Amazon and Morrisons deal strengthens supermarket chain’s manufacturing

Posted on 10 Mar 2016 by Tim Brown
A Morrisons truck travelling on a UK road - image courtesy of Bilbobagweed, cropped and used under creative commons licence
A Morrisons truck travelling on a UK road - image courtesy of Bilbobagweed, cropped and used under creative commons licence.

Late last month, Amazon and Morrisons announced a new supply agreement whereby hundreds of Morrisons products will be available online via Amazon Prime Now and Amazon Pantry.

Morrisons will provide a wholesale supply service to Amazon, allowing Amazon customers access to a wide range of Morrisons ambient, fresh and frozen products.

In a statement, Morrisons said the deal was “focused on its six priorities“, which include the introduction of ‘popular and useful services’, in order to make the supermarket chain “strong again”.

The statement continued: “In addition we have an opportunity to build a broader business that complements our supermarkets and is consistent with our commitment to pursue capital light growth. Wholesale supply enables this by growing volumes and leveraging our manufacturing, distribution and wholesale capabilities.”

David Potts, Chief Executive of Morrisons, said the Amazon and Morrisons agreement was built on the unique strengths Morrisons has as a food maker.

“The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling,” Mr Potts said.

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Morrisons’ manufacturing business is one of the largest food manufacturing operationd in the UK – with an estimated £2.6bn (US$3.7bn) of annual sales – with its retail supermarkets being the primary customer.

The deal will also provide Amazon with more opportunities to deliver non-grocery packages to its Prime members. However, according to news site, Retail Dive: ‘With competitive pricing such a major part of the UK upheaval in the space, it remains a question whether grocery delivery is a sustainable offering for many UK shoppers in the long term.’

Morrisons on the up and up

Supermarket giant Morrisons is expected to report an improvement in underlying sales when it reports its annual results later today.

Having recently rejoined the FTSE 100 list, the company has cut prices in order to restore its former reputation as being one of the cheapest on the high street. According to the latest Which? report, Morrisons has overtaken Asda as the cheapest main supermarket following its ‘1,000 price cuts’ earlier this year.

Morrisons has also been in discussions with Ocado to grow Morrisons.com and an agreement in principle has been reached. This agreement involves Morrisons taking space in Ocado’s new Customer Fulfilment Centre (“CFC”) in Erith (east London) and Ocado delivering a store pick solution for Morrisons that leverages Ocado’s technology and Morrisons store assets. When implemented, this would enable Morrisons.com, working with Ocado, to sell to customers all over Great Britain.