Morrisons has confirmed that its long-awaited online grocery delivery service will launch from January 2014 after finalising a deal, worth up to £216 million, withonline retailer Ocado.
The Bradford-based business says it will utilise Ocado's 'leading end-to-end technology, logistics and distrubution operations'.
As part of the agreement - which will see Morrisons make an initial payment of £170m to Ocado with a further £46 million to expand and establish a delivery network -the 'big four' retailer will acquire Ocado's recently opened Dordon Customer Fulfilment Centre (CFC) based in the Midlands to bolster its logistics operation. All delivery vans will be branded with the Morrisons logo.
'Morrisons will now be competing in the fast growing on-line channel by the end of this year with a really compelling proposition,' saidDalton Philips, CEO of Morrisons.
Philips estimates that the new food.com business will deliver a return on the retailer's multi-million pound investment within three to four years. Meanwhile,Ocado's share price surged 42 per cent after news of the deal broke, pushing the company's market valuation to over £1 billion.
Philips added: 'The customer will be getting our affordable fresh food delivered by Ocado’s state of the art distribution system. I’m confident that Morrisons.com will grow over time to be an operation of real scale and significance whilst creating meaningful long-term value for Morrisons shareholders.'
The deal had caused some controversy with Ocado - who already have a delivery agreement with Waitrose which is due to run until 2020, with a break clause in 2017 - now working with one of Waitrose's biggest rivals. Waitrose MD Mark Price admitted the retailer was exploring its options legally. He said last week: 'If a contract is signed between Morrisons and Ocado we will want our legal team to examine it immediately to ensure there are no breaches of the contract”.
However, Tim Steiner, CEO of Ocado, is remaining calm over the new deal. He concluded:“Morrisons' desire to offer its customers the choice of online shopping illustrates the structural shift we are seeing in favour of the channel.
'Our customers will see no change to the service they receive from Ocado as a result of this agreement. We will continue to source products under our long term agreement with Waitrose, and our customers will continue to benefit from the existing high levels of service, wide range of products and competitive prices that they currently enjoy.”
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