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Waitrose Ocado Morrisons

Ocado claims deal with Morrison's has not altered arrangements with Waitrose

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By Stephen Lepitak, -

July 2, 2013 | 3 min read

Ocado has claimed that it is deal to source products from Waitrose is unaffected, despite agreeing a 25 year deal with rival Morrison's as it aims to aid the introduction its online business next year.

In releasing its half year figures, which included a £3.8m pre-tax loss, despite an increase in revenue of 15.6 per cent to £355.9m, Ocado also highlighted its IP and technology development and its agreement with Morrisons, claiming that the deal would improve its economic model.

Of its existing deal with Waitrose, the company stated: "Ocado's rights and obligations to source products (including Waitrose own-label products) from Waitrose remain unaffected by the arrangements."

Later in the statement, highlighting potential risks that the company faces, it stated: "The Group intends to operate its business in a manner fully consistent with the agreements with Waitrose. However, it is possible that the arrangement with Morrisons may accidentally or by design be operated differently from the way in which the Group anticipated when the agreements were executed. In addition, the Company can give no assurances as to any action Waitrose may take outside the terms of the agreements with Waitrose."

Waitrose however, has sought legal advice over Ocado's move to partner with another rival firm, releasing a statement to The Drum in May following the agreementthat explained that it had asked to see details of the deal and the operating arrangements, while also confirming that it had instructed its lawyers in order to receive "a clear and unequivocal view" of the contract with the aim of finding any breach.

In response to the half year figures, John Ibbotson, director of retail consultants, Retail Vision, said that another pre-tax loss for Ocado felt like it was unlikely to make a sufficient return on the millions it had invested, despite the Morrisons deal.

"The economics can never stack up. How can Morrisons make money delivering to its customers in the North from a depot in Hatfield in the South? Ocadonomics are fundamentally flawed.

"Despite this, the Ocado share price keeps on rising, fuelled by speculation that Amazon or Boots will buy it for its state-of-the-art technology, or that it can license its technology to others.

"It’s all wishful thinking and has echoes of the dotcom boom. In reality, Ocado is loss-making and is likely to remain so for a long time," he continued before concluding that the business model was "flawed" and that hype and technology were unlikely to alter that.

Ocado also revealed that the introduction of its Smart Pass online membership scheme now formed the majority of its transactions, while its mobile transactions were also growing, with 30 per cent coming through its mobile site and apps.

Waitrose Ocado Morrisons

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