Kroger and Ocado go smaller with additional CFC plans

Stewart Samuel
Program Director - Canada
@RetailAnalysis

Date : 05 June 2020

Kroger is to build three additional Customer Fulfillment Centres through its partnership with Ocado Solutions, two of which will be smaller than those announced to date.

Nine sites announced to date

Kroger has announced plans to open new facilities in the Great Lakes, Pacific Northwest and West regions. The new facility in the West, at 300,000 sq ft, will be comparable in size to some of the sites already announced. However, the CFC in the Pacific Northwest will measure 200,000 sq ft while the facility in the Great Lakes region will measure 150,000 sq ft. These sites will optimise the flexibility of the Ocado model, enabling Kroger to develop the appropriate ecommerce capacity in each location.

Source: IGD Research, Map Data © Google 2020

Targeting range of catchments

Specific locations for the new facilities will be announced shortly. However, the retailer has a strong presence in the Seattle market through its QFC and Fred Meyer businesses, while in the West, it has significant presence through its Ralphs operation. In terms of the location of its site in the Great Lakes region, the retailer already has sites planned in Wisconsin and Ohio, although the region is densely populated. The three facilities will create more than 1,000 jobs once fully operational.

Planned sites

  • Monroe, Ohio – this is located close to the retailer’s Cincinnati HQ and is set to become operational in early 2021 following a ground-breaking ceremony last summer. This is core Kroger territory
  • Groveland, Florida – this site is expected to become operational in 2021. It is unique among the locations announced to date as the retailer does not operate any stores in Florida. Recently it divested its stake in Lucky’s Market, a natural and organic specialist that had expanded in the region with Kroger’s support
  • Forest Park, Georgia – expected to become operational in early 2022. Kroger has a strong physical presence in the region
  • Dallas, Texas – expected to become operational in early 2022. Kroger has a solid presence in Texas overall, but significantly stronger in Houston than Dallas
  • Pleasant Prairie, WI – expected to become operational in late 2022, core Kroger territory, driven by its acquisition of Roundy’s in 2015
  • Frederick, Maryland – expected to become operational in early 2023. The retailer has a strong presence in Washington and Baltimore through its Harris Teeter business, but no real presence in the Philadelphia market
  • Pacific Northwest – 200,00 sq ft site, potential to sited in Washington state and to be operational in 2023 or earlier
  • West – 300,00 sq ft site, potential to be sited in California and to be operational in 2023 or earlier
  • Great Lakes – 150,000 sq ft site, potential to be sited in Michigan and to be operational in 2023 or earlier

Pandemic-driven growth affirms Kroger’s bold plan

The initial announcements were focused on areas where Kroger is the market leader, where it has lower penetration and where it has almost no physical presence. Although the specific locations of the three additional facilities are yet to be confirmed, they are likely to support the retailer’s existing operations. These form part of its plans to develop up to 20 CFCs as part of the strategic partnership with Ocado. The recent boost to grocery ecommerce given by the coronavirus pandemic will have provided some affirmation to the retailer’s plans, which have often been considered bold in scope and ambition. Developing this fulfillment model will be a key part of Kroger’s strategy to build a large, sustainable and profitable model for grocery ecommerce.

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