Kroger to pay $350 million to automation partner as it scales back robotic warehouses
The Kroger Co. is making a one-off cash payment to compensate U.K.-based online grocer Ocado Group as it scales back a leading-edge automated warehouse concept.
Kroger has agreed to pay $350 million cash to Ocado following the grocery giant’s recent decision to rely less on a leading-edge automated warehouse concept known as a customer fulfillment center (CFC). Introduced in 2018 in partnership with U.K.-based online grocer Ocado Group, the CFC model combines vertical integration, machine learning and robotics with affordable and fast-delivery service for fresh food.
CFC facilities leverage proprietary technology solutions focused on artificial intelligence (AI) and advanced robotics and automation to create more seamless and efficient fulfillment, picking and delivery capabilities for enhanced digital commerce.
Following a comprehensive review, in November 2025 Kroger identified opportunities to optimize its fulfillment network by closing CFC facilities in Pleasant Prairie, Wis.; Frederick, Md.; and Groveland, Fla. in January 2026, while monitoring the remaining facilities' performance and not proceeding with the opening of a CFC in Charlotte, N.C. previously planned for 2026.
[READ MORE: Kroger seeks e-commerce profit boost by closing distribution hubs]
The retailer previously closed three CFC cross-docking facilities (known as “spokes”) in March 2024. Ocado said it expects the closure of the three live sites to reduce its fee revenue in fiscal 2026 by approximately $50 million.
According to Ocado, it will continue cooperating with Kroger to operate the five currently live CFCs in Monroe, Ohio, Atlanta, Denver, and Detroit, with Kroger ordering further capacity to be utilized in the Detroit facility in 2026. In addition, Ocado said Kroger still plans to open a new CFC in Phoenix that will include Ocado’s new “AutoFreezer” solution.
"We continue to invest significant resources to support our partners at Kroger, and to help them build on our longstanding partnership,” said Tim Steiner, CEO of Ocado Group. “Ocado's technology has evolved significantly to include both the new technologies that Kroger is currently deploying in its CFC network, as well as new fulfillment products that bring Ocado's technology to a wider range of applications."
In geographies where Kroger sees higher density of demand, the company said it will continue to leverage automated customer fulfillment to increase customer engagement, capacity and improve productivity and profitability.
Kroger also plans to pilot capital-light, store-based automation in high-volume geographies in an effort to improve fulfillment capabilities and elevate the in-store customer experience.
Kroger expects $2.6B impact
Kroger previously said it expects to incur impairment and related charges in the third fiscal quarter of 2025 of approximately $2.6 billion as a result of these closures and the automated fulfillment network not meeting financial expectations. It is not clear whether the $350 million payment to Ocado is included in this estimate.
"E-commerce remains a core part of serving customers who want better value, wide selection and flexible ways to shop," said Ron Sargent, Kroger chairman and CEO, in a November 2025 statement. "We are building on a strong foundation with five consecutive quarters of double-digit e-commerce sales growth and increased profitability improvements. We are 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 recently announced its sixth straight quarter of double-digit e-commerce growth with a 17% year-over-year increase in its third quarter of fiscal 2025.
Kroger expands delivery partnerships
As it shutters some of its CFCs, Kroger will increase its involvement with several well-known online delivery providers. The company, which began offering online delivery in collaboration with grocery technology company Instacart in 2017, will be one of the first retailers to offer customers access to the Instacart AI Assistant - Cart Assistant, which it will offer to customers shopping on the Kroger iOS mobile app.
Kroger also recently broadened its collaboration with DoorDash, enabling customers to shop its full grocery assortment from nearly 2,700 stores. In addition, Kroger announced the upcoming launch of a new joint offering with Uber Eats Marketplace to be the first retailer on the platform allowing customers to order grocery items alongside orders from hundreds of thousands of restaurants.
According to Kroger, these expanded partnerships will also create new opportunities for CPG companies to reach and engage its customers with relevant advertising via its retail media business.
Cincinnati-based The Kroger Co. operates nearly 2,800 stores in 35 states across banners including Kroger, Mariano’s, Fred Meyer, Ralphs and Harris Teeter.
