Supermarket Waitrose’s Managing Director Mark Price has threatened to reject the anticipated deal between online grocer Ocado and competitor Morrisons, causing shares at Ocado to slide, it has been revealed.
Ocado’s share price declined eight per cent in early trading today after Price revealed that he had been approached by Morrisons’ previous CEO Marc Bolland over a possible partnership four years ago and refused.
Waitrose’s existing agreement with Ocado is in place until 2020, though there is a break clause in 2017.
Speaking to The Telegraph, Price commented: “I would never knowingly sign a contract with Ocado that agreed to them working with another retail competitor.
“We have moved to defcon one on online expansion because we don’t know where this is going to end up and we are now working on adding considerable extra capacity to Waitrose.com.”
Price added that Bolland had contacted him recently to see if there was any possibility of a deal between Morrisons and Ocado and Price denied this, emphasising that any tie-up could potentially risk a breach of contract.
“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,” Price warned.
In March, Morrisons confirmed that it was in talks with Ocado to utilise its technology ahead of a long-awaited online launch as profits declined 7.1 per cent in the year ended February 3rd 2013, and it is understood that talks are ongoing.
In a bid to expand its own multichannel operations, Waitrose is set to further roll-out its “dark stores” to strengthen its online delivery, growing the number from one to three, it is thought.
Waitrose’s own online service has an operating profit margin of six per cent, so it is likely that its need for Ocado will diminish as it continues to grow, though the newspaper stated that senior Waitrose figures have noted that Ocado’s growth is in part due to its access to the upmarket brand.
Ocado’s CEO Tim Steiner rejected claims that such a move would have a detrimental effect, commenting: “The Ocado.com business will remain totally unchanged, sourcing its products from the Waitrose/Ocado brand products.
“There are no concerns about a conflict of interest.”