Kroger, Ocado to open automated fulfillment center in Phoenix

Dive Brief:

Kroger and e-commerce partner Ocado plan to open a 200,000-square-foot automated customer fulfillment center (CFC) in Phoenix, the two companies announced in a press release on Friday. Construction on the $89 million facility is expected to begin this year and the site will open 24 months later.
The facility will have digital and robotic capabilities and will utilize Ocado’s proprietary technology to serve customers in the Southwest region, according to Ocado’s CEO, Luke Jensen. Phoenix Mayor Kate Gallego said in the announcement she expects the center will add around 700 jobs to the city in its first five years of operation.
The facility, which is expected to be operational in two years, is the latest of almost a dozen CFCs announced by Kroger and Ocado.

Dive Insight:

As the capital of Arizona and one of the fastest-growing cities in the U.S., Phoenix has witnessed a surge in tech firms springing up in recent years, including several projects working on self-driving grocery delivery in a nearby suburb. Kroger and Ocado are evidently looking to capitalize on that existing innovation and wide talent pool in automation technology with their latest fulfillment center. Kroger-owned Fry's Food Stores operates in the Phoenix metro area and will receive e-commerce support from the site.

Along with its fleet of roving robots primed to fill e-grocery orders, the facility will also utilize Ocado’s software that optimizes fulfillment for curbside pickup, Jensen of Ocado said in the announcement. Kroger has expanded pickup since the start of the coronavirus pandemic, and now offers the service at more than 2,100 stores.

Kroger's decision to use large automated distribution centers is unique in the industry as several other major grocers have instead invested in micro-fulfillment and store-based automation. Kroger’s first CFC, located in Monroe, Ohio, is expected to open in early 2021.

The two companies invested $121 million in a distribution facility near Atlanta in 2019 and announced in September last year that they had plans in the works for a CFC in the Pacific Northwest as well as one in southeast Michigan and one on the West Coast.

Robotic technology in e-grocery has ticked up since the pandemic caused a surge in demand for the services. Ahold Delhaize revealed its plans last May for two automated warehouses, and Dollar General has scaled up its self-distribution program to up to 10 dedicated facilities.