Dive Brief:
- Ocado plans to open two customer fulfillment centers — one in Charlotte, North Carolina, and one in Phoenix — with Kroger in fiscal 2026, Ocado Non-Executive Director Stephen Daintith told investors Thursday during an earnings call timed to the company’s fourth-quarter fiscal 2024 results.
- Kroger’s order in January for Ocado’s Auto Freezer solution, which automates the management of frozen inventory, for those sites pushed the openings back by a few months, Daintith said.
- Kroger and Ocado are moving forward with advancing their partnership after months of stifled development.
Dive Insight:
Ocado Chairman Adam Warby told investors that while the company is seeing growth across many of its customer fulfillment centers around the world, “we recognize that that is behind our expectation and the expectation of partners.”
Ocado and Kroger, which linked up for an exclusive partnership in 2018, made an initial commitment to build capacity equivalent to 20 CFCs across the U.S. but so far have only opened eight, according to Ocado’s website. Several investors questioned how the Kroger partnership is coming along during the Thursday call.
“There isn’t a bad relationship with Kroger,” Ocado CEO Tim Steiner said during the earnings call Q&A.
Steiner continued: “Obviously, there were some other distractions that [Kroger] had before that have fallen away. And we are working very closely on these sites. We still believe the U.S. is a huge opportunity. We would like to address that huge opportunity with Kroger.”
Kroger Chairman and CEO Rodney McMullen told investors in mid-2023 that the grocer was holding off on building new e-commerce sites with Ocado “until we make sure that we have a clear path on the ones we have.”
Last year, Kroger said it would add Ocado technologies, including On-Grid Robotic Pick and Automated Frameload, to its CFCs. That announcement came months after the companies closed three spoke facilities — two in Texas and one in Florida.
After a flurry of announcements between 2020 and 2022, Kroger has remained largely silent with the public about its work with Ocado. During its third-quarter earnings call in December, the grocer said CFCs helped fuel its 18% growth in delivery sales, noting the automated centers saw a significant increase in households and trips as well as a boost in basket sizes.
Steiner said that most of Ocado’s CFCs globally are “growing well” with some operating at or approaching profitability, but others need improvements or “require a different strategic approach” due to difficulty scaling volumes. The CFCs performing well have good locations, customer densities and target demographics, Steiner said.
Speaking to Ocado’s value proposition, Steiner told investors that the company’s solutions help retailers reduce labor costs. An Ocado CFC can fulfill a 45- to 50-item order in about 10 minutes of human labor — roughly an hour less than it would take store workers, Steiner said.
For full fiscal 2024, Ocado reported 14% revenue growth to 3.2 billion pounds ($4 billion), a loss of 374 billion pounds and adjusted EBITDA of 153 million pounds, nearly triple the prior year. The company made a nearly 249 million pound improvement to its underlying cash flow and refinanced 700 million pounds of debt.
