Morrisons enters online grocery deal with Ocado

Suzie Neuwirth

SUPERMARKET chain Morrisons and online grocer Ocado today announced that they have entered a 25-year deal, following weeks of discussions which investors were uncertain would come to fruition.

The agreement will enable Morrisons to enter the lucrative online grocery market, using Ocado’s technology, logistics and distribution.

Morrisons will make an initial capital payment of £170m to Ocado and said that it anticipates a further £65m of development costs in the year.

Ocado said that the agreement would not impact its existing tie-up with supermarket chain Waitrose.

“We see Morrisons' decision to adopt our model to drive its online launch as a further endorsement of our technological and logistical excellence,” said Tim Steiner, chief executive of Ocado.

“This validation should support the internationalisation of our model as well as the growth of our UK business by increased market use of our operating model, enhancing capital efficiency and improving returns.”

Dalton Philips, chief executive of Morrisons, commented: “This agreement is a significant strategic step for Morrisons. From a standing start, Morrisons will be competing in the fast growing online channel by the end of this year with a really compelling proposition.”