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Kroger launches hi-tech facility as digital competition among grocers heats up – MarketWatch

Kroger Co. KR, -0.90% launched its newest hi-tech fulfillment center on Tuesday, the first facility in the U.S. powered by Ocado Group PLC, a U.K.-based robotics and software company.

Located north of Cincinnati in Monroe, OH and spanning 375,000 square feet, the facility, also called a “shed,” has more than 1,000 bots operating on 3D grids called “the hive.” Bots organize customer orders so that, for example, eggs are strategically placed to avoid breaking and items are packed to minimize the number of bags used.

The facility will also employ nearly 400 associates focused on tasks like customer service and engineering.

The Monroe facility will have seven modules, each with the ability to handle between $80 million and $100 million in sales annually, according to Kroger.

Temperature-controlled Kroger Delivery vans can hold up to 20 orders. Through the use of machine learning, delivery routes are optimized, factoring in things like road work and fuel usage. According to commentary during a Wednesday media event from Gabriel Arreaga, Kroger’s chief supply chain officer, in the three minutes that he spoke, dozens of orders could be filled.

Kroger KR, -0.90% and Ocado OCDDY, -0.67% OCDO, -1.39% established a partnership in 2018 to bring Ocado’s technology to the U.S. and have plans for additional customer fulfillment centers across the nation, which will include smaller facilities and other models, as well as the use of Ocado software. A Groveland, FL facility, a new market for Kroger, is also going into operation, and others in Atlanta, Dallas, Phoenix and in the Pacific Northwest and the West are planned.

See: Smoothies and salads: Kroger says these 4 items account for 28% of its produce sales

Kroger’s newest Ocado-powered facility can fill thousands of orders in a day. Image via Kroger

“2020 was a pivotal year for grocery e-commerce, with Kroger’s digital business scaling to over $10 billion—and achieving a record digital sales increase of 116%,” said Rodney McMullen, Kroger’s chief executive, in a statement.

In Kroger’s fourth quarter, digital sales were up 118%.

“The momentum we’re experiencing is well-timed with the evolution of Kroger Delivery, underpinning the permanent shift in grocery consumer behavior and
need for enterprising and modern e-commerce and last-mile solutions—today’s true
competitive horsepower.”

Also: Online grocer Ocado dismisses Amazon as a ‘very small competitor’ ahead of first Kroger warehouse launch

Kroger Delivery offers deliveries to up to 90 miles from a hub location. The system will also use Kroger stores and third parties to aid with deliveries.

Grocers have stepped up their technology capabilities as more consumers head online for their food shopping.

Online grocery grew 52% according to JLL’s Grocery Tracker 2021 report. JLL provides market research, retail business insight and retail property management services.

Grocers are investing in technology and other infrastructure to keep pace with customers who now expect the convenience of online grocery.

“One of the biggest hurdles to fulfilling online orders is the inefficiency of grocery employees picking items for pickup or delivery alongside in-store shoppers,” the report said.

And: Amazon launches new food brand, Aplenty

Albertsons Cos. Inc. ACI, +1.65% announced in March that it has partnered with Google GOOG, -0.55% GOOGL, -0.56% to make the shopping experience easier with the use of artificial intelligence.

And other large retailers that sell groceries like Target Corp. TGT, +0.38%, Walmart Inc. WMT, -0.04% and Costco Wholesale Corp. COST, -0.56%, have talked up the use of technologies to upgrade capabilities online, in stores, on apps and through their delivery services.

Leading up to its investor day presentation, Kroger said it will also focus on private labels, a $26 billion business in 2020, and fresh food as part of its growth strategy.

Read: Target to launch another food and beverage brand in April, Favorite Day

Kroger stock is up 17.2% for the year to date while the S&P 500 index SPX, -0.41% has gained 10.4% for the period.