Morrisons to expand home deliveries nationwide for the first time after new deal with Ocado

Previous restrictions on store pick meant regions such as the South West and Scotland had no access to Morrison’s delivery service

Morrison has agreed to take capacity and invest in Ocado’s new customer fulfilment centre in Erith, southeast London (AP)

Morrisons has signed a new deal with online supermarket Ocado, enabling the grocer to reach its home delivery customers across the UK.

Until now, about half of UK households could buy from Morrisons online, following a £210 million 25-year deal with Ocado to provide the service and housing the supermarket’s products in its warehouse picking centres.

The new agreement allows Morrisons to double its delivery area by using its own stores to pick up products for delivery. Previous restrictions on store pick meant regions such as the South West and Scotland had no access to Morrison’s delivery service.

Once the store pick model becomes operational in 2017, Morrisons contractual obligation to share a proportion of its future online profits with Ocado will end.

This means the supermarket will no longer pay a 25 per cent cut of its future online profits to Ocado.

Morrisons will also reduce the fee it pays to Ocado’s research and development centre.

In return, Morrison has agreed to take capacity and invest in Ocado’s new customer fulfilment centre in Erith, southeast London, due to be completed in 2018.

The revised deal also allows the Morrisons to increase the number of non-food brands it sells online, which are not currently available on its website.

David Potts, Morrisons chief executive, said the retailer continues to follow the customer and move towards achieving profitable growth online.

“The new investments in online growth are further example of Morrisons building a broader business and will allow millions more customers all over Britain to enjoy Morrisons good quality fresh food and great value for money,” Potts said.

The supermarket said the extension of its online offer nationwide, through its investments in Erith and store pick, means it will take longer than planned for Morrison’s online operations to break even.

However, it still expects its online business to be a key component of the £50 to £100 million profit opportunity announced in its preliminary results in March 2016.

Ocado and Morrisons shares both jumped on the news and continued rising in the afternoon trading.

By 2.30 pm on Tuesday Morrisons shares rose 2.14 per cent 192p while Ocado shares increased by 4.52 per cent to 289.10p.

In February, Morrisons agreed to a side deal with Amazon to provide groceries to Amazon customers in the UK.

Ocado is also under pressure to announce an international partnership, after a self-imposed deadline to reveal one passed at the end of last year.