Kroger Bet $2.6 Billion on Robot Warehouses. Guess How That Turned Out.

The Grocery Giant Admits Defeat

In 2018, Kroger announced a bold plan to build 20 robot-powered warehouses across America.

The idea was simple: thousands of machines would zip around massive facilities, picking groceries faster than any human could. Seven years and billions of dollars later, the country’s largest supermarket chain is pulling the plug.

Kroger is closing three of its automated fulfillment centers, canceling a fourth, and paying its technology partner $350 million just to walk away.

The robots worked exactly as promised, but the customers never showed up in the numbers Kroger expected.

$350 Million to End It

Kroger will pay Ocado, its British technology partner, a $350 million one-off payment after opting to shut three robotic warehouses and scrap plans for another facility.

The payment will be made in January 2026 and reflects the loss to Ocado of future capacity fees for the affected sites.

The payment includes $250 million already announced by Ocado.

For Kroger, it’s the cost of admitting that a strategy it championed for nearly seven years simply didn’t work out the way anyone hoped.

Three Warehouses Go Dark in January

Kroger will close customer fulfillment centers in Pleasant Prairie, Wisconsin; Frederick, Maryland; and Groveland, Florida in January 2026.

These facilities had been operating for years but never hit their financial targets. Kroger also plans to close a spoke facility in Nashville, in early 2026, laying off 132 workers.

The closures mark the end of Kroger’s presence in several key delivery markets where the robot strategy was supposed to give them an edge over competitors.

Charlotte Never Opens

Kroger has canceled plans to open an automated fulfillment center in the Charlotte, North Carolina, area that it had been developing with Ocado.

The North Carolina facility would have served a competitive Mid-Atlantic market through Kroger’s Harris Teeter banner.

Earlier in 2025, Ocado said Charlotte was slated to open in late 2025 or early 2026. Instead, Kroger decided the math no longer made sense.

The building will never fulfill a single order.

A $2.6 Billion Writedown

Kroger is taking a $2. 6 billion impairment as it shifts toward completing online orders from its store network rather than the Ocado warehouses.

That figure represents one of the largest writedowns in grocery retail history. The impairment charges came in the third quarter of 2025 alone.

The number reflects not just the cost of building the warehouses but also the equipment, technology licensing, and years of operating losses that never turned into profits.

The Original 20-Warehouse Plan

In May 2018, Kroger and Ocado announced an exclusive partnership in the United States, promising to bring Ocado’s Smart Platform technology to America for the first time.

Kroger and Ocado planned to identify up to 20 sites for new automated warehouse facilities over the first three years of the agreement.

Each facility would range from 135,000 to 375,000 square feet.

Former CEO Rodney McMullen called it a transformation that would let Kroger serve customers “anything, anytime, anywhere.

Robots That Pick in Five Minutes

Inside each fulfillment center, more than 1,000 robots move at speeds up to 4 meters per second across a 3D storage grid called “The Hive.”

An AI control system communicates with each robot 10 times per second to ensure peak performance, enabling 50-item orders to be picked in just five minutes.

Algorithms control the pick-and-sort process to ensure products are packed intelligently, with fragile items on top and bags evenly weighted.

The technology worked. The problem was everything around it.

Pandemic Sales Vanished

Kroger’s digital sales grew 116% during the pandemic year that ended in January 2021. The company boldly proclaimed it wanted to double that figure by the end of 2023.

But online grocery shopping didn’t keep climbing. Customers who ordered groceries online during lockdowns went back to shopping in person.

Online grocery sales stabilized at 10-12% of total U.S. grocery spending post-pandemic, nowhere near the trajectory that justified building warehouse-sized robots.

Only Eight Centers Opened

Kroger and Ocado initially agreed to build the equivalent of 20 customer fulfillment centers but have only opened eight sites.

By September 2023, Kroger announced it would pause further development of new Ocado facilities until existing sites proved they could meet performance benchmarks.

They never did.

By September 2025, interim CEO Ron Sargent announced a full site-by-site analysis of the network, signaling the retreat that would come two months later.

The CEO Who Built It Left

Kroger CEO Rodney McMullen resigned in March 2025 after a board investigation into his personal conduct found it inconsistent with the company’s ethics policy.

McMullen had been with Kroger for nearly five decades, joining as a part-time stock clerk in 1978 and becoming CEO in 2014.

He was the executive who championed the Ocado partnership and pushed the robot warehouse strategy as Kroger’s path to competing with Amazon.

The board appointed Ronald Sargent as interim CEO, and within months the automation retreat was announced.

Stores Beat Robots

Kroger now believes scale is better achieved through stores that are closer to customers and cheaper to operate than warehouses full of robots.

Kroger plans to boost its presence in quick grocery delivery through expanded relationships with Instacart, DoorDash, and Uber Eats.

The company has 2,700 stores across 35 states, and filling orders from those locations means faster delivery times without the hundreds of millions needed to build new facilities.

Kroger expects to reach online grocery profitability in 2026.

What Survives the Retreat

Ocado will continue to operate five active fulfillment centers for Kroger, while a sixth facility in Phoenix is scheduled to open next year.

The surviving locations are in Monroe, Ohio; Dallas; Atlanta; Denver; and Detroit.

The Phoenix facility will be the first to include Ocado’s new robotics technology developed specifically for freezer environments. Kroger isn’t abandoning automation entirely.

It’s just admitting that 20 giant robot warehouses was the wrong bet for how Americans actually shop for groceries.

This article was created with AI assistance and human editing.

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