Morrisons confirms deal with Ocado to launch online grocer

Morrison Supermarkets has confirmed it is teaming up with Ocado Group to launch its first shopping website in January next year.

The partnership had been expected as the two have been in talks since Morrison announced it was moving online in its annual results in March.

Online grocer Ocado will provide its technology, logistics and distribution operations to Morrison.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

Morrisons said fulfilment will be from Ocado's recently opened Dordon Customer Fulfilment Centre (CFC) in central England. Customer deliveries will come through a Morrisons liveried fleet.

It said the website will have a clear "Morrisons look and feel".

The deal will comprise a technology and services arrangement and a sale and leaseback of property and equipment at Dordon.

Morrisons will make an initial capital payment of £170m to Ocado to acquire Dordon and associated mechanical handling equipment, as well as a licence and integration fee.

A further £46m will be invested to expand Dordon in order to accommodate Morrisons range, integrate with Morrisons systems and establish a network of delivery spokes.

"This agreement is a significant strategic step for Morrisons," said Chief Executive on Morrisons, Dalton Philips.

"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."

RD