Grocery ecommerce is driving takeover bids from “cash-rich investment firms” say analysts


Online grocery’s meteoric rise during the pandemic has driven the recent “interest in British grocers from cash-rich investment firms from across the pond”, according to experts.

Morrisons confirmed earlier this week that it is preparing to launch an auction process on the stock exchange, hoping to bring an end to an ongoing bidding war for the grocer which began in June.

Amid rising bids for the UK’s fourth largest grocer, jumping from £5.5 billion to £7 billion over the last three months, speculation that similar foreign takeover bids for the rest of the UK’s Big 4 has been rife.

“The sudden interest in British grocers from cash-rich investment firms from across the pond is not hugely surprising,” Edge by Ascential’s director of advisory Nick Everitt said.

Everitt argued that this sudden interest has largely been driven by a new age of online grocery, driven almost entirely by lockdown.

READ MORE: Morrisons warns of price rises as profits nearly halve

“Grocery ecommerce has now come of age,” he said.

“Data from our Edge Retail Insight database shows that in 2020, Morrison’s ecommerce grew 55 per cent in 2020, Tesco 49 per cent, Waitrose 57 per cent and Sainsbury’s a staggering 120 per cent.

“They have expanded last-mile services like click and collect and have been making significant investments to meet the changing needs of shoppers; expanding delivery capacity and launching new rapid on-demand delivery services, with many partnering with the likes of Deliveroo and other food aggregators to add capability to their supply chain.

“This all indicates that the shift to grocery ecommerce as well as omnichannel shopping is permanent”.

Despite this, Everitt says the new owners risk alienating local shoppers, sending them to newcomer rivals like Amazon.

“The test will be whether the new owners of Morrisons are prepared to make the required investment, as simply cutting costs and rationalising the business could alienate shoppers and open the door to others, most notably Amazon, which has still to make a truly sizeable impact on UK grocery,” he continued.

“Suppliers should look to the Amazon retail model to understand what operating in the new era of grocery could look like.”

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