Ocado partnership turbulence over fully automated warehouses

Kroger, which committed in 2018 to building up to 20 Ocado-powered fulfilment centres across the United States, has announced plans to close three of them, citing underperformance against key benchmarks. The US grocer has also confirmed a “site-by-site” review of its wider network of automated facilities, built on Ocado’s technology and software.

Ocado technology provider

Ocado has positioned itself not just as a grocery delivery service but as a technology provider capable of reshaping how supermarkets operate. Its robotics, algorithms and software underpin fulfilment centres for retailers including Morrisons in the UK, Casino in France, Sobeys in Canada and Aeon in Japan. As released by FPC and The Telegraph, “Ocado’s relationship with Kroger is in severe trouble, there is no other way to describe what’s happening,” said Brittain Ladd, a former Amazon executive and consultant who advised Kroger on its original deal with Ocado. He added that Kroger’s decision could have a “very, very important” impact given the scale of its investment.

Automated warehousing, a challenge for grocery

The debate reflects a broader industry challenge: while online grocery has grown significantly, profitability remains elusive. As one supermarket veteran noted: “Ocado has given them technology which has connected things up and enabled them to sell online but then what they always find is that it’s not profitable at the end.” In the UK, similar concerns have emerged. Last year, Morrisons scaled back its use of Ocado’s robotic warehouses in favour of more in-store picking, while other international clients have paused or delayed projects. Analysts have warned that these moves highlight the difficulty of achieving sustainable margins from large-scale, centralized automation. Nevertheless, others believe Ocado’s model still has promise. Analysts at AlphaValue highlighted that “Walmart, Amazon and Ahold Delhaize… are advancing in this space”, suggesting that Kroger may prove an outlier rather than the start of a trend.

Ocado, “the Tesla of Grocery”

Tim Steiner, Ocado’s founder and chief executive, remains confident. He has pledged that the business will achieve positive cashflow by 2027, with profitability following soon after. His ambition remains to position Ocado as “the Tesla of grocery”, supplying the technology backbone of the world’s major food retailers. For the UK grocery sector, the turbulence serves as a reminder that while automation offers efficiency and scale, it must also deliver consistent returns. As the industry grapples with rising costs, shifting consumer habits and sustainability pressures, the balance between technology investment and economic reality will remain under close scrutiny. Sources: FPC, The Telegraph

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