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Kroger Makes Further Foray Into Ghost Kitchens

Kroger Co. has partnered with ClusterTruck to expand pilot ghost kitchens that the grocery giant set up last year in metro Indianapolis and Columbus, Ohio. The original pilot locations were 1K SF in Kroger grocery stores dedicated to the preparation of cooked meals for in-store pickup or delivery.

Pickup at a ClusterTruck ghost kitchen.

"The new on-premise kitchen ... is an innovation that streamlines ordering, preparation and delivery, supporting Kroger as we meet the sustained customer demand for quick, fresh, restaurant-quality meals," Kroger Group Vice President of Fresh Merchandising Dan De La Rosa said in a statement.

Indianapolis-based ClusterTruck got into the ghost kitchen space fairly early, creating its own software system to facilitate kitchen and delivery operations. The company says its approach to meal delivery allows ClusterTruck to deliver to customers with seven minutes of preparation, or on average less than 30 minutes after ordering. 

Ghost kitchens, which prepare food off-site for food service businesses, aren't new but are more associated with restaurants than grocery stores. Investors are interested: Earlier this year, even before the worst of the coronavirus pandemic hit, Dubai-based ghost kitchen operator Kitopi raised $60M in new funding to add 150 locations by the end of 2020. 

Former Uber CEO Travis Kalanick has taken a keen interest in ghost kitchens, buying properties in a number of countries to develop delivery-focused facilities. Also, Wendy's and Chick-fil-A have begun testing ghost kitchens. 

In its most recent conference call, Kroger executives didn't specifically mention the expansion of ghost kitchens or any similar concept, but they did stress that more people eating at home would offer more opportunities to sell them food.

"Customer adoption of pickup and delivery has grown significantly during the pandemic," Kroger CEO Rodney McMullen said during the call, which was in mid-September

"Kroger's digital ecosystem continues to expand and customers are increasingly engaging with us. For example, Home Chef is growing incredibly fast, no doubt accelerated by the food-at-home trend that we believe is a structural change," McMullen said.

"We also announced that Kroger Ship will expand to offer an extended ship-to-home assortment through a marketplace offering of third-party sellers. We will continue to expand our ecosystem over time," McMullen said.

During Q2 2020, Kroger reported it enjoyed 127% growth in its digital sales, along with an expansion of business at its conventional grocery stores. The grocery sector has had a good run thus far in 2020, with sales at stores up 9% in August compared with a year ago, according to the Census Bureau.