A fire at Ocado’s Andover customer fulfilment centre cost the company £110m in damaged property, equipment and inventory loss.
In its half-year results, Ocado said property, equipment and inventory with a value of £110m was destroyed in the fire in February 2019 with damage so bad that “nothing significant is expected to be recoverable”.
Other costs included “transporting employees to other warehouses to work, professional fees relating to the insurance claims process and reimbursement of employees' personal assets that were destroyed”.
The fire had started in an area of the centre where goods are stored at ambient temperature. According to the BBC, investigators said the fire had been caused by an electrical fault in a battery-charging unit.
However, Duncan Tatton-Brown, CFO for Ocado, told investors on a webcast that the company anticipated that all losses sustained in the fire would be covered by insurance.
“Importantly, we expect to be fully indemnified for business disruption, including estimated lost sales and cost inefficiencies, and for the steps we have taken to minimise these,” he added.
Tatton-Brown said the firm had lost approximately 10% of its capacity in the fire but it had been able to mitigate this by spreading customer demand more evenly throughout the week.
“This is fine in the short term but it does run the risk of not being able to satisfy our customers’ demand which may lead to them getting their groceries elsewhere.”
As a result, Ocado loosened its agreement to be Morrisons’ exclusive digital partner in order to secure the entire capacity of their shared Erith customer fulfilment centre in Kent.
By taking back capacity at Erith, Tatton-Brown said the online retailer hopes to deter its customers from shopping elsewhere for groceries.
Last month, Ocado announced it is investing £17m in joint ventures to develop vertical farms to grow produce metres away from its distribution centres.