By Lisa Baertlein
(Reuters) - Kroger (NYSE:KR) Co has chosen its hometown of Cincinnati for the first of 20 high-tech warehouses it plans to build with UK-based Ocado (LON:OCDO) Group Plc in a bid to dominate the U.S. grocery delivery business.
Kroger, the largest U.S. supermarket operator, is battling Walmart (NYSE:WMT) Inc and Amazon.com Inc (NASDAQ:AMZN) in the small, but fast-growing online segment that accounts for anywhere from 1 percent to 4 percent of the $800 billion U.S. grocery market. (Graphic: https://tmsnrt.rs/2LYQUUV)
In May, Kroger paid roughly $248 million for a minority stake in Ocado, an online grocer, and struck an exclusive deal for the U.S. market.
Kroger will spend $55 million on the partners' first project - a 335,000-square-foot facility in Monroe, Ohio, a suburb north of Cincinnati.
Ocado's "sheds" house hives of robots that pick and pack groceries. The company's newest machines can pull together a 50-item grocery order in as little as five minutes - potentially slashing Kroger's labor costs at a time when U.S. grocers are looking for ways to profitably delivery milk, eggs and other necessities to customer doorsteps.
Kroger said the project, which is expected to create 410 jobs, is subject to securing state and local incentives. The facility is scheduled to open by 2021, a Kroger spokeswoman said.
Amazon was the top online grocery seller before its $13.7 billion purchase of Whole Foods Market (NASDAQ:WFM) last summer that spurred rival grocery sellers to invest in cost-saving automation.
Kroger, Walmart and Ahold Delhaize each have partnered with technology companies that build automated order fulfillment warehouses.