Gulp! M&S in talks to gobble up Ocado
FOR almost 20 years it has been a familiar sight on the streets of Middle England – an Ocado van bearing home deliveries of Waitrose groceries.
But soon those same vehicles might instead be carrying goods for Marks & Spencer, which is planning to launch its own £1 billion food delivery service and is in top secret talks with Ocado.
If the deal is successful, M& S would buy key distribution centres, delivery vans and lorries from the online food retailer.
The Mail on Sunday understands that talks between top executives at the two companies have been conducted over the past few weeks.
The talks are the latest twist in M&S chairman Archie Norman’s strategy to turn around the £11 billion retail giant’s fortunes.
A City source said: ‘Archie Norman needs something transformational to make his mark at M&S and he is running out of time.
‘The deal on the table is effectively buying the Waitrose part of the Ocado business and replacing it with M&S products.’
Norman said last summer that fierce rivalry from other chains, growth in home delivery and a consumer squeeze were ‘eroding our business and market position’. He added: ‘The business is on a burning platform. Accelerated change is the only option. The tide is running more strongly against us now.’
Ocado – whose contract with Waitrose runs until the end of September 2020 – was launched by three ex-Goldman Sachs bankers as an online-only supermarket in 2000.
It soon struck a partnership to deliver Waitrose food alongside groceries from well-known brands.
Waitrose now has its own separate delivery operation run directly from its own stores and warehouses.
Its customers can order from Waitrose or Ocado.
A deal is by no means certain. But if Ocado decides to sell its highly automated distribution centres to M&S, it would allow the online pioneer to focus on selling its technology expertise to supermarkets in other countries and fulfil the ambition of its chief executive Tim Steiner for the company to become a global technology success story to rival California’s Silicon Valley.
Ocado has recently agreed a string of deals to provide its technology blueprint to giant food retailers outside Britain, such as US supermarket giant Kroger. That has quadrupled Ocado’s value to almost £7 billion.
But an M& S deal could mean ultra-loyal, affluent Waitrose shoppers desert the Ocado business overnight, a chief concern that could jeopardise the ambitious deal. The tie-up would not affect a separate Ocado service agreement with Morrisons, which uses Morrisons branded vans.
Ocado and Marks & Spencer both declined to comment.