Morrisons unveils Amazon supply tie-up to bolster online presence

The supermarket giant revealed it will provide “a wholesale supply service” to Amazon, allowing a “wide range” of its fresh, frozen and ambient products to be sold through the US titan’s Prime Now and Pantry services.

Morrisons chief executive David Potts, who took the reins last March, is focused on rejuvenating the grocer’s performance in its core supermarket business and has already sold off its convenience business in order to concentrate on its larger stores.

The first green shoots of recovery in his turnaround plan came over Christmas when Morrisons turned in an unexpected 0.2% increase in like-for-like sales.

“The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling”

David Potts, Morrisons

However, the grocer said it also has an opportunity to “build a broader business that complements our supermarkets” and pursues capital light growth.

It said the wholesale supply deal, which starts in “the coming months”, would take advantage of its vertically integrated business model by “growing volumes and leveraging our manufacturing, distribution and wholesale capabilities”.

Potts said: “Today’s agreement is built on Morrisons unique strengths as a food maker. The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling.

“This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business.

“We look forward to working with Amazon to develop and grow this partnership over the coming months.”

Ocado deal

Separately, Morrisons is also striving to build its own online business, which it operates via a partnership with online grocer Ocado.

The grocer has agreed a deal “in principle” to take space in Ocado’s new customer fulfilment centre in Erith, southeast London.

Morrisons has shared capacity of Ocado’s Dordon warehouse since they launched their partnership in 2013, but the grocer will also take space in the Erith fulfilment centre when it opens in 2017.

The deal would also see Ocado deliver a store picking solution that would enable Morrisons.com to expand across the UK.

The two parties are now working on detailed terms of the agreement and warned there was “no certainty that an agreement will be reached”.

Ocado boss Tim Steiner said: “This is a win-win arrangement, which allows both of us to grow faster, and more profitably, in a grocery market where channel shift is now an unquestionable reality.

“This potential deal demonstrates Ocado has the technology and know-how to help partners grow their online businesses rapidly and successfully, and take advantage of consumers’ increasing desire for the convenience, choice, quality and value offered by online shopping and enabled by the Ocado Smart Platform.”