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Kroger to Break Ground on Major Michigan Customer Fulfillment Center

By Rhian Hunt – Sep 28, 2020 at 7:26PM

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The company provides details on its latest giant facility.

As part of its ongoing push into grocery e-commerce, supermarket and pharmacy chain Kroger (KR -0.16%) announced today its plans to build one of its huge Customer Fulfillment Centers, or CFCs, in the Great Lakes region. The company identified Romulus, Michigan, as the site for the facility.

The 135,000-square-foot CFC will be constructed in partnership with Ocado Solutions, part of Ocado Group (OCDO 1.17%), a U.K.-based online supermarket that also provides various software and technology packages related to internet or automated grocery operations. According to the press release, Ocado's contribution to the project will include helping with an "automated warehouse facility with digital and robotic capabilities" buttressing Kroger's "flexible distribution network."

Two Ocado Group trucks with different supermarket logos decorating them.

Image source: Ocado Group.

The CFC will take about 18 months to build and create roughly 250 local jobs. Kroger supply chain VP Robert Clark said it will improve the company's grocery e-commerce operations in Michigan and will "bring fresh food to our customers faster than ever before."

Kroger's recent second-quarter earnings report indicates that the grocery chain's profitability is still running strong after emerging from COVID-19's first wave. During the fiscal Q2 2020 earnings call, CEO Rodney McMullen stressed the company's e-commerce vigor, saying that 98% of Kroger's customers live near its 2,100 pickup and 2,400 delivery locations. Senior VP Gary Millerchip added that digital sales surged 127% year over year.

McMullen said the CFC network development continues even as Kroger already has such extensive delivery capacity because Ocado's artificial intelligence and automation represent a fast delivery method that's "significantly less costly than our existing model."

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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