Morrisons seal online shopping deal with Ocado

Grocer to make first foray into online world - but how will Waitrose react to Ocado's deal with its rival?

(Image credit: 2003 Getty Images)

MORRISONS has gone from a "standing start to the fast lane" after agreeing to launch an online shopping service with Ocado, its chief executive said today. Dalton Philips told the BBC the grocer was making an "important step" in joining the fast-growing online shopping world.

Unlike rivals Tesco, Sainsbury's and Asda, Britain's fourth-biggest supermarket has not offered an internet shopping service before. But Morrisons is attempting to turn around its flagging fortunes after reporting its first profit drop in six years last March.

The grocer said its website will have a clear "Morrisons look and feel" and that will be delivering to customers by January 2014. It has agreed to pay £170m to acquire Ocado's distribution centre in Dordon, North Warwickshire and a further £46m to expand it in a 25-year deal.

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While Ocado said that the Morrisons deal would not affect its ongoing partnership with Waitrose, The Sun's business editor Steve Hawkes joked that Waitrose would be spitting out organic tea at the news. Days before the deal was announced The Times reported that the John Lewis business was prepared to take legal action against Ocado over its plans to help a rival. One Waitrose insider told the paper: "Why does Ocado think that Waitrose would be happy to see them introduce competition into the marketplace against the background of the agreement we have?" Waitrose Managing Director Mark Price told the BBC ahead of today's announcement: "I'll want to look really closely at that contract to see whether there is any breach of the agreement we have [with Ocado]".

Waitrose has not commented on the deal. But speaking this morning Philips said Morrisons "are confident we are not in breach of anything".

Both Morrisons and Ocado shares rose in early trading with Ocado's up by 25 per cent and Morrisons rising by 1.7 per cent.

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