Kroger has announced it is to close three of its Ocado tech-powered CFCs in January. The decision will mean Ocado Group’s fee revenue next year will take a $50m hit.
Ocado’s share price fell by more than 19% in the wake of the announcement by the US retail giant.
The retailer said it would continue to operate CFCs in “geographies where Kroger sees higher density of demand” but was looking to “pilot capital-light, store-based automation in high-volume geographies to improve fulfilment capabilities and elevate the in-store customer experience”.
E-commerce operations would see “increased store-based fulfilment” Kroger said.
The retailer noted it had expanded its relationship with Instacart “as its primary delivery fulfilment provider” across Kroger.com and the Kroger app and had also broadened its relationship with DoorDash, “giving tens of millions of customers access to food and grocery essentials on-demand” through the DoorDash marketplace.
In addition, Kroger announced the upcoming launch of a new customer experience on Uber Eats Marketplace.
In early 2026, it will launch “a new customer experience” on Uber Eats to fulfil more orders by “providing access to groceries when customers order meals from their favourite local restaurants as well as offering standard grocery delivery”.
Ocado, in a statement today, said it “continues to support Kroger to optimise logistics operations and drive profitable volume growth” in the remaining CFC sites, with “constructive ongoing discussions around further use of Ocado’s technology to support Kroger”.
“Ocado continues to engage with Kroger on these and other matters, and expects significant growth in the US market, both with CFCs and store-based automation,” the company said.
Ocado said it expected to receive compensation for fees related to the early closure of the three sites of more than $250m.
Clive Black, head of consumer research at Shore Capital, said the announcement was “a near knockout punch” for Ocado and “a dreadful acclamation of what Morrison, Waitrose and others already knew: capital-intensive, centralised fulfilment of food to a dispersed mass-market customer does not financially work”.
“With its leverage, we worry about Ocado more not less,” he added. “How may more punches can it take?”
In September, Kroger’s interim CEO Ron Sargent said “stores are our most important asset, and when we use our stores to fulfil online orders, the inventory is closer to customers and the last-mile delivery costs are lower”.
“As demand for convenience grows, we can leverage our store footprint to reach new customer segments and expand rapid delivery capabilities without significant capital investments,” he added on the earnings call.
Last year, Canadian chain Sobeys similarly put on pause a plan for another Ocado robotic warehouse and revealed the tie-up between the two businesses was no longer exclusive. Late last year, Morrisons announced it was phasing out deliveries of online orders from Ocado’s Erith CFC, and expanding its store-pick fulfilment model.
“We are big fans of British entrepreneurs, British firms, and especially successful British innovators,” Black added. “Alas, that cannot be wholly said of Ocado where the vision and aspiration was wonderful, as was the idealism with no shortage of brainpower and masses of technobabble. Kroger, however, is a smelling salt moment for the group and we worry further about the real value of what is left in this firm.”
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