Marks & Spencer joint-venture with Ocado to ‘transform’ online grocery

Upmarket retailer Marks & Spencer has promised to ‘transform’ online grocery in the UK as it unveils its joint-venture with online grocer Ocado, following weeks of press speculation – but no changes are planned to its wine-by-the-case site.

The retailer, which already operates an online wine shop selling predominantly wine by the case, along with selected bottles of fine wines, magnums, wine for gifting, and spirits, confirmed the press rumours of a collaboration yesterday. Today announced it was acquiring a 50% share of the digital player’s UK’s retail business for £750 million, raising £600 million of equity to invest in the joint venture.

The move will allow M&S to accelerate its online ambitions for its food and drink through Ocado’s online technology and experience. The joint-venture will trade as Ocado.com, but sell M&S branded products, including its wines, beers and spirits range.

However a spokesman told db that there were no changes planned for the current online wine and food-to-go proposition as a result of the joint-venture.

The deal, which will share access to M&S’s database of 12million customer, will come into effect by 2020 following the end of Ocado’s sourcing agreement with Waitrose, which cost it £15 m last year.

“The joint-venture (JV) combines the strength of M&S’s brand and its leading food quality and innovation with Ocado’s unique and proprietary technology to create an unrivalled online offer for our customers,” M&S said in a statement. “In bringing the best together the JV will benefit existing and new UK customers, colleagues and suppliers.”

The deal is expected to yield ‘significant potential synergies’ of around £70 million per annum for M&S Food within three years, the retailer announced, on the back of increased buying power, and shared marketing and innovation.

The retailer already operates an online wine and flowers shop, has not confirmed how this would change.

Steve Rowe, M&S CEO said the move was “transformational”.

“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.”

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel said Ocado’s decision to partner with M&S would reveal a lot about the e-commerce retailer’s existing customer base.

“How many Ocado shoppers are currently there for the Waitrose products and how many for the delivery service?” he asked.