Ocado and Marks & Spencer to form online food shopping joint venture

Ocado and Marks & Spencer have announced the creation of a joint venture, in a move which the companies say will transform online grocery shopping.

M&S is set to acquire 50% of Ocado’s UK retail business for up to £750 million as part of the deal.

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

It spells the end of Ocado’s long-running partnership with Waitrose, which had been coming up for renewal this week.

Ocado said ending the relationship would mean it no longer needs to pay sourcing fees to Waitrose, which were more than £15 million in 2018.

Following the termination of the agreement, it is expected that the new venture will be able to launch by September 2020 at the latest.

M&S is to issue new shares in a bid to raise up to £600 million to finance the deal.

The high street retailer predicts potential cost savings of up to £70 million a year to be achieved due to increased buying scale, conversion of customers and joint marketing.

M&S boss Steve Rowe said: “I have always believed that M&S Food could and should be online.

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.”

Tim Steiner, Ocado’s chief executive, 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.”