Waitrose is “more likely than not” to sever its partnership with Ocado, with its notice to end the agreement coming as early as next year, according to a City broker.

In a note published this week, analysts at Jefferies predicted Waitrose would invoke the March 2017 break on the pair’s supply agreement, which runs until 2020. To do so, Jefferies said, Waitrose would have to serve notice by 1 September next year.

Since Waitrose helped the online grocer launch in 2001, relations have grown increasingly fractious, as Waitrose went into head-on competition by operating inside the M25, while Ocado signed a controversial 2013 deal to work simultaneously with Morrisons.

Ocado has been steadily building up its range of non-Waitrose products - accounting for about 25% of total sales.

Waitrose declined to comment, instead restating CEO Mark Price’s previous comments that there was “no reason” the break clause would be invoked. Ocado did not return requests for comment.

Retail analyst Nick Bubb also felt the uneasy relationship may endure: “I think it’s like one of those loveless marriages where neither party is quite strong enough to break things off,” he said.

“Despite building up its dotcom capacity Waitrose is still dependent on Ocado as its biggest customer, whilst Ocado still needs the cache of the Waitrose brand, despite building up its third party brands and own-label.”

Jefferies added that should Waitrose call it quits, it would not be catastrophic news for Ocado, and increased its price target on the stock to 350p (currently trading at 330p), arguing that 2015 could see Ocado sign its first international agreements.

Although noting customer flows could be disrupted, it said that Ocado “should be in a position to find alternative supply partners”.

A supply relationship with M&S has long been talked about as a potential alternative strategic option in the UK.

“Grocers worldwide continue to struggle to put together an economically viable online offer, and whilst we have taken issue with the capital intensity of the Ocado approach, the operational KPIs are markedly superior to those achieved by any multi-channel or pure-play operator globally,” the broker said.

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