Kroger and Ocado reveal location for sixth CFC

Kroger and Ocado have announced Pleasant Prairie, WI, as the sixth US location for their Customer Fulfilment Centre (CFC) project.

This will measure 350,000 square feet and is expected to create up to 400 new jobs. It will become operational 24 months after the site breaks ground and will serve customers in Wisconsin, northern Illinois and northwest Indiana.

In June, Kroger broke ground on its first CFC (aka shed) in Monroe, OH and has since announced additional locations in Florida, Georgia, Texas and in the Mid-Atlantic region.

“We’re incredibly excited to construct one of our industry-leading CFCs in Pleasant Prairie, WI, in relationship with Ocado to bring fresh food to our customers faster than ever before," says Robert Clark, Kroger's Senior VP of Supply Chain, Manufacturing and Sourcing.

"Through our strategic partnership, we are engineering a model for the region, leveraging advanced robotics technology and creative solutions to redefine the customer experience for our customers in Wisconsin and Illinois."

Thumbs down

Not everyone is quite so enthusiastic, however. Last month, we reported that Kroger stock had been downgraded from a buy to a hold by analysts at equity research firm Jefferies.

It cited Kroger’s partnership with Ocado as a concern and a "misstep when compared to micro-fulfilment," according to a note emailed to investors. Jefferies believes that each Ocado shed could take about four years to turn a profit and return limited market share gains.

"Unfortunately, details are lacking from [Kroger] concerning this agreement, including minimum capacity requirements, fee structure, and other assumptions that drive [management’s] expectation of a positive ROI by [year three]," analysts wrote.

Speedy delivery will be an issue with the Ocado sheds, given their location outside major metro areas. With a price tag of around $55 million each and a two-to-three-year buildout timeframe, this is an expensive, time-consuming model that could run into roadblocks in a rapidly changing e-commerce space, Jefferies argues.