Dive Brief:
- Hy-Vee is working with Takeoff Technologies to develop micro-fulfillment centers in certain areas where the Midwestern supermarket chain operates, the companies announced Thursday.
- Takeoff expects to supply “upwards of 20” automated online grocery order-assembly facilities to Hy-Vee through the multi-year partnership, Takeoff President Mitchell “Mitch” Freeman said in an interview. The first sites are scheduled to begin operations next year.
- Hy-Vee has elected to invest in micro-fulfillment technology at a time when shopper demand for grocery e-commerce services has been softening.
Dive Insight:
Hy-Vee plans to use the MFCs it is building to help workers prepare orders that come in through the company’s Aisles Online ordering platform more efficiently, according to the announcement.
A Hy-Vee spokesperson said in an email that the grocer intends to deploy the facilities “in limited locations that continue to see a significant increase in online ordering," but declined to provide further details about the arrangement.
Freeman said Takeoff began talks with Hy-Vee about potentially building MFCs for the supermarket chain about a year and a half ago, adding that the terms of the partnership have evolved since the companies began their conversations. Takeoff expects “several” of the facilities will be ready to go live during the second half of 2024, Freeman added.
“Hy-Vee obviously is a leading retailer and to be able to win the opportunity to do MFCs at scale with them is meaningful for us and for MFCs writ large,” Freeman told Grocery Dive.
Freeman said the initial MFCs Takeoff is developing for Hy-Vee will be separate from the company’s supermarkets, with some of the later facilities possibly being co-located with a store. Takeoff’s current technology can process ambient-temperature and refrigerated goods, with workers helping to handle frozen items, Freeman noted. He added that the company is working on automation technology that would be able to manage frozen products.
In addition to its newly announced deal with Hy-Vee, Takeoff also has partnerships with other grocers, including Wakefern Food and Albertsons. Freeman said those arrangements could expand in the future, adding that Takeoff expects to debut one or two more MFCs for Albertsons “in the next year or so.”
According to Freeman, Takeoff believes interest in MFCs among grocers remains solid even as customer demand for online grocery services has come off COVID-19 pandemic-fueled highs.
E-commerce is “working through a penetration curve right now. And so at times, people have focused on different investments versus on micro-fulfillment. We’re still very, very strong believers that this is going to be a very important part of a grocer’s portfolio in the medium term and long term,” said Freeman.
