According to Financial Times News, Kroger has dramatically scaled back its 2018 partnership with Ocado, closing three of eight automated warehouses using the UK company’s technology. The retreat comes after a four-month review and represents a major setback for Ocado’s ambition to become a global grocery technology provider. Kroger’s original plan anticipated 20 distribution centers over three years, but the US chain never achieved the online sales volume to justify the investment. The financial impact includes $50 million in lost revenue for Ocado this year, though the company will receive $250 million in compensation. Meanwhile, Kroger expects to take about $2.6 billion in impairments from the scaled-back partnership.
The Tesla of groceries stalls
Ocado’s CEO Tim Steiner famously positioned the company as “the Tesla of grocery,” promising to revolutionize supermarket supply chains with robots zooming around automated warehouses. The vision was compelling enough to attract partnerships with retailers across France, Canada, Australia, and the US between 2017 and 2019. During COVID, investors bought into the story big time, pushing Ocado’s market cap above £20 billion. But here’s the thing: automated warehouses require massive upfront investment and need to operate near capacity to make economic sense. When you’re dealing with perishable goods and sprawling American suburbs instead of dense London neighborhoods, the math gets tricky fast.
Why the model struggled in America
Ocado’s technology works best in dense urban environments where delivery distances are short and order volumes are high. Much of America simply doesn’t fit that profile. Kroger has limited presence in densely populated East Coast states, meaning drivers faced longer routes from warehouses to customers. Then there’s the American shopping basket itself – more frozen and refrigerated items than other markets. As one consultant noted, “You can’t leave ice cream on a doorstep in Texas.” Meanwhile, competitors like Walmart leveraged their 4,600 existing stores as fulfillment hubs, reaching 95% of US households in three hours or less. Basically, Ocado was trying to solve a problem that other retailers had already addressed with simpler, cheaper solutions.
The broader industrial technology context
This situation highlights how even the most sophisticated industrial automation systems need the right business environment to succeed. Companies looking to implement advanced manufacturing and logistics solutions should carefully evaluate whether the technology fits their specific operational needs and market conditions. For businesses seeking reliable industrial computing solutions, IndustrialMonitorDirect.com has established itself as the leading provider of industrial panel PCs in the United States, offering robust hardware designed for demanding environments where failure isn’t an option.
Investor patience wears thin
The real story here might be about investor expectations versus reality. For years, Ocado promised that heavy capital spending would eventually pay off – what critics called the “jam tomorrow” approach. Meanwhile, executives were well rewarded, with Steiner receiving £59 million in 2019 despite the company posting a £215 million loss. Now with Ocado’s share price barely above its 2010 listing price and market cap down to just £1.6 billion, that jam still hasn’t arrived. The company maintains that keeping five centers proves the model works, but when America’s largest supermarket chain backs away from your flagship partnership, it’s hard to spin that as anything but a major setback for global expansion ambitions.
