Kroger is reportedly slowing the development of robotic customer fulfillment centers with U.K.-based grocery automation company Ocado. Reuters reports that although the company is easing the pace of opening the centers, Kroger remains committed to expanding the network.
"[Kroger is] committed to building more, they just want to make those (existing) ones work as well as they can before they roll out loads—very sensible thing to do," Ocado CEO Tim Steiner told reporters, adding that Kroger is still "extremely positive" about the partnership.
"They expect to have loads of these warehouses. But when you do something new, you need to make it work really well before you scale it up massively," he said.
Kroger currently has eight centers open, with plans for a total of 16 warehouses; however, when Kroger initially announced its partnership with Ocado, it said it would identify sites for as many as 20 facilities within three years, according to Grocery Dive.
Kroger currently operates these centers in Monroe, Ohio; Groveland, Florida; Forest Park, Georgia; Pleasant Prairie, Wisconsin; Dallas; Romulus, Michigan; Aurora, Colorado; and Frederick, Maryland. Although the company says it plans to build more centers, it has not announced plans for the projects publicly.
During Kroger’s fourth-quarter earnings call in early March, the company’s CEO Rodney McMullen said that identifying locations for these centers “ended up being a little bit more difficult than what we would have expected.”
Also on the call, Kroger’s CFO Gary Millerchip responded to a question regarding the pace of the opening of the centers, saying the company is “very much in the middle of that journey right now of sort of 18 months or so into those first two facilities, really kind of fully understanding the scale of demand to how the customers behave and how you optimize that model.”
Kroger’s online sales were up 12% year over year during the final three months of 2022, and during a conference last month, McMullen said its online business could be at least as profitable as its physical locations. He also said that the company decided to move forward with the Ocado partnership because he felt confident in the automation’s ability to advance its technology, according to Grocery Dive.
“I said we are going to sign, but we are signing this in terms of what we believe you can become, not what you are, because it doesn’t do us any good for what you are,” McMullen said. “But if I look where you are at the time today versus where you were five years ago, I expect you to improve more than that five years into the future because you have learned a lot and technology always gets incrementally better.”