Kroger entering new online markets powered by Ocado technology
Kroger to enter new markets with Ocado distribution centers in Austin, San Antonio and Birmingham
Kroger Co. continues to beef up its distribution network.
On Friday, the Cincinnati-based grocery giant announced plans to build three new spoke distribution facilities in Austin; San Antonio, Texas; and Birmingham, Ala. All three represent new markets for Kroger, according to a news release. A total investment price was not disclosed.
The announcement comes as company executives continue to tout the early success of Kroger's 2021 expansion into Florida, where the company has just one store and a growing number of tech-centric facilities.
In recent months, Kroger has announced a string of new distribution facilities, including in Oklahoma City and just this week in Cleveland. Those facilities, like those in today's announcement, also are part of Kroger's ongoing partnership with British online grocery delivery company Ocado. Kroger plans to open 17 new Ocado-powered facilities over the next two years, the release states.
In 2018, the companies announced a collaboration to establish a delivery network that combines artificial intelligence, advanced robotics and automation.
The Ocado facilities, which Kroger calls “sheds,” are aimed at providing products for customers who order online, either to be delivered to their homes or to be made available for them to pick up at stores. The automated facilities are designed to make fulfilling those orders faster, more accurate and ultimately less expensive than if humans selected those orders at stores.
“Kroger’s growing seamless ecosystem continues to scale and allow us to reach customers who are not in the proximity of a store with delivery services, and we're committed to doubling both our digital sales and profitability passthrough rate by the end of 2023 and our continued network expansion will help us reach this target," Yael Cosset, Kroger’s chief information officer and chief digital officer, said in a statement.
Here's what Kroger had to say about its new facilities:
Austin: The location is pending a lease agreement but is expected to be 70,000 square feet in the northeastern part of the city. Its hub will be in Dallas, and it's expected to employ 161 people.
San Antonio: This location is also pending a lease agreement for a 67,000-square-foot space in the northeastern part of the city. It will also have 161 job opportunities and work with the Dallas hub.
Birmingham: This 50,000-square-foot facility will be located at 30 W. Oxmoor Road, and work with Kroger's hub outside of Atlanta. It will have 161 job opportunities.
Kroger Fulfillment Network Expands to Three New Cities
Company Release - 3/4/2022
Austin and San Antonio, TX and Birmingham, AL newly named geographies
CINCINNATI and ORLANDO, Fla., March 4, 2022 /PRNewswire/ -- The Kroger Co. (NYSE: KR), America's largest grocery retailer, today announced at its 2022 Business Update in Orlando it will offer more Americans delivery through the addition of spoke facilities in Austin and San Antonio, TX and Birmingham, AL powered by the Kroger Fulfillment Network and Ocado Group (LSE: OCDO). As a continuation of Kroger's successful entry into Florida in 2021 without physical stores, the new Texas and Alabama facilities will serve as new geographies for the organization, bringing innovation and modern e-commerce to the cities and extending the grocer's reach and ability to provide customers anything, anytime, anywhere.
Kroger Delivery (PRNewsfoto/The Kroger Co.)
"Kroger today looks very different than it did in 1883 when we opened our first store. But the core principles that made that store successful – service, selection, value, and our commitment to our customers – remain the bedrock of our business," said Rodney McMullen, Kroger's chairman and CEO.
"I'm incredibly excited for the future of Kroger, and both thriving physical stores and digital solutions are part of it. We continue to feel great about the momentum we're experiencing with Kroger Delivery and our partnership with Ocado, supporting Kroger in strategically leveraging our unique assets to expand in existing regions, including Atlanta, Cincinnati and Dallas, as well as enter into new geographies like Austin, Birmingham, Cleveland, Oklahoma City, Orlando, San Antonio, South Florida, and the Northeast through a flexible network of differently sized, high-tech facilities operated by friendly and knowledgeable associates," continued McMullen.
Austin, Texas
The 70,000-square-foot spoke facility in northeast Austin, pending finalization of lease negotiation, will collaborate with the hub in Dallas, TX, serving as a last-mile cross-dock location that efficiently expands Kroger's grocery delivery services. The facility is expected to become operational later this year and will create up to 161 job opportunities.
San Antonio, Texas
The 67,000-square-foot spoke facility in northeast San Antonio, pending finalization of lease negotiation, will also collaborate with the hub in Dallas, TX, serving as a last-mile cross-dock location that efficiently expands Kroger's grocery delivery services. The facility is expected to become operational later this year and will create up to 161 job opportunities.
Birmingham, Alabama
The 50,000-square-foot spoke facility, located at 30 West Oxmoor Road in Birmingham, AL, will also collaborate with the hub in Forest Park, GA (Atlanta), serving as a last-mile cross-dock location that efficiently expands Kroger's grocery delivery services. The facility is expected to become operational later this year and will create up to 161 job opportunities.
"Kroger's digital investments are focused on driving expanded capacity, improving the customer experience, and developing new, innovative propositions via our strategic partnerships, including our Kroger Delivery fulfillment network powered by Ocado technologies," said Yael Cosset, Kroger's chief information officer and chief digital officer. "Kroger's growing seamless ecosystem continues to scale and allow us to reach customers who are not in the proximity of a store with delivery services, and we're committed to doubling both our digital sales and profitability passthrough rate by the end of 2023 and our continued network expansion will help us reach this target."
"We're excited to continue extending the Kroger fulfillment network, with dedicated facilities of various sizes providing added scale, reliability of experience, and benefit of automation and wide customer reach, in both current operating regions as well as in new parts of the U.S.," said Gabriel Arreaga, Kroger's senior vice president and chief supply chain officer. "This network is enabling Kroger to create thousands of technology, operations, logistics, and customer care jobs and improve access to fresh food in cities eager for the variety and value offered by Kroger that once could only be accessed through our stores."
Kroger Delivery Explained
This expansion represents an extension of a partnership between Kroger and Ocado, a world leader in technology for grocery e-commerce. In 2018, the companies announced a collaboration to establish a delivery network that combines artificial intelligence, advanced robotics, and automation in a bold new way, bringing first-of-its-kind technology to America. Through the hub-and-spoke delivery network, the organization now serves customers in Florida, as an example, without traditional brick-and-mortar stores.
The delivery network relies on highly automated fulfillment centers. At the hub sites, more than 1,000 bots whizz around giant 3D grids, orchestrated by proprietary air-traffic control systems in the unlicensed spectrum. The grid, known as The Hive, contains totes with products and ready-to-deliver customer orders.
As customers' orders near their delivery times, the bots retrieve products from The Hive and are presented at pick stations for items to be sorted for delivery, a process governed by algorithms that ensures items are intelligently packed. For example, fragile items are placed on top, bags are evenly weighted, and each order is optimized to fit into the lowest number of bags, reducing plastic use.
After being packed, groceries are loaded into a refrigerated delivery van, which can store up to 20 orders. Powerful machine learning algorithms optimize delivery routes, considering factors like road conditions and optimal fuel efficiency. Drivers may travel up to 90 miles with orders from facilities to make deliveries.
Kroger unveiled its Monroe, Ohio customer fulfillment center in April 2021, its first, followed by centers in Groveland, FL and Forest Park, GA. The Dallas fulfillment center is slated to open this spring with additional customer fulfillment centers slated for California, Frederick, MD, Phoenix, AZ, Pleasant Prairie, WI, Romulus, MI (Detroit), as well as South Florida and the Northeast and West. Kroger anticipates opening 17 new facilities, including hubs and spokes, within the next 24 months.
About Kroger
At The Kroger Co. (NYSE: KR), we are dedicated to our Purpose: to Feed the Human Spirit™. We are, across our family of companies, nearly half a million associates who serve over nine million customers daily through a seamless digital shopping experience and 2,800 retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities by 2025. To learn more about us, visit our newsroom and investor relations site.
About Ocado Group
Ocado Group is a UK based technology company admitted to trading on the London Stock Exchange (Ticker OCDO). It provides end-to-end online grocery fulfilment solutions to some of the world's largest grocery retailers and holds a 50% share of Ocado Retail Ltd in the UK in a Joint Venture with Marks & Spencer. Ocado has spent two decades innovating for grocery online, investing in a wide technology estate that includes robotics, AI & machine learning, simulation, forecasting, and edge intelligence.
