When Ocado finance director Jason Gissing called the John Lewis Partnership "a pain in the arse", many believed the relationship between online retailer and stakeholder was close to breaking point.
JLP's announcement earlier this month that it had shifted its 29% stake from Ocado to its own pension fund was seen by some as a sign it had grown tired of the loss-making venture.
It also freed up Gissing and his colleagues to run Ocado without interference from JLP. Since this also meant JLP was free to expand its online service, Deliver, it also enabled it to compete directly with Gissing's company.
Sounds like trouble? Gissing insists not. On the same day, Ocado and JLP signed a five-year sourcing deal, giving Ocado the boost of long-term certainty of supply. This will replace the existing one-year rolling contracts. Furthermore, a clause in the contract will limit Waitrose Deliver's expansion within the M25, protecting Ocado's biggest market.
"Waitrose will concentrate on expanding the service in Scotland, Cornwall and Somerset - areas Ocado does not reach," says Gissing. "Inside the M25, where we are the number one internet grocery retailer, there are restrictions on what they can or can't do - and they will remain," he explains.
"In the parts of the UK where Waitrose will roll out their service, we don't have any intention of trading. We can't make our business work in Somerset or Cornwall, but we can make it work in Birmingham, central London and Manchester. They will continue rolling out in those rural areas."
Waitrose agrees that the new deal allows the two businesses to complement, rather than compete with, each other. "Largely we see the Ocado customer as someone who would rarely go to Waitrose or someone who doesn't have a Waitrose in their area, whereas the Waitrose Deliver customer would probably regularly go to that store and would see delivery as an additional service we are offering," says a spokeswoman.
The fact Waitrose had been held back from expanding Deliver had in recent years become a source of frustration, according to a source close to the business. He describes an online offer as a "hygiene factor" - something you have to do. "If you're a service brand you can't afford not to," he says. However, the source claims that vouchering and discounting will take place in the areas where Waitrose and Ocado will compete.
"You've got these voucher tarts who get their groceries delivered and never pay full price," he says. "There is always a deal. It will be promoted more on incentives, 10% or 15% off your next shop. So there won't be price cuts on individual items, but e-vouchers instead."
Gissing is pleased JLP is no longer a shareholder, as it simplifies the relationship. "It is quite difficult if you are a shareholder and a supplier to distinguish between the two. They are not always the same. It's easier for them and great for us.
"To have certainty of supply for a five-year term sends a strong message to customers, suppliers and stakeholders - because there was a lot of speculation we were having trouble with our friends in Bracknell when actually we were just trying to work out the best way of taking the business forward ." Gissing also claims his infamous remark, made back in July, was a reference to Waitrose leafleting near Ocado's head office, rather than corporate dealings.
The security the five-year deal brings will again fuel speculation that Ocado plans to float the business. However, the independent valuation of Ocado, published earlier this month, came out at £448m - far lower than had previously been estimated. Gissing shrugs this off. "Whether the business is valued at £200m or £2bn, it doesn't make any difference. It's only relevant if we want to sell it and I can assure you we do not."
JLP's announcement earlier this month that it had shifted its 29% stake from Ocado to its own pension fund was seen by some as a sign it had grown tired of the loss-making venture.
It also freed up Gissing and his colleagues to run Ocado without interference from JLP. Since this also meant JLP was free to expand its online service, Deliver, it also enabled it to compete directly with Gissing's company.
Sounds like trouble? Gissing insists not. On the same day, Ocado and JLP signed a five-year sourcing deal, giving Ocado the boost of long-term certainty of supply. This will replace the existing one-year rolling contracts. Furthermore, a clause in the contract will limit Waitrose Deliver's expansion within the M25, protecting Ocado's biggest market.
"Waitrose will concentrate on expanding the service in Scotland, Cornwall and Somerset - areas Ocado does not reach," says Gissing. "Inside the M25, where we are the number one internet grocery retailer, there are restrictions on what they can or can't do - and they will remain," he explains.
"In the parts of the UK where Waitrose will roll out their service, we don't have any intention of trading. We can't make our business work in Somerset or Cornwall, but we can make it work in Birmingham, central London and Manchester. They will continue rolling out in those rural areas."
Waitrose agrees that the new deal allows the two businesses to complement, rather than compete with, each other. "Largely we see the Ocado customer as someone who would rarely go to Waitrose or someone who doesn't have a Waitrose in their area, whereas the Waitrose Deliver customer would probably regularly go to that store and would see delivery as an additional service we are offering," says a spokeswoman.
The fact Waitrose had been held back from expanding Deliver had in recent years become a source of frustration, according to a source close to the business. He describes an online offer as a "hygiene factor" - something you have to do. "If you're a service brand you can't afford not to," he says. However, the source claims that vouchering and discounting will take place in the areas where Waitrose and Ocado will compete.
"You've got these voucher tarts who get their groceries delivered and never pay full price," he says. "There is always a deal. It will be promoted more on incentives, 10% or 15% off your next shop. So there won't be price cuts on individual items, but e-vouchers instead."
Gissing is pleased JLP is no longer a shareholder, as it simplifies the relationship. "It is quite difficult if you are a shareholder and a supplier to distinguish between the two. They are not always the same. It's easier for them and great for us.
"To have certainty of supply for a five-year term sends a strong message to customers, suppliers and stakeholders - because there was a lot of speculation we were having trouble with our friends in Bracknell when actually we were just trying to work out the best way of taking the business forward ." Gissing also claims his infamous remark, made back in July, was a reference to Waitrose leafleting near Ocado's head office, rather than corporate dealings.
The security the five-year deal brings will again fuel speculation that Ocado plans to float the business. However, the independent valuation of Ocado, published earlier this month, came out at £448m - far lower than had previously been estimated. Gissing shrugs this off. "Whether the business is valued at £200m or £2bn, it doesn't make any difference. It's only relevant if we want to sell it and I can assure you we do not."
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