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Ocado Group PLC this week announced that Sobeys will be closing its customer fulfillment center, or CFC, in Calgary, Alberta. The automation provider and retailer have collaborated since 2018.
Sobeys said it is closing the Ocado-equipped CFC largely due to the Alberta grocery e-commerce market’s size and rate of growth.
“Sobeys is an important partner to Ocado, and we have taken a pragmatic approach to refining the network and placing our partnership on the right footing to secure long-term, sustainable growth in the Canadian market,” stated Tim Steiner, CEO of Ocado Group. “This has meant addressing some key challenges from early network planning decisions, in particular where the market has not developed as anticipated. It has also led to agreement on deepening our partnership in key markets.”
Sobeys will pay Ocado around $24.6 million for closing the CFC in Alberta. Ocado expects to lose around $9.5 million in revenue in 2026 because the closure.
Sobey will keep Toronto and Montreal CFCs running
In Ontario and Quebec, Sobeys plans to continue serving customers through its Ocado-enabled Voilà banner in those provinces, supported by its two existing CFCs in the greater Toronto and Montreal areas.
Ocado is deploying new technology into those operations, including the Ocado Swift Router, a functionality designed to enable the CFCs to handle a higher proportion of same-day and short lead-time orders. This also includes the option for Ocado-fulfilled orders to integrate with third-party platforms, such as online aggregators.
Ocado claimed that it and Sobeys have agreed on a number of further actions to place the partnership on a strong footing for continued long-term growth.
“Online grocery in North America has continued to develop, and Ocado’s technology has evolved significantly since our first CFCs were launched in the region,” Steiner said. “The changes we have made in our relationships with both Sobeys and Kroger represent a reset of our North American business, placing those partnerships in the best position to secure long-term growth, while reopening a substantial market for Ocado’s much-evolved technology.”
The partners also plan to continue the pause on development of Sobey’s CFC in the Vancouver area. The go-live timeline for that site remains under regular review, Ocado said.
In addition, Sobeys continues to use Ocado’s AI-powered in store fulfilment software across 87 grocery stores across Canada.
Inside Kroger and Ocado’s partnership
The Sobeys news came on the heels of Kroger’s announcement that it will make a one-time payment of $350 million to close three of its Ocado warehouses.
Kroger and Ocado have also worked together since 2018, but in recent years, their relationship has been rocky. When the partnership started, Kroger planned to build 20 CFCs across the U.S. using Ocado’s technology. These CFCs would support several “spoke” facilities for fast order fulfillment.
Outages with Ocado’s website, delays in order fulfillment, and even warehouse fires have dimmed the Hatfield, U.K.-based company’s prospects. It laid off 500 technology and finance staffers in February.
In September, Kroger said it would conduct a “full site-by-site” analysis of the Ocado network to reduce costs and improve profitability. Now, the company is putting more emphasis on its store-level fulfillment than its robotic network.
Ocado has started to expand its portfolio beyond automated storage and retrieval systems (ASRS). Last year, it debuted its Porter pallet-moving AMR. This robot navigates warehouses to automate several workflows, such as cross-docking, bulk-item picking, putaway, and pallet movement.