British retail chain Morrison has invested more than GBP200 million for a twenty five year agreement with online grocer Ocado. The move is to become another player in the increasing market for home deliveries.
The move also resulted in a steep jump for Ocado shares at the London bourse. This though was criticized by Waitrose, another upmarket grocer who has a standing agreement with Ocado for its online products. There were assurances though that the Morrison-Ocado deal would not overlap with the Waitrose-Ocado deal.
Morrison trails rivals Tesco, WalMart's Asda and J. Sainsbury in terms of annual sales and has been losing market share because of its lack of exposure in the increasing market of British online delivery service.
While Morrison already has a presence online, it refrained from selling food over the Internet because of trepidation as to profitability of delivering the food items to homes of customers. This was echoed in the declaration of Ocado that it still has not made a pretax profit in its ten years of operations.
Because of the announcement, Ocado shares jumped 47% to a record 296.8 pence from 180 pence in 2010. Now, the firm is valued at GBP1.72 billion.
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