and City scepticism was setting in again. It took a while, but Ocado struck a second technology licensing agreement with the Catalan retailer Bon Preu in June 2017, followed by deals with Groupe Casino in France, Sobeys in Canada and ICA in Sweden. Kroger, a game-changer in terms of scale and the 6% stake it took in Ocado, catapulted the shares up 44% in a day.
Ocado made a pre-tax profit of £1m last year on £1.5bn of sales — £117.7m of which came from licensing. Steiner rejects the suggestion that its core business of delivering food and drink has failed.
“We’ve chosen not to try to maximise the cash it generates and convert it into traditional profit before tax, we’ve chosen to invest faster, to invest in more stuff and to create and expand a global intellectual property business,” he says.
He insists the company would be “quite a profitable business today” if it decided to curb investment in those areas. He also points out that the supermarket industry “has been through unexpected times” with price-cutting that has “dramatically shrunk the profitability of Tesco, Sainsbury’s, Asda, Morrisons, Waitrose and Marks & Spencer”.
This year has not been an easy one for him on a personal level. In January, he was revealed to have been among guests at the Presidents Club, the scandal-hit dinner where hostesses were allegedly harassed. (He says he “wasn’t witness to any of it” and has no tolerance for “any form of harassment”.) In April, he repaid a loan taken out to fund his divorce two years ago from Belinda, his wife of 14 years. (He now lives with his Polish model girlfriend, Patrycja Pyka.)
As it comes to an end, though, he can enjoy the plaudits for what he calls “an 18-year overnight success” story. Not that he plans on slowing down.
“I’m in France skiing, but I guess you could describe holidays these days as just moving the venue of the office,” Steiner says.
“Tomorrow, my conference calls start at 9am and go on all day. You try to get some time off, but you’ve got to do what you’ve got to do.”
That’s the attitude that has helped Ocado’s boss see off the sceptics.
That’s the attitude that has helped Ocado’s boss see off the sceptics.
