Morrisons to launch online shopping with Ocado next year

20/05/2013

UK supermarket chain Morrisons has struck a deal with Ocado to launch an online grocery service by January 2014.

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Under the deal, the delivery vans will carry the Morrisons brand, with logistical support by Ocado from its Dordon distribution centre in the Midlands.

At the moment, Morrisons is the only one of the big four chains not to offer online shopping.

Morrisons will make an initial payment of £170m to Ocado to acquire the Dordon centre, then a further £46m to expand it and establish a delivery network.

Morrisons expects a return on its investment within three or four years, Mr Philips said.

Ocado said its current contractual agreement with Waitrose would "remain unaffected by these arrangements" and that customers would experience "no
It maintained that there was no exclusivity clause in the Waitrose agreement preventing it from offering services to rival supermarkets.

Ocado said it would continue to deliver Waitrose food from the Dordon centre.

But in the agreement with Morrisons there is a "restrictive covenant" preventing Ocado from providing a similar online grocery service to more than one competitor to Morrisons at any one time.

Waitrose signed a deal with Ocado in 2000 and now serves up to 40,000 online shoppers a week.

Ocado's share price surged 30% in morning trading on news of the deal. Its shares have risen 149% over the past year.

Online food sales in the UK are growing, with te total food and grocery market is forecast to grow 22% from £127bn to £155bn by 2017.

Online food sales are expected to grow by nearly 70% over the same period, from £5.9bn to £10bn. As a proportion of the total, online is set to grow from 4.66% to 6.47% Nearly 30% of people in the UK now shop online for food and groceries.

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