Alex Freudmann, M&S’s man leading the Ocado turnaround

Even then, Freudmann was crafting a reputation as a turnaround specialist, transforming Coles Meat into what would eventually become the country’s largest meat exporter and then, at Australian booze specialist Dan Murphy’s, leading a substantial shift to online as the retailer battled through the pandemic.

So Freudmann was the perfect candidate to help M&S get a grip on arguably its biggest transformational headache right now: its joint venture with Ocado. The online retailer – of which M&S owns 50% – was one of the few black marks on an otherwise strong set of annual results last month, racking up losses of £29.5m for M&S.

“When we went onto Ocado we had to build more ranges around ingredients, homemaking”

The M&S-Ocado tie-up was originally sold as a means to deliver a profitable and scalable online grocery business. However, its launch during the depths of Covid left it profitable but not scalable, while the post-Covid return to in-store shopping has left it scalable but not profitable.

The problems were not only circumstantial, however. “When you amalgamate an online retailer and a physical retailer, there are a lot of processes that were never designed to be together,” Freudmann explains. “So, when we go through weights and measures, photography, packaging, all those are things M&S designed for physical stores. Whereas for Ocado those processes all exist but they work slightly differently.”

Freudmann is speaking while touring M&S’s biggest food hall yet, in St Albans’s Colney Shopping Park, recently expanded to over 18,000 sq ft. It’s a clear manifestation of the renewed success of the food business, featuring the full lineup of 6,500 products.

Yet while for now, at least, Ocado remains a drag, Freudmann believes it still offers an opportunity for M&S to improve. As well as making the full range available to a wider number of M&S customers than the current store expansion allows, “what we have through our Ocado relationship is all the information and data about the categories where there are opportunities”.

To help unlock that, Freudmann has led a full review alongside Ocado Retail CEO Hannah Gibson, looking at how the two companies can collaborate more closely on everything from logistics to customer experience, from availability to marketing.

Given it’s now almost three years since M&S products replaced Waitrose on Ocado’s website, to a casual observer, it may seem that collaboration should have been cracked a while ago. But as an own-brand retailer with a historically limited range, that time has been a “bit of a learning curve” for both parties, Freudmann says. “We never retailed alongside brands as we do on Ocado,” he explains.

There is also the issue of availability. When M&S first launched with Ocado in 2020, the aim was to sell 6,000 of M&S’s 6,500 full range. Yet three years later, the number still only stands at 5,700.

Building a range for online

M&S has also grown its range since then. “When we went onto Ocado we had to build more ranges around ingredients, homemaking. Also spices and herbs,” Freudmann says. The downside of this is that “there are generations of us not having bought that [from M&S]. So we’ve got to tell customers we’ve got it.”

The solution has been to recruit celebrity chef Tom Kerridge to provide recipes in M&S’s latest ad campaign. Ocado shoppers will then find the recipes online with the option to say ‘click here now to add all these M&S items to your basket’, Freudmann explains. (Once again, the latest Ocado ad, which is about matching Tesco Clubcard Prices, doesn’t mention M&S at all.)

But the job on availability also applies to modernising processes for M&S stores. The retailer rolled out new practices early in 2020, including more out-of-hours deliveries to stores after food waste mounted to the point of hurting profits in its Christmas quarter. Now the work has moved on to AI and machine learning.

“Over the years, as a business we haven’t invested heavily in systems and processes around availability,” says Freudmann. “We’re in the middle of rolling out a new forecasting engine, which we have to do. The sun shines and people come and buy their picnics from M&S. That’s the nature of our business. So we need to be really good at forecasting.”

The new forecasting engine benefits from a “learning loop”, says Freudmann, who in his early career worked in telecoms at Tesco. “It learns what happened the last time the sun shone in London – down to that product in that store – which is a capability we never had before.”

Technology improvements to increase supply chain efficiency were listed in M&S’s annual results as part of plans to grow margins, which are currently under pressure as it grapples with higher costs while trying to keep prices as low as possible.

But like most retailers at the moment, M&S is keen to impress that the biggest threat to food prices now is restrictive legislation. “The biggest thing government can help us with is less regulation,” says Freudmann, highlighting the priorities as removing GB-wide labelling from the looming Windsor Framework border arrangement and pausing extended producer responsibility legislation until concerns are addressed over how the tax will be spent.

Freudmann was part of the prime minister’s recent ‘farm to fork’ summit with food industry leaders, where he hoped to put across his case. Does he think anyone is listening? “The proof of the pudding is in the eating. We’ll see what happens next.” Investors in Ocado may well be thinking the very same thing.