Kroger will make a $350 million cash payment to Ocado Group after deciding to scale back the automated customer fulfillment center (CFC) model the two companies launched in 2018.
The move follows a strategic network review in which Kroger opted to close three CFCs, in Pleasant Prairie, Wis.; Frederick, Md.; and Groveland, Fla., in January 2026, pause plans for a Charlotte, N.C. site, and monitor the performance of its remaining facilities.
The CFC model, powered by Ocado’s AI, robotics, and vertically integrated platform, was designed to enable fast, efficient e-commerce fulfillment.
Ocado said the closures will reduce its fiscal 2026 fee revenue by about $50 million. Kroger had already closed three CFC “spoke” cross-docking sites in early 2024.
Despite the retrenchment, the companies will continue operating five active CFCs: in Monroe, Ohio; Atlanta; Denver; and Detroit, with Kroger planning to add more capacity to Detroit next year.
Kroger also still intends to open a Phoenix CFC that will deploy Ocado’s new AutoFreezer technology.
Related Story
Kroger is shifting toward a more flexible fulfillment model, saying it will use automated CFCs selectively in dense markets while piloting capital-light, store-based automation in high-volume areas.
The changes come after Kroger said it expects approximately $2.6 billion in impairment and related charges tied to the underperformance of its automated network.
Kroger stressed that e-commerce remains central to its strategy, noting six consecutive quarters of double-digit online sales growth, including a 17% year-over-year increase in Q3 2025.
To expand delivery options, the retailer is deepening partnerships with Instacart, DoorDash and Uber Eats.
This includes integrating Instacart’s AI-powered Cart Assistantinto the Kroger iOS app and enabling nearly 2,700 stores for DoorDash delivery.
Kroger will also become the first grocer on Uber Eats Marketplace to allow customers to order groceries alongside restaurant meals.
Click here to sign up to Retail Gazette‘s free daily email newsletter
