Kroger announced that “following a comprehensive review,” it has decided to close three of its Ocado-powered robotic distribution centers, in Pleasant Prairie, Wis.; Frederick, Md.; and Groveland, Fla.
The closures will come in January, while the company said it will continue “monitoring the remaining facilities’ performance.”
According to the announcement, “In geographies where Kroger sees higher density of demand, the company will continue to take advantage of automated customer fulfillment to increase customer engagement, capacity and improve productivity and profitability. As part of its comprehensive hybrid fulfillment network, Kroger will also pilot capital-light, store-based automation in high-volume geographies to improve fulfillment capabilities and elevate the in-store customer experience. The adjustments to the network combined with increased store-based fulfillment will contribute to ROIC improvement.
“This flexible, hybrid network balances an expanded store footprint, third-party delivery, and automation, providing customers the products they love, the value they want, through the options they need, while building a sustainable and profitable business.”
Kroger said it “expects these updates to have a positive effect to eCommerce operating profit of approximately $400 million in 2026.”
“eCommerce remains a core part of serving customers who want better value, wide selection and flexible ways to shop,” Ron Sargent, Kroger’s chairman and CEO, said in a prepared statement, adding that the company is “taking decisive action to make shopping easier, offer faster delivery times, provide more options to our customers, and we expect to deliver profitable sales growth as a result.”
Kroger, which already has collaborative relationships with Instacart and DoorDash, said that it will launch a “new customer experience on Uber Eats Marketplace in early 2026 to fulfill more customers shopping needs by providing access to groceries when customers order meals from their favorite local restaurants as well as offering standard grocery delivery.”
KC’s View:
Implicit in Kroger’s current statements is an admission that it invested too much and too quickly in the Ocado robotic facilities – and even as it was laying on the hyperbole just a few years ago, the wisdom of these investments always was a question.
I went back to look at what I wrote back in 2020 about the Kroger-Ocado arrangement, and I wondered if it were possible that Kroger would find a micro-fulfillment center approach to be more important to its long-term plans than the giant robotic warehouses. I appreciated the fact that Kroger was taking a big swing, but wondered if, in fact, it was betting too much at one table.
Kroger’s belief just a few years ago seemed to be that it needed to own, as much as possible, all of the elements of its e-commerce infrastructure. Now – and I have no idea how much this may be related to the unceremonious departure of CEO Rodney McMullen – they’re backing off that, apparently believing that it needs to assemble an e-commerce puzzle that requires an amalgam of alliances.
As Kroger seeks a permanent replacement for McMullen – Sargent is there on an interim basis, while a search goes on for a new CEO – laying out an effective and rationalized e-commerce approach obviously will be top of mind.
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