Kroger's Robotics Strategy Faces Reevaluation Amid Automation Challenges

Kroger's announcement on Tuesday that it will shutter three of its robotic e-commerce fulfillment facilities represents a sharp turnabout for the grocery company. Until recently, Kroger expressed confidence in its ability to leverage automation to run a profitable online grocery business.

Less than a year ago, Kroger planned to expand the fleet of high-tech fulfillment centers it developed in partnership with U.K.-based warehouse automation company Ocado. In mid-2024, Kroger revealed it would install new technology from Ocado to improve the efficiency of the warehouses.

However, Kroger's projected confidence came even as it questioned whether the Ocado network was living up to expectations. In September 2023, Kroger decided to pause the development of the Ocado project as it waited to see if already operational sites would meet performance benchmarks.

In March, Kroger announced it would close three spoke facilities that worked with its robotic centers, with a spokesperson noting these facilities did not meet the benchmarks set for success. By September 2025, it became clear that relying on automation as the foundation of a profitable grocery delivery business was unlikely to succeed for Kroger.

During an earnings call, interim Kroger CEO Ron Sargent stated the company would conduct a full site-by-site analysis of the Ocado network. Sargent also indicated Kroger would refocus its e-commerce efforts on its fleet of over 2,700 grocery supermarkets, believing this would allow them to reach new customer segments and expand rapid delivery capabilities without significant capital investments.

Kroger's decision to close the three robotic facilities and adjust its e-commerce operations is projected to provide a $400 million boost as the company aims to improve e-commerce profitability. However, this course-correction will incur charges of about $2.6 billion.

Ken Fenyo, a former Kroger executive and current managing partner of Pine Street Advisors, stated the changes reflect the reality that grocery e-commerce has not reached the expected levels since the COVID-19 pandemic.

Fenyo highlighted that Kroger's decision to locate the Ocado centers outside cities was a key flaw, as these locations had insufficient order volumes and significant delivery distances. Kroger's automated fulfillment network assumed consumers would prioritize lower prices over delivery speed, a model successful for Ocado in the U.K.

However, U.S. consumers have shown a preference for speed, with competitors like Instacart and DoorDash rapidly expanding their services. Acknowledging this, Kroger noted it would deepen partnerships with third-party delivery companies and pilot capital-light, store-based automation in high-volume markets, aligning with trends in micro-fulfillment technology.

Fenyo pointed out that micro-fulfillment technology also faces challenges, suggesting that automated order-assembly systems may not justify costs outside of high-demand areas. Kroger's reduced commitment to automation represents a significant setback for Ocado, which has touted its relationship with Kroger as a key endorsement of its technology, leading to a dramatic drop in Ocado's shares, returning to levels not seen since the company's public offering 15 years ago.