Dive Brief:

• Kroger will open a restaurant dedicated to pickup and delivery inside an Indianapolis area store Thursday and debut another such facility inside a metro Columbus, Ohio, location next month, the company announced.
• Each on-premise "ghost kitchen" measures approximately 1,000 square feet and is operated by restaurant technology firm ClusterTruck, which also handles order delivery. Using online ordering or kiosks at the two Kroger stores, shoppers can select from more than 80 menu items prepared by ClusterTruck staff.   
• Kroger and the tech startup first teamed up in late 2019 on a delivery service pilot that is no longer operating. The expansion of their partnership furthers Kroger’s efforts to offer prepared fresh foods through digital ordering options at a time when more consumers are ordering restaurant delivery and eating at home.  

Dive Insight:

Kroger branching into a new concept through its partnership with ClusterTruck indicates the largest grocery store chain in the U.S. is looking for new ways to capitalize on online ordering of prepared fresh foods.

Whereas the pilot service launched last year, Kroger Delivery Kitchen, focused on home and office delivery, this new store-focused kitchen operation allows Kroger to fulfill delivery as well as pickup orders. Consumers have shown great enthusiasm for click-and-collect during the pandemic, and Kroger offers grocery pickup service at around 2,100 stores. 

Although Kroger refers to the new locations as "ghost kitchens," which refer to facilities that are closed to the public, ClusterTruck's in-store facilities welcome orders placed by customers using nearby kiosks.

Founded in 2015, Indianapolis-based ClusterTruck has four ghost kitchens located throughout the Midwest, one of which it opened with Kroger last year in Carmel, Indiana. The company aims to get food to customers within 30 minutes after they place their order, with 22 minutes being the average fulfillment time system-wide, CEO and co-founder Chris Baggot said. It relies on both drivers and bicyclists for deliveries, with suburban areas relying more heavily on drivers. 

ClusterTruck’s proprietary software manages kitchen and delivery operations so that food gets handed off quickly to drivers and couriers, Baggott said.

The software tracks everything from traffic to where couriers are to how many pizzas each kitchen has and helps align food prep so that dishes requiring different cooking times will get finished at the same time. Consumers can track their food as it's being prepared and receive estimated times for when the order will be ready.

“It's super intelligent and that's what interests Kroger,” Baggot said. 

The dark kitchens will replace Kroger's in-store restaurants at the two locations, Baggot noted. This could signal a potential new direction for the in-store restaurants and other immersive dining concepts grocers have established in recent years, but have had to shutter or severely limit operations due to pandemic-related safety restrictions. 

Kroger is further testing a format that has taken off with restaurant operators in recent years that could be worth $1 trillion globally by 2030, according to Euromonitor. Ghost kitchens boost restaurant delivery in dense markets by utilizing dedicated facilities close to customers' homes. 

ClusterTruck’s menu runs the gamut from tacos, burritos and salads to poke bowls, Kung Pao chicken, Asian Pad Thai and pub food like burgers and hot chicken sandwiches. Customers can find vegan and vegetarian items, and Baggott said everything is customizable for taste and dietary needs. 

“We’ve done a couple of million orders and never actually talked to a customer before, so this is sort of a new one for us,” Baggott said. If all goes well with the two stores, ClusterTruck would consider expanding into more Kroger stores. 

Recently, Kroger has made several moves to boost its digital presence as the coronavirus pandemic boosts online shopping. In August, Kroger expanded its ship-to-home service, doubling its online assortment. Last month, Kroger announced it was partnering with Dinner Daily, a personalized meal planning service for consumers and grocers, on grocery order delivery and pickup in 24 states. 

In Q2, Kroger saw a 127% digital sales uptick, which the grocer attributed to shoppers opting for online orders for delivery, shipped items and in-store pickup.