Amid continuing efforts to boost Kroger’s online sales and streamline its fulfillment network, the grocer is committing resources to a new distribution center in Kentucky, a state close to its Cincinnati-based corporate headquarters.
Kroger’s moves in Kentucky bolster its presence in a state where Florida-based grocer Publix has made inroads over the past two years.
On Dec. 11, the office of Kentucky Governor Andy Beshear announced that the grocery giant plans to open a new $391 million distribution center in Simpson County. The project is expected to create 430 new full-time jobs.
What Kroger plans to do with its new Kentucky distribution center
The Kentucky governor’s press release states that Korger’s new operation will serve as a full-line distribution center, featuring scalable and automated operations to help supply the region. It comes in addition to a $204 million expansion in nearby Bowling Green, where Country Oven, a bakery owned by the Kroger Co., has made investments in the region.
Local officials from the governor on down lauded the move.
“Kroger has long been a crucial contributor to Kentucky’s thriving economy, and this new location helps ensure that will continue to be the case for years to come,” Beshear said. “I’m grateful for the company’s expanding presence in our state — and these 430 new jobs for our people.”
A Kroger spokesperson did not return an email and call for comment and has not said anything publicly about the planned new distribution center. However, Kroger executives have telegraphed their desire for digital growth in recent years and how distribution centers play into that.
“As our digital business grows, so does its impact on our financial results. As a result, we’re making improved profitability a key priority through automation, new technology, and improved density and volumes,” said Todd Foley, the chief financial officer at Kroger, in a recent earnings call. “Capturing more digital households is important to accelerating growth in our model because these households are more loyal and spend nearly three times as much as non-digitally engaged households.”
Kroger’s fulfillment network challenges
Kroger has more than 2,700 stores in 35 states, more than 400,000 associates and annual sales in excess of $147 billion, according to its own reports.
Kroger ranks No. 6 in Digital Commerce 360’s Top 2000 Database. The database ranks North America’s largest online retailers by their annual ecommerce sales. Furthermore, Kroger is No. 1 in the database’s Food & Beverage category, though it competes with Mass Merchants — Walmart and Target — that rank higher in the Top 2000 for online grocery sales.
“This increases Kroger’s reach into rural areas that Kroger may not have delivery infrastructure for,” said Amrita Bhasin, a food and beverage supply chain expert who serves as CEO of the San Francisco-based reverse logistics firm Sotira.
The new distribution center also comes at a time when Kroger has been reassessing its digital delivery options, leaning more on DoorDash, Instacart and Uber Eats, which Bhasin said saves Kroger money.
“It means that Kroger does not need to have a fleet, which decreases logistics costs and complications,” Bhasin assessed. “Outsourcing delivery, especially for cold chain products [such as in grocery], is often optimal and preferred vs. creating infrastructure in-house.”
“Kroger’s previous investments in AI were based on demand forecasting and inventory as well as food waste solutions, which go hand in hand with food and beverage supply chain,” Bhasin stated.
Kroger has been working with UK-based Ocado Group’s AI-retail platform in a relationship dating back to 2018 to enhance its digital capabilities. However, Kroger recently agreed to make a $350 million on-time payment to Ocado as the retailer reassesses its plans.
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