Morrisons' share price climbs as supermarket and Amazon reveal Pantry and Prime Now tie up - but Ocado's share price is plummeting


Morrisons is hoping to grow without having to invest too much (Source: Getty)

Morrisons' share price soared 5.4 per cent this morning, after revealing it had secured a major new agreement with Amazon, to sell "hundreds of products" via Prime Now and Pantry. 

The new tie-up, which will go live "in the coming months", will see Morrisons provide a wholesale supply service to Amazon, offering delivery of its ambient, fresh and frozen products.

The move is part of Morrisons' six-pillar turnaround plan "to make the supermarket strong again", with this enabling the business to grow volumes while remaining "capital light". 

Chief executive David Potts said: "Today's agreement is built on Morrisons unique strengths as a food maker. The combination of our fresh food expertise with Amazon's online and logistics capabilities is compelling.

"This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months."

The deal is not only beneficial to Morrisons, however. Amazon has been testing the waters for fresh food deliveries in London since last autumn, but so far has only been able to offer a limited service. 

Morrisons has also reached an agreement with Ocado to grow, which will include the grocer taking space in the delivery group's new customer fulfilment centre in Erith as it looks to sell to customers across Great Britain. 

"This amended agreement is subject to detailed terms being agreed and will only proceed if it enables Morrisons to achieve profitable growth online," the supermarket explained. 

However Ocado investors - who had been hoping there would be a tie-up of a different kind - were unimpressed.

Ocado's share price was down 5.8 per cent in early trading. 

Phoenix Asset Management - which owns one per cent of Morrisons - noted this could also be because  it will give the supermarket "leverage when discussing future plans with Ocado".

Tristan Chapple, head of research, said: "Morrisons can now take online growth through Amazon instead of Ocado.

"There has been some evidence to suggest that the deal signed by the previous chief executive with Ocado was less than favourable to Morrisons. Morrisons has the option to take 50 per cent of the capacity of incremental Ocado distribution hubs.

"Looking at Ocado’s balance sheet and considering the fact that they have not made a cash profit since their IPO we would say that Ocado are very keen for Morrisons involvement, especially since their other deal with Waitrose has a break clause in 2017.”