Kroger's Ocado robot warehouses couldn't pay for themselves — $2.6B to unwind

On 18 November 2025 Kroger announced it would shutter three of its robotic e-commerce fulfillment facilities — a sharp turnabout for a grocery company that, until recently, kept expressing confidence that automation could run a profitable online grocery business. The closures and other e-commerce adjustments were projected to provide a $400 million boost to e-commerce profitability, at the cost of about $2.6 billion in charges.

The bet had been slowing down for two years. In September 2023 Kroger paused development of the Ocado project while it waited to see whether operating sites would meet performance benchmarks; in March it closed three spoke facilities that worked in tandem with the robotic centers, acknowledging they 'did not meet the benchmarks we set for success'. Less than a year before the announcement, Kroger had still been planning to expand the fleet, and in mid-2024 it was installing new Ocado technology to improve warehouse efficiency.

By September 2025 interim CEO Ron Sargent — who took over in March after Rodney McMullen's sudden departure following an ethics probe — said Kroger would conduct a 'full site-by-site analysis' of the Ocado network and refocus e-commerce on its fleet of more than 2,700 supermarkets, which it believed could 'reach new customer segments and expand rapid delivery capabilities without significant capital investments'.

Former Kroger executive Ken Fenyo, now of Pine Street Advisors, named the key flaw: the Ocado centers were located outside cities. 'You didn't have enough people ordering, and you had a fair amount of distance to drive to get the orders to them,' he said — the large centers simply were not processing enough orders to pay for the technology investment, in a grocery e-commerce market that never reached its pandemic-era projections.

The fulfillment centers were built outside cities, too far from enough customers to generate order density.

Grocery e-commerce never hit the volumes the industry predicted when Covid supercharged digital sales.

Performance benchmarks went unmet for two years before the company admitted the model was failing.

Supermarket-based fulfillment achieves rapid delivery without the capital intensity of dedicated robotics.

Locating automation where order density is thin means the technology never pays for itself — match the warehouse model to how many customers can actually reach it.

The three robotic facilities were slated for closure as part of the 18 November 2025 restructuring, with the $400 million profitability boost meant to offset the $2.6 billion of charges.