Tech
After $2.6B in Charges, Kroger Is Filling Orders by Hand
Kroger wrote down the entire Ocado network in Q3 and closed three underperforming CFCs. The $400 million improvement claim has its first audit in mid-June.
Kroger closed its Groveland, Florida Customer Fulfillment Center on February 1, laying off 935 workers.
The 375,000-square-foot warehouse ran on Ocado's Smart Platform since June 2021: a ceiling grid of rails on U.S. Highway 27 in Lake County. More than 1,000 bots followed algorithmic routes to pick grocery orders.
One of eight Ocado Customer Fulfillment Centers Kroger built across the U.S., Groveland was the third to open. The Frederick, Maryland facility, opened June 2023, carried a $60 million price tag; the Groveland building, 25,000 square feet larger, cost at least as much.
Kroger's Q3 FY2025 charge totaled $2.585 billion, written against the entire automated fulfillment network, not the three closing buildings alone. The figure encompasses asset impairments across all eight sites, the Charlotte cancellation, and a $350 million cash payment to Ocado.
A Food Trade News reporter visiting the Frederick CFC in July 2023, a month after its opening, counted roughly a dozen refrigerated delivery vans departing over four hours. The vans served approximately 50 Harris Teeter stores in the Baltimore-Washington corridor. Return visits over the next two years showed more traffic, never enough to justify a $60 million facility.
Ocado's model developed around its home market: London and its outer ring, where online grocery adoption was already high when the company's grid-based fulfillment design was formalized. Former Kroger executive Ken Fenyo named the American mismatch plainly after the closures: "You didn't have enough people ordering, and you had a fair amount of distance to drive."
By November 2025, Kroger filed WARN notices for 1,403 Florida employees across the Groveland CFC and three spoke facilities. Pleasant Prairie, Wisconsin and Frederick, Maryland closed on the same schedule, effective February 1. Kroger also canceled a planned Charlotte, North Carolina CFC as part of the restructuring.
The fulfillment work moved to Kroger's 2,700-plus supermarkets, where store associates now pick from live shelves. Instacart became the primary delivery partner, with DoorDash and Uber alongside.
Under a "Partner Pick" arrangement, Instacart phased out 366 of its own employee pickers from Kroger-owned stores; Kroger's existing store associates absorbed that work under their current payroll. The incremental picking hours per store are not broken out in any filing. Kroger's Q4 FY2025 results, announced March 5, projected a $400 million e-commerce operating profit improvement for 2026, the company's first profitable e-commerce year.
What the Van Count Shows
All three closed markets are suburban or exurban rings: Lake County, Florida; Pleasant Prairie, Wisconsin; and the Baltimore-Washington corridor outside Frederick. Kroger ordered additional capacity for Detroit's surviving CFC in 2026 and is opening a sixth site in Phoenix this year with Ocado's new AutoFreezer technology. Ocado confirmed the three closures reduce its annual fee revenue by roughly $50 million, three markets from an eight-site network generating that slice.
The $50 million reduction points to what the press releases never said: the three closed markets were the network's low-volume tail, not a random sample. Kroger expanding Detroit and opening Phoenix rather than closing them is the documentary counter to any reading of Florida and Wisconsin as a verdict on the format.
Kroger's Q1 FY2026 results, expected in mid-June, are the first audit of the $400 million improvement claim. If the in-store model's operating line doesn't improve, the density problem isn't solved. It has only moved from a purpose-built warehouse into 2,700 stores.