Hundreds of Morrisons products will be available to Amazon Prime Now and Amazon Pantry customers in the UK over the coming months.
Although the retailer has not revealed what products it will be supplying Amazon, Morrisons operates manufacturing sites including its own bakery, and industry insiders said they would expect bread and baked products to be included in the agreement.
Some analysts had previously suggested Morrisons would sell off its manufacturing facilities in order to focus on its retail business.
Morrisons today said wholesale supply would complement its existing supermarket business and enable it to grow volumes and leverage its manufacturing, distribution and wholesale capabilities.
“Today’s agreement is built on Morrisons’ unique strengths as a food maker,” said Morrisons chief executive David Potts. “The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling.”
“This is a low-risk and capital-light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business,” he added. “We look forward to working with Amazon to develop and grow this partnership over the coming months.”
The Amazon tie-up had strategic merit for Morrisons, suggested analyst Darren Shirley of Shore Capital, particularly given the retailer’s low exposure in London and the South East.
“We sense that this relationship will evolve over time and so the starting point is expected by us to involve modest activity levels centred but not necessarily exclusively upon Morrison vertically produced lines, maybe a few hundred SKUs,” added Shirley.
“Clearly, the advance of Amazon as a participant in UK grocery is a potential challenge to the whole trade in time; any new entrant is, but particularly the American behemoth.”
Richard Perks, director of retail research at Mintel, said the strength of the Morrisons brand would engender a degree of trust in the Amazon offer.
"This deal is significant because it takes Amazon beyond just ambient temperature, long-life groceries into fresh and chilled products," he added.
Separately, Morrisons has reached an agreement ‘in principle’ with online retailer Ocado, which operates Morrison’s online retail site Morrisons.com. Morrisons will take space in Ocado’s new customer fulfilment center in Erith, London, with Ocado delivering a store-pick solution for Morrisons. If agreed and implemented, this would enable Morrisons.com to sell to customers all over Great Britain, said Morrisons.