Ocado 'playing with fire' after Morrisons talks

Ocado: in discussions with Morrisons
Ocado: in discussions with Morrisons

Ocado is "playing with fire" by discussing a partnership with Morrisons and could put itself out of business if it continues to provoke the wrath of partner Waitrose, claims Shore Capital.

The comments come after Waitrose boss Mark Price told the Sunday Telegraph he would reject a potential tie-up between Ocado and Morrisons and would ask his legal team to investigate any contract signed between the two companies.

Morrisons has entered discussions with Ocado to help it launch an online grocery business. The proposed discussions have angered Waitrose because it is a major supplier of Ocado and has a delivery agreement with it until 2020, with a break clause in 2017.

Clive Black at Shore Capital said: "We believe that Ocado is playing with fire in speaking to [Morrisons] because the group's umbilical cord to Waitrose may be cut sooner than we anticipated and Ocado cannot exist as a commercial entity without Waitrose in our view."

However, last year Ocado founder Jason Gissing told Marketing that there is "enough space for everyone" and implied Ocado could survive without Waitrose.

At the time, Gissing claimed only about 20% of its products, or 4,000 items, were from Waitrose. In yesterday's article, Price fired a warning shot at Ocado by stating he "would never knowingly sign a contract with Ocado that agreed to them working with another retail competitor".

He also hinted Waitrose, which has been able to compete with Ocado within the M25 since 2011 following the expiration of a non-compete clause, would continue to escalate pressure on Ocado’s core business.

Price said:  "We have moved to defcon one [on online expansion] because we are now working on adding considerable extra capacity to Waitrose.com."

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