M&S and Ocado unveils online grocery joint venture

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M&S Ocado
// M&S and Ocado unveil details of new joint venture
// M&S will buy 50% of Ocado’s retail business and supply them with M&S-branded products
// Venture will begin September 2020, after Ocado’s longrunning deal with Waitrose ends

Marks & Spencer and Ocado have announced a joint venture that would give M&S a full online food delivery service for the first time.

As part of the tie-up, M&S will buy a 50 per cent share of Ocado’s UK retail business for up to £750 million.

The joint venture will trade as Ocado.com but will stock M&S’s own-brand products, and benefit from access to the retailer’s database of 12 million M&S food shoppers.

The news comes a day after M&S confirmed speculation that it had been in talks with Ocado over a possible deal.

M&S said it would finance the deal from a rights issue of shares to raise up to £600 million.

The bellwether retailer added that it would also cut its dividend by 40 per cent to “a sustainable level”.

The joint venture spells the end of Ocado’s partnership with Waitrose, which had been running since 2000 and was due for renewal this week.

Ocado said this meant it would no longer pay sourcing fees to Waitrose, which were more than £15 million in 2018.

It is expected that the new venture with M&S will be able to launch by September 2020, which is when the contract with Waitrose comes to an end..

M&S said it predicted potential cost savings of up to £70 million a year to be achieved due to increased buying scale, conversion of customers and joint marketing.

“I have always believed that M&S Food could and should be online,” M&S chief executive Steve Rowe said.

“Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth.

“Our investment in a fully aligned joint venture with Ocado accelerates our food strategy as it enables us to take our food online in an immediately profitable, scalable and sustainable way.”

Ocado chief executive Tim Steiner said: “We are delighted that our UK retail business will become a joint venture with M&S.

“This is a transformative moment in the UK retail sector with the combination of two iconic and much-loved retail brands set to provide an unrivalled online grocery offer.”

Meanwhile, Waitrose managing director Rob Collins said the partnership with Ocado left solid foundations for the upmarket grocer to be able to focus on growing its own online offering.

“We have strengthened our own online business significantly and said last summer that we will double Waitrose.com within five years,” he said.

“Today’s announcement will be a major part of achieving this and in future Waitrose.com and our shops will be the exclusive places in the UK to buy Waitrose & Partners products.”

He added: “We are planning a second fulfilment centre to support our growing volumes in London and will be able to welcome thousands more online customers to Waitrose from the end of this year.

“We have valued our relationship with Ocado and thank them for the last 19 years.”

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