Kroger Confirms Plans to Build Northeast Ohio Grocery-Delivery Hub

Michelle Jarboe, Crain's

The Kroger Co. is forging ahead on plans for a robot-powered grocery-delivery center in Northeast Ohio, after winning state tax credits for the deal.

The Ohio Tax Credit Authority voted Wednesday, March 2, to approve an eight-year, 1.551% job-creation tax credit for the $100 million project. That credit is worth an estimated $1.962 million, based on anticipated annual payroll of $18 million, according to the Ohio Department of Development.

Crain's reported in early November that Kroger was eying a site in Oakwood, near the southeastern edge of Cuyahoga County, for a high-tech fulfillment hub. The Cincinnati-based grocer wouldn't comment at the time.

On Wednesday, though, the company confirmed that it is planning a 270,000-square-foot project that will support up to 400 jobs. The facility will serve Northeast Ohio and Pennsylvania, marking Kroger's return to this region after a 36-year absence.

"The Cleveland region facility is an accelerant to our strategy to achieve the doubling of our digital sales and profitability rate by the end of 2023," said Gabriel Arreaga, Kroger's senior vice president and chief supply chain officer, in a written statement.

The grocer's first such facility opened in early 2021 in Monroe, north of Cincinnati. The Oakwood operation will rise along Interstate 271, on property currently owned by Premier Development Partners. The development site, at Alexander and Macedonia roads, is former residential land.

The fulfillment center will open 24 months after construction starts, Kroger said.

The publicly traded company is rolling out a network of high-tech grocery-delivery hubs through a partnership with Ocado Group, a British technology company. That model lets Kroger cater to customers in places like Florida and Northeast Ohio, where the grocer does not have traditional brick-and-mortar stores.

Inside the buildings, more than 1,000 robots traverse three-dimensional grids to gather up fresh and frozen foods and private-label products. Employees pack up orders and load them into refrigerated vans, which travel up to 90 miles away to make deliveries.

In addition to using the latest robotics and logistics technology, the Oakwood hub will help improve access to fresh food in communities without grocery stores, said J.P. Nauseef, president and CEO of JobsOhio, in a written statement. The state's private nonprofit economic development corporation and its regional affiliate, Team NEO, worked with Kroger on the deal.

Kroger's decision to build a facility in Northeast Ohio "demonstrates that the region has favorable logistics and talent to connect technology with retail," said Bill Koehler, Team NEO's CEO, in a written statement.

Since launching its partnership with Ocado in 2018, Kroger has opened three fulfillment centers — the Cincinnati-area project and buildings in Georgia and Florida. A Dallas facility is set to open in the spring, and additional locations are on the drawing board in Arizona, California, Maryland, Michigan and Wisconsin.

Kroger closed its last Northeast Ohio stores in 1985. The company's reentry into the market comes amid fierce competition between traditional grocers and e-commerce providers.

A proposed development agreement between Kroger and Oakwood shows that the grocer plans to buy 28.3 acres of Premier's 32-acre site. The village is offering 15 years of property-tax breaks for the project, equal to 75% of the value of the new structure.

The development agreement, set for discussion at a public meeting Thursday, March 3, states that Oakwood also plans to provide tax-increment financing. That arrangement will reallocate a portion of the new property-tax revenues from the project to paying for development costs, such as infrastructure investments.

The state incentive agreement requires Kroger to maintain operations in Oakwood for at least 11 years. Ohio was vying against Pennsylvania for the project, according to a deal summary provided by the development department.