Supermarket chain Morrisons has signed a deal with US online retailer Amazon that will see the company supply groceries to customers through the Amazon Prime Now and Amazon Pantry services.

Morrisons will supply fresh, frozen and non-perishable goods through the services, starting later this year. Amazon Pantry launched in the UK last year, but has not previously offered fresh food.

The deal with Amazon complicates Morrisons existing 25-year agreement with Ocado, which currently runs the supermarkets online delivery service. The deal was signed by Morrisons previous chief executive, and current CEO David Potts has been looking for ways to leave the arrangement. Following news of the deal, Ocados shares fell 6.2 per cent, while Morrisons stock rose 4.4 per cent.

As part of the deal, Morrisons will take additional space in Ocados new Customer Fulfilment Centre in southeast London, while Ocado will provide Morrisons with a store pick solution built using its technology.

The partnership represents the first deal between Amazon and one of the UKs big four supermarkets. Morrisons has previously lagged behind in terms of constructing its own online and mobile retail presence, relying on firms like Ocado to build an infrastructure instead. The deal with Amazon enables it to compete on a higher level, while also giving Amazon a solid foothold in the UK groceries industry.

“Todays agreement is built on Morrisons unique strength as a food maker,” said Potts. “The combination of our fresh food expertise with Amazons 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. We look forward to working with Amazon to develop and grow this partnership over the coming months.”