Morrisons plans to take on rivals with online food business

Morrisons is planning to launch online food business by 2014 in partnership with Ocado by using the online grocer’s technology, in an effort to compete with the biggest supermarkets in the UK – Tesco, Wal-Mart’s Asda and J Sainsbury. Morrisons is attempting to ramp up its business after it posted its first fall in full-year profits for six years. Morrisons is the only one of the UK’s leading supermarkets not to have an online business, while rival Tesco has been selling food over the internet for a decade.

The talks between Morrisons and Ocado may lead to an agreement to licence certain of Ocado’s intellectual property and operating knowledge for the purpose of Morrison commencing an on line grocery business in the UK. Morrisons has also lagged behind in the roll-out of convenience stores but since Christmas it has bought dozens of sites from collapsed chains HMV, Blockbuster and Jessops which it plans to bring under a ‘Morrisons M Local’ brand. Morrisons made an underlying pretax profit of £901m in the year to February 3, in line with analysts’ consensus forecasts but down from the £935m made in the 2011-12 year.

“The sustained pressure on consumer spending was reflected in our like-for-like sales performance, which was not as good as it should have been”, chief executive Dalton Philips said. The Morrisons chief refrained from spilling out more information about the upcoming online food business stating that he did not want to alert competitors about the model that the supermarket chain would follow shortly. Following the news of online business launch, shares in Morrisons rose by more than 5% this morning.