Morrisons, Britain’s fourth largest supermarket chain, is going into business with online retail grocer Ocado.
Morrisons says it has agreed an online food tie-up with Ocado that will enable the group to launch an online grocery service by January 2014.
The delivery vans will carry the Morrisons brand, with logistical support by Ocado from its newly opened distribution centre in Dordon, Warwickshire.
At the moment, Morrisons is the only one of the big four chains not to offer internet shopping.
Morrisons Chief executive Dalton Philips told BBC Radio 4’s Today programme: “This is a very good transaction for both parties. We’re going from a standing start to the fast lane in the blink of an eye.”
Morrisons will pay £170m upfront to Ocado to acquire the Dordon centre, then a further £46m to expand it and create a delivery network.
Morrisons anticipates a return on its investment within three or four years, Mr Philips said.
Retail analyst with Conlumino, Neil Saunders told the BBC: “This is a transforming deal for Morrisons that will allow them to make the move online in an efficient and effective way that is easily scalable. In many ways, it’s the best possible solution for them.
“It is a good deal for Ocado, too, in that it broadens its business model and provides it with an injection of capital for future investment. The unknown in the mix is the reaction of Waitrose.”
Ocado said its existing contractual agreement with Waitrose would “remain unaffected by these arrangements” and that customers would experience “no change to the service” as a result of the deal with Morrisons.
The online grocer maintained that there was no exclusivity clause in the Waitrose contract preventing it from offering services to rival supermarkets.
Ocado said it would carry on delivering Waitrose food from the Dordon centre.
However in a statement Waitrose said: “We have asked to see the detail of the deal and the operating arrangements. Meanwhile, we have instructed lawyers so that we can get a clear and unequivocal view of the contract and examine what might constitute a breach.”
In the agreement with Morrisons there is a restrictive arrangement preventing Ocado from providing a similar online grocery service to more than one of Morrisons rivals at any one time.
Waitrose signed an agreement with Ocado in 2000 and now serves up to 40,000 online customers a week.
Ocado’s shares closed 36 per cent higher. In total they have risen 149 per cent over the last year.
