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Morrisons to fast track its online offer with Ocado link up

Published:  17 May, 2013

Morrisons is looking to fast track its move in to online grocery shopping with a deal that will see Ocado, that currently provides Waitrose with much of its online offer, offer a similar service to Morrisons.

Morrisons is looking to fast track its move in to online grocery shopping with a deal that will see Ocado, that currently provides Waitrose with much of its online offer, offer a similar service to Morrisons.


In what is being seen as a major coup for Morrisons and a bitter blow for Waitrose and its parent company, John Lewis, it means Morrisons could have a full grocery offer available by January 2014.

It made its first move in to online shopping by setting up its own wine offer, the Morrison Cellar, last October and has been using the Bibendum-backed Taste Test initiative to drive customers to its new site.

Under the deal any Ocado van delivering Morrisons products will carry the Morrisons brand. Logistical support will be handled by Ocado from its Dordon distribution centre in the Midlands.

Chief executive Dalton Philips said: "This is a Morrisons website, it's Morrisons food in a Morrisons van with a Morrisons driver; it's Morrisons the whole way through. It is are simply providing the technology and the platform."

Under the terms of the agreement Morrisons will pay £170m to Ocado initially to acquire the Dordon centre, with an additional payment of £46m to widen the delivery network.

Ocado said its current deal with Waitrose would "remain unaffected by these arrangements" and that customers would experience "no change to the service" as a result of the deal.

It said it was free to work with other stores as there was not an exclusivity clause in the Waitrose agreement.

The Morrions tie-up, though, does prevent Ocado working with more than one competitor to Morrisons at any one time.

It is thought Ocado currently serves around 40,000 customers a week.

Sam Fuller, UK head of consumer and leisure at international investment bank Altium, said: "On paper the Morrisons deal looks like an excellent one for Ocado and a ringing endorsement of its platform and business model. Morrisons is one of the big four supermarket chains but its lack of online service and local convenience stores has put it at a disadvantage to its rivals.

"The terms of the 25-year agreement will offer Morrisons much more visibility in the marketplace and provides Ocado with the security it needs by generating a welcome chunk of funds for the firm to pay down debt. Morrisons, which is strong in the north of England, also offers Ocado a counterbalance to its deal with Waitrose, which is much stronger in the south.

"That said, Waitrose has made some ominous noises about a potential tie-up with Morrisons and its reaction to it. At best it is likely to annoy Waitrose. At worst it could result in legal action to try to prevent the Ocado-Morrisons tie-up happening before Ocado's contract with Waitrose comes to an end in 2017."

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