Waitrose keeps a close eye on Ocado moves

WAITROSE yesterday confirmed it is “monitoring developments with interest” at Ocado, after the online delivery service entered talks with rival supermarket Wm Morrison.

A Waitrose spokesman also pointed out that the company has the opportunity to break its long-running agreement to supply products to Ocado in 2017, raising the prospect that it could ultimately choose to focus on its own Waitrose Direct service.

Last week Morrisons chief executive Dalton Phillips confirmed that his company will follow the lead of its rivals and start selling groceries online by January 2014.

However, the announcement was overshadowed by leaked reports that the company is in talks with Ocado to license its proprietary technology, and possibly even capacity at its enormous delivery centres.

The news caused Ocado’s shares to jump 36 per cent and pleased analysts who have repeatedly urged the two firms to consider a tie-up or even a possible takeover.

Although Ocado is closely associated with Waitrose, it is a separate business that also delivers own-brand goods. Two years ago Waitrose relaunched its own website to compete with Ocado within the M25 area, raising tensions between the two companies.

Waitrose’s existing deal to supply Ocado with products is due to expire in 2020.

Morrisons, the fourth biggest player in the UK grocery marketplace, last week unveiled a fall in year-end profits as like-for-like sales fell by 2.1 per cent, placing the blame on its weak online and convenience store offering. It hopes to rectify the latter issue by rushing to open 100 new corner shops this year under the M Local brand.

By contrast the company’s route to web sales has been slow and torturous. Two years ago it bought the online children’s store Kiddicare for £70m in order to access its technology and expertise. This was followed by the purchase of a minority stake in US online retailer Fresh Direct, although it has yet to deploy any of the acquired expertise or platforms.