John Lewis gave a show of support for online supermarket Ocado today, agreeing to keep supplying it with Waitrose food for the next five years at least.

It also shifted the 29% stake it has in the firm into the staff pension fund, valuing the holding at £128 million in the process.

On that basis, the whole business is worth £441 million and the stake held by founders Tim Steiner, Jonathan Faiman and Jason Gissing is worth £90 million. Ocado was founded in 2002 in partnership with John Lewis, which owns Waitrose.

It has faced scepticism it could survive, given the intense competition from Tesco, Asda and others. It has racked up huge losses over the years, moving Tesco boss Sir Terry Leahy to dub the business "a charity".

Today's move indicates that John Lewis is optimistic about its long-term prospects - until now, its deal with Ocado was a one-year rolling affair.

John Lewis said today that Ocado is "no longer the start-up business that the partnership helped to nurture".

Gissing, the chief financial officer and marketing man, is convinced the online grocery market will expand hugely.

"The MySpace generation will start working soon, and they are used to buying online," he said, insisting Ocado will thrive even in a recession. "Food retailing is not a cyclical business. We are growing by 20% a year and I think we are creating a fantastic customer facing company."

Gissing claims the credit crunch has helped the firm as more shoppers use price-comparison sites such as mysupermarket.co.uk, and discover Ocado is not as expensive as they thought.

It cut the cost of all branded goods last March to match Tesco. Gissing says the new deal gives "certainty of supply" as well as clarifying the relationship between the two companies.

John Lewis Partnership today said sales at Waitrose supermarkets gained 0.5% in the week ended 1 November, boosted by wine promotions and Halloween products. Sales at the John Lewis department store chain fell 1.3%, the seventh straight weekly drop.