In July 2023, shortly after Kroger opened it is newest Ocado customer fulfillment center (CFC) in Frederick, MD, I stopped by to pay a visit. I didn’t enter the 350,000 square foot automated full-service distribution center but instead sat in my car and watched the truck traffic exiting the large depot.
To say there wasn’t much action would be a gross understatement. In the four hours I observed from my perch, I counted about a dozen customized temperature- controlled vehicles leaving the yard on their way to fulfill online orders to as many as 50 Harris Teeter stores in the Baltimore-Washington area.
For the next two years I repeated the process and, while traffic had increased, it was nowhere near the level it should have been to support such a $60 million facility which also employed about 400 associates.
Last month it was announced that the brainchild of former Kroger CEO Rodney “King” McMullen will be stymied, at least in part, when the Cincinnati-based merchant shutters the Frederick “shed” and two others – in Pleasant Prairie, WI (opened 2022) and in Groveland, FL (opened 2021). The three closures will impact about 1,400 employees.
As for the remaining five full-service (non-spoke) “sheds” that Kroger operates in partnership with Ocado (in Monroe, OH; Romulus, MI; Atlanta; Dallas; and Denver), they will remain open, but their performances will continue to be monitored (translation: expect several more to close).
And there’s no update on whether two new “sheds” in Charlotte and Phoenix that Kroger announced earlier this year it would open in 2026 will actually see daylight.
However, the big chain was happy to point out the overall gains it has made in its e-commerce portal, touting its success with third-party providers Instacart, DoorDash and UberEats (all of those orders are assembled at store level).
Behind the mascara and hoopla about Kroger’s total e-commerce progress, it’s important to temper that enthusiasm with the fact that the nation’s largest pure-play supermarket chain took a $2.6 billion impairment charge in its recently released Q3 earnings, one of the largest write-downs of its kind in retail food history.
While a few other traditional supermarket chains have invested in their own segregated fulfillment networks (Ahold Delhaize, H-E-B), no conventional grocery chain planted their flag in the ground as deeply as Kroger.
When the Ocado partnership was first announced in 2018, the British logistics company and the big American retailer were locked in arms. When COVID arrived in 2020, the urgency to build more CFCs seemed greater (to be fair, Kroger wasn’t the only retailer driven to expand its digitally-driven business) and Kroger ramped up its expansion plans.
If hindsight is at least a meaningful way to measure history, then it’s now clear how much Kroger overshot the runway. What we’ve also learned is that Kroger, on several levels, is many miles behind Walmart and Amazon. At the very least, there should have been much greater internal accountability to invest the billions that the retailer squandered over the past seven years. Then again, these things tend to happen at companies where the board of directors is weak, the chief executive is an autocrat, and the line of succession is ambiguous.
It’s going to be an interesting 2026 for the $150 billion retailer. It will select a new CEO (likely an outsider) to lead the company, one who can provide greater peripheral vision and foster a culture of more openness and accessibility. There’s also a good chance that the company’s litigation with Albertsons over their failed merger will be adjudicated or settled. Kroger has already spent more than $1 billion on legal fees and could face about another billion dollar charge if things don’t go in their favor.
As for e-commerce, as it turns out, it’s gone the way many trade analysts forecasted 10 years ago: continued steady growth with many retailers seeing about 12-18 percent of their business currently generated from online sales (most of it from pick-up), with that number possibly climbing to 25 percent of the pie by 2030 (call me skeptical about that prediction).
A $2.6 billion write-down – that still boggles my mind.
Doug McMillon – The Greatest CEO Of The Current Millennium
Sure, you can find CEOs in fields such as big pharma, insurance and tech whose top and bottom-line performances are better when comparing measurable metrics over at least a five-year period.
But I’d argue that no one in any business segment has surpassed the performance of Doug McMillon, 59, Walmart’s chief executive who will be stepping down from the helm of the world’s largest company next month.
While Walmart’s statistics alone under McMillon would make him a first ballot Hall of Famer (its stock price has skyrocketed a whopping 323 percent and market value has more than tripled to $817 billion), it’s been McMillon’s skills and the accuracy and timing of his decision making that make him stand out.
When he assumed the helm in 2014 from Mike Duke (remember him?), Walmart’s future appeared to be significantly less stable. It seemed defenseless to counteract the e-commerce progress that Amazon was making, and the store-level workforce at the company’s more than 4,200 U.S. stores (at that time) was apathetic and not well-trained.
Perhaps part of McMillon’s skill set evolved from his first Walmart job as an hourly store associate in 1984, or perhaps his leadership abilities are more intuitive, but in a relatively short period of time Doug McMillon galvanized his company’s culture (are you listening, Kroger?) while bringing Walmart into the modern age. His 2017 decision to switch the company’s business focus towards digital (and away from bricks-and-mortar) was not only brilliant, it was also ballsy. And while for a seven-year period Walmart didn’t open many physical stores, it spent earnest capital on improving store conditions and financially investing in its store level associates.
As for newly named chief executive John Furner, his resume closely resembles that of McMillon. Both grew up in Arkansas and graduated from the University of Arkansas. Furner, too, started as an hourly store associate (in 1994) and rose up through the ranks to join Walmart International, then became the CEO of Sam’s Club (as McMillon did). In 2019, Furner was promoted to president and CEO of Walmart’s U.S. stores.
He’ll have big shoes to fill, but Walmart’s succession plan has been solid for years.
What’s also impressed me about McMillon is his ability to simplify his approach to business. His style never seemed layered; his ego was always controlled, and his bluntness was easy to digest.
To wit: “Retailers come and go. It’s really simple: If you’re not meeting the wants and needs of the customer, you’re done.”
What’s amazing is that while McMillon gets my vote as the best business leader of the past 25 years, he’s still not the best chief executive the company has ever had. That distinct honor belongs to company founder Sam Walton – the “Babe Ruth” of retailing.
‘Round The Trade
Another strong quarter from Providence, RI-based wholesaler/retailer UNFI. Uh, wait a second. I apologize. I was listening to the company’s analyst conference call led by chief executive Sandy Douglas following the release of its Q1 2026 earnings and became temporarily delusional. Let me start again. Earlier this month, UNFI released the sales and earnings report for its recently completed first quarter which ended on November 1. While it’s true a few metrics improved (sales at its natural segment grew 11 percent and its operating rate expense efficiency was 0.2 percent better), other more important measurements were still pretty dismal. Overall, net sales decreased 0.4 percent; sales at its larger conventional segment dipped 12 percent; and the company continued to post red bottom-line numbers (a loss of $4 million). But that’s not how “Mr. Sunshine” sees it: “We started fiscal 2026 with another quarter of solid execution and continued progress in delivering more value to our customers and suppliers as we strengthen effectiveness and efficiency. Our network optimization is proceeding ahead of schedule, and the benefits of recent supply chain investments, coupled with process improvements, is enabling us to strengthen service levels and increase throughput. This helped us deliver Adjusted EBITDA growth of nearly 25 percent, free cash flow meaningfully above last year and a sequential net leverage decline,” said Douglas. Seriously, who is he kidding? The numbers, while slightly better, still pretty much suck. But even if you disregard the financials and performed more than a cursory analysis of UNFI’s relationship with many of its Mid-Atlantic independent retailers, you’d realize how out of touch Mr. Douglas and his acolytes are. In the past five months alone, it has lost Boyer’s and Key Food (with that $1 billion annual revenue loss also came the closure of a relatively new distribution center near Allentown, PA) and has several more UNFI customers frustrated by UNFI’s inability to help resolve long-standing issues…Costco officially became the first large food retailer to sue the Trump administration over its tariff policies. According to The Wall Street Journal, Costco said the lawsuit is necessary to make sure it is eligible for refunds if the Supreme Court rejects the administration’s reasons for tariffs collected under the International Emergency Economic Powers Act. The Issaquah, WA-based club store merchant is seeking a full refund of all duties paid under the act, which was passed in 1977 and allows the president to regulate imports during an emergency. The company’s lawsuit was filed on November 28 in the U.S. Court of International Trade, and further states that the “IEEPA does not clearly authorize the president to set tariffs,” therefore they “cannot stand and the defendants are not authorized to implement and collect them.” As the nation’s third largest retailer, Costco brings a lot of skin into the game where shifting political policies have created a nightmare for retailers to manage…for Boar’s Head the (bad) beat goes on: a huge recall from one of Boar’s Head’s private label cheese processors – New Jersey-based Ambriola Company – over the possibility that its pecorino Romano cheese might be contaminated with listeria. Boar’s Head wasn’t the only Ambriola customer impacted. Retailers such as Wegmans, Walmart/Sam’s Club, Kroger and Big Y were also forced to recall product. Thankfully, no illnesses have yet been reported….scary statistic of the month: according to prestigious academic institution MIT, artificial intelligence can already replace 11.7 percent of the current U.S. labor force which translates to as much as $1.2 trillion in wages across several administrative sectors. Ouch!…every once in a while, I come across a person so distinctly ignorant that he needs to have his head blown off (or be terminated). Such a person is Martin Bally, who until late last month served as VP-information technology for the Campbell Soup Company. An audiotape released last month disclosed that Mr. Bally described his company as making products for poor people along with other racist remarks. Bally went even further, noting Campbell’s products contained bioengineered meat and its chicken came from a 3-D printer. Of course, Bally was fired. What a dumbass!
Local Notes
It was a big November for Aldi. The fastest growing (by store count) food retailer in the U.S. opened 25 new stores last month including new discount stores in W. Springfield, VA and New Freedom, PA. Another Aldi will debut in Lexington Park, MD (St. Mary’s County) on December 11…in somewhat of a rarity, Amazon will be closing a fulfillment center, specifically its 87,000 square foot warehouse and office in Sterling, VA, on January 30. The facility, which opened in 2018, employs about 400 associates, including 215 who work directly in the fulfillment center. About 125 employees will be relocating to other Amazon facilities. “Godzilla” operates 14 other DCs as well as 16 delivery stations in the Old Dominion). Approximately 245 associates will be laid off…from the obit desk, passing on last month was one of the greatest Reggae singers of all time. Jimmy Cliff, arguably second only to the legendary Bob Marley, has left us at the age of 81. While Cliff began singing professionally as a teenager in his native Jamaica, it wasn’t until he appeared in the 1972 crime drama film “The Harder They Come” (his first movie and only starring role) that he gained fame internationally. Among his best songs were classic tunes such as “You Can Get It If You Really Want It;” “Sitting In Limbo;” “Many Rivers To Cross;” and the aforementioned “The Harder They Come.” And one more from my “deep tracks” archive: “Struggling Man.” Cliff is one of the few Jamaican musicians to receive his country’s “Order of Merit.” He’s also won two Grammys; and he and Bob Marley remain the only two Jamaican singers ever inducted into the Rock and Roll Hall of Fame.
Jeff Metzger is publisher emeritus of Food World and Food Trade News and founder of Taking Stock LLC, a grocery industry advisory and consulting firm.