Billion dollar flop: Kroger's failed automated fulfilment strategy with Ocado worse than it appears
Ocado Group’s shares tumbled on Tuesday after US grocer Kroger said it would close three underperforming warehouses developed using the UK company’s technology.
Ocado Group will miss out on $50 million of revenue in its current financial year as a result of the closures. It will receive $250 million in compensation, while Kroger expects to incur about $2.6 billion in impairments because of the closures and its automated warehouses not meeting financial expectations.
In a LinkedIn post, Brittain Ladd, a supply chain consultant and former Amazon executive, said: “Few people have a better understanding of what’s actually going on at Kroger regarding their partnership with Ocado than I do.”
“I was the first person to recommend in a research report that Kroger should acquire or partner with Ocado, and I was recruited from Amazon by Kroger to work as an internal strategy consultant. The first question I asked the executive team when I arrived was, “What is our Ocado strategy?” No one had an answer.”
He added: “Fast forward to the present and Kroger has announced that following a comprehensive review, it identified opportunities to optimise its fulfillment network by closing Ocado customer fulfilment centre (CFC) facilities in Pleasant Prairie, Wis.; Frederick, Md.; and Groveland, FL, and will monitor the performance at five other Ocado Group facilities.”
Kroger will also pilot capital light, store-based automation in high volume geographies to improve fulfillment capabilities and elevate the in-store customer experience. “Translation: Kroger is going to implement automated micro-fulfillment centres,” Ladd commented.
He continued: “The brutal truth of the matter is that the partnership failed because of poor decisions made by Ocado CEO Tim Steiner; multiple executives from Kroger including Yael Cossette and CEO Rodney McMullen; and consultants from several firms.”
According to Ladd, he offered up the following advice:
1. Steiner should relocate to Cincinnati, OH, and open a Ocado HQ for North America. “Tim refused even though Kroger was Ocado’s largest and most important customer.”
2. Begin by opening MFCs inside select stores, attached to the side of stores, or located among a cluster of stores. Do not begin with CFCs.
3. Introduce a marketing campaign to increase the awareness that groceries can be ordered online and fulfilled same day.
4. Introduce pricing to incentivise customers to order online, but charge a delivery fee to break even on every online order. “Do not, under any circumstances, lose money on online orders. Note: Kroger ignored the warning and they still lose money on every online order,” Ladd said.
5. Only open CFCs in geographic locations that have the most order volume and order density to justify the costs and that can maximise the capacity of the CFC. “Ocado ignored this advice as did Kroger. I warned that if the CFCs were built without the needed volume, they would eventually be shut down and the project would fail between 2026 to 2028 if not sooner.”
Ladd concluded: “Kroger has lost billions on the project, and they’re years behind H-E-B, Walmart, and Amazon in using automated fulfillment from MFCs. I advise Kroger to contact Isabelle Baumann of Oda; and Richard McKenzie of Veloq. In addition, Kroger should hire Vineta Bajaj.”
Ocado Group and Kroger did not respond to our request for comment.
2025 RTIH INNOVATION AWARDS
Supply chain automation was a key focus area at the 2025 RTIH Innovation Awards.
We received a record number of entries and many fantastic examples of the continued resilience and dynamism of the retail space during hugely challenging times.
For a full rundown of all of the shortlisted entries, click here.
Our 2025 hall of fame entrants were revealed during a sold out event which took place at The HAC in Central London on 16th October and consisted of a drinks reception, three course meal, and awards ceremony presided over by award winning comedian, actress and writer Tiff Stevenson.
In his welcome speech, Scott Thompson, Founder and Editor, RTIH, said: “This is the awards’ fifth year as a physical event. We started off with just 30 people at the South Place Hotel not far from here, then moved to London Bridge Hotel, then The Barbican, and last year RIBA’s HQ in the West End.”
“But I’m conscious of the fact that, to quote the legend that is Taylor Swift, You’re only as hot as your last hit, baby. So, this year we’ve moved to our biggest venue yet, and also pulled in our largest number of entries to date and broken attendance records.”
He added: “This year’s submissions have without doubt been our best yet. To quote one of the judges: The examples of innovative developments across both traditional and digital retail spaces were truly remarkable.”
Congratulations to our winners, and a big thank you to our sponsors, judging panel, the legend that is Tiff Stevenson, and all those who attended our 2025 gathering.
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