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Kroger has announced it will pay $350 million to Ocado Group following the closure of three automated warehouses that were part of their partnership aimed at enhancing grocery fulfilment capabilities across the US.

This payout underscores a critical pivot from the companies' initial collaboration established in 2018, which aimed to capitalise on the burgeoning online grocery market by developing 20 state-of-the-art customer fulfillment centres (CFCs) using Ocado’s advanced automation technology.

However, after successfully launching only eight facilities, Kroger has determined that the investment did not yield the expected results.

The closures were attributed to several factors, including suboptimal locations, insufficient volume, and an inability to meet the speed and efficiency standards set by competitors like Amazon and Walmart.

Kroger’s decision to shutter these facilities comes alongside a substantial $2.6 billion impairment charge, reflecting the challenges faced by the Ocado-automated sites.

In light of these developments, Kroger has opted to pivot towards leveraging its existing store network to fulfil online orders, further expanding partnerships with delivery services such as Instacart, DoorDash and Uber Eats.

Despite the setback, Ocado has indicated its commitment to continue collaborating with Kroger on the five remaining operational sites, with plans for a new CFC expected to open in Phoenix, Arizona, in 2026. However, the previously planned facility in Charlotte, North Carolina, has been cancelled.

Following the announcement, shares of Ocado surged by as much as 10% on the London Stock Exchange, reflecting investor optimism regarding the compensation deal. Conversely, Kroger's stock opened slightly lower, continuing a trend of declines over the past few days.