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M<br />
FOUNDATION<br />
Exhibit 18:<br />
Path to profitability for online grocery in India (without considering commissions from suppliers)<br />
A.O.V (Rs) 1,000 1,500<br />
Gross profit margin 29% 15% 18%<br />
Total operating costs 200 183<br />
Trucking and delivery 80 80<br />
as % of sales 12% 8% 5%<br />
Customer fulfillment costs 40 45<br />
as % of sales 9% 4% 3%<br />
Other opex 20 20<br />
as % of sales 4% 2% 1%<br />
Marketing 60 38<br />
as % of sales 1% 6% 3%<br />
EBIDTA (50) 87<br />
EBIDTA Margin 5.9% -5.0% 5.8%<br />
Ocado* India Mse Path to Profitability<br />
Current Scenario<br />
Basket size increases by 50%<br />
Industry (physical retail) gross<br />
margins are in the 14-18% range<br />
Trucking and delivery costs to remain<br />
stable<br />
Marketing costs for Ocado are low;<br />
High competitive intensity in India will<br />
demand continuing high marketing<br />
spends<br />
29.6%<br />
Ocado Gross<br />
profit margins(%)<br />
Ocado<br />
Fulfillment costs<br />
(as a % of sales)<br />
21.2%<br />
28.8%<br />
20.2%<br />
2014 2017<br />
2014 2017<br />
Ocado<br />
Average order<br />
value (£) 1.1%<br />
107<br />
100<br />
Ocado<br />
Marketing costs<br />
(as a % of sales)<br />
1.0%<br />
2014 2017<br />
2014 2017<br />
Source: Company Data, Morgan Stanley Research estimates Note: *Gross margins and costs for Ocado are based on reported F2017 financials and include supplier income @3.5% of retail revenues<br />
MORGAN STANLEY RESEARCH 21
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