Kroger reportedly slows Ocado fulfillment center rollout

For Kroger, rolling out its automated Ocado fulfillment centers across the U.S. hasn't exactly been an automatic process.

The power grocer announced an aggressive plan back in 2018, when it said there would be as many as 20 centers operational in three years. A partnership was forged with British online grocer and technology group Ocado to handle the rollout. Today, that number stands at eight, and it appears Kroger has spent the last five years trying to understand the process outside of cutting opening-day ribbons.

According to reporting by Reuters, Kroger is still committed to building more automated warehouses in partnership with Ocado despite slowing a roll-out of sites, Ocado CEO Tim Steiner told reporters Tuesday.

Currently, Kroger has Customer Fulfillment Centers (CFCs) in Monroe, Ohio; Groveland, Fla.; Forest Park, Ga.; Pleasant Prairie, Wis.; Dallas; Romulus, Mich.; Aurora, Colo.; and Frederick, Md. The one in Aurora just recently became operational.

When asked about the status of automated CFCs at Krogers last quarterly results meeting, CFO Gary Millerchip gave the impression that the company was still trying to understand customer behavior and how automated systems can best meet that behavior. Millerchip also admitted determining locations for the new CFCs was more difficult than first thought.

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Still, Kroger wants to keep the build moving, and for good reason. Online sales at the grocery retailer grew 12% during the final three months of last year compared to the same time period of 2021, according to Ocado. The thought is Kroger’s online business can be just as profitable as its brick-and-mortar business. Furthermore, Ocado’s revenue with Kroger and other stores around the world more than doubled in 2022.

Kroger generated plenty of fanfare behind its latest opening in Aurora, Colo. The approximately 300,000 square-foot facility will delivery groceries and home essentials to customers up to 90 minutes away. The delivery network relies on highly automated fulfillment centers. At the hub sites, more than 1,000 bots move around giant 3D grids, orchestrated by proprietary control systems. The grid, known as The Hive, contains totes filled with products and ready-to-deliver customer orders. From there, machine-learning algorithms optimize delivery routes, considering factors such as road conditions and optimal fuel efficiency.