Notice of 2021 Annual Meeting of Shareholders
2021 Proxy Statement
2020 Annual Report on Form 10-K
Bring it all home.
When the pandemic hit last year, our world changed dramatically. What remained constant was people's need for food, and Kroger was there to meet that need. Through new channels and formats, we uplifted our customers, communities, and each other, with a relentless focus on quality, value, and convenience.
We not only met our customers' immediate needs, but we also used this unique period to accelerate our own transformation. Thanks to our team's response, and by leading with our purpose and our values, we converted the crisis into a catalyst for sustainable growth.
We are committed to delivering consistent and attractive Total Shareholder Return (TSR) of 8 - 11%.
We will deliver this growth by Leading with Fresh and Accelerating with Digital.
Food is a necessity − and a comfort − and we are positioned to win share of wallet by leading with fresh food.
We also have a tremendous sales and profit growth opportunity in digital.
And, as we look at a post-COVID world, we are confident that our strategic moats of Fresh, Seamless, Our Brands, and Personalization will position us to compete and win.
It's true that the shift to spending more time at home and eating less at restaurants was a tailwind for our industry, and we believe that retailers who can convert this short-term boost into long-term competitive advantages will emerge as winners. That is what we are doing - and we have the benefit of our transformation efforts at our backs.
Restock Kroger Transformed Us
Our primary business − food − never goes out of fashion, but in 2017 we were facing continuing challenges from low margins, new competition, and changes in buying and consuming habits, especially the increasing demand for a seamless customer experience that we forecasted. We knew we had to build the war chest to remake ourselves and turn those headwinds into tailwinds.
Through Restock Kroger, we removed more than $3 billion in costs out of the business, freeing up resources to invest in associates, technology, and pricing. We strengthened our competitive moats. We established a flywheel to monetize the traffic and data generated by our core business and identify growth opportunities. We improved talent development at all levels of the business, placing the right people in the right roles. And, we made a series of bold commitments to advance our Zero Hunger | Zero Waste vision at the center of our Environmental, Social, and Governance portfolio.
And while not everything went according to plan, we learned and adjusted throughout, transforming our business model, and making changes that allowed us to continue to be there for our customers, associates, and communities when COVID-19 began in February 2020.
COVID-19 Changed Us
When the pandemic arrived, we acted quickly to protect our associates and customers and deploy our expertise to make sure individuals' need for food − and need to obtain it in evolving ways − were met reliably, safely, and cost- effectively. Indeed, we recognized that in the depths of the crisis, food had become not just a necessity, but a core comfort. A reminder that life would go on and get better, so we built upon that powerful sentiment to deepen our connection with customers.
The pandemic nearly doubled the number of customers using our seamless shopping experience, achieved through a focused effort to create the ability for more customers to use our online shopping services - whether by waiving the pickup fee for all orders for an extended period and accepting SNAP EBT for pickup orders or improving the user experience on Kroger.com and our mobile app. We now have almost 50,000 associates dedicated to our e-commerce services. Because of our previous investments and innovations that were part of the Restock Kroger commitment, we were able to support the increased demand for Pickup, Delivery, and Ship.
COVID-19 served as an accelerant to our e-commerce business, helping us achieve triple-digit digital sales growth last year. As we entered the pandemic and dynamics shifted rapidly, the investments we had already made in building a seamless ecosystem enabled us to respond quickly, reinforcing our competitive advantages.
Knowing that an ounce of prevention is worth a pound of cure, we took immediate steps to safeguard our associates and make sure our customers could continue to rely on us for fresh food and essentials despite rapidly
changing buying patterns. Since the start of the pandemic, we've invested more than $2.5 billion to implement dozens of safety measures nationwide, reward and uplift our associates, and better secure pensions. Our investments in these areas continue to make a difference today for our associates and our customers.
COVID-19 and its impact also shined a light on the intersection of food security, health and nutrition, and racial equity. Given the increased need in 2020, we nearly doubled our charitable giving to the Feeding America network of food banks and supported key partners like No Kid Hungry to direct meals where they were needed most. Additionally, our associates continued to rescue surplus food throughout the year despite heavy stocking-up periods early in the year.
As we look ahead to tomorrow, Kroger Health continues to play a leading role in helping America recover and heal. Our mission at Kroger Health is to help people live healthier lives. Throughout the pandemic, we've been working to do just that through testing, vaccine administration, and supportive care services. Our health experts, pharmacists, and clinicians have worked tirelessly to turn the tide of the pandemic and offer hope, administering 3.5 million doses of the COVID-19 vaccine as of early May, including more than 175,000 to associates. To encourage our associates to better protect themselves - and their families and communities - we're providing a one-time payment of $100 to every associate once they have been fully vaccinated.
Throughout the pandemic, our team has never lost sight of our goals and remained focused on serving our customers when they needed us most. More than ever, our performance over this past year is owed to them.
Our Associates Guide Us
I've been in this business more than 40 years and our nearly half a million associates continue to amaze me. During the past year, we've seen associates rise to meet extraordinary challenges and keep Americans nourished during a global health crisis.
We often provide people with their first job, with many choosing to stay with the Kroger Family of Companies and make it their career. To support this choice, we are building a more connected culture of opportunity that embraces speed, agility, collaboration, and career advancement in part realized by ongoing training and education support through our tuition reimbursement program that covers everything from a GED to PhD. Since inception, this program has benefitted 6,000 associates, with hourly associates making up 87% of those who have taken advantage of the offering so far.
In addition to our $800 million incremental investment in associate wages and training over the last three years through Restock Kroger - which raised our average national wage to more than $15.50 per hour - in 2021, we plan to invest an additional $350 million more that we expect will increase our average associate wage to $16 per hour by year end.
Alongside our continuing investment in wages and benefits, we are also using technology to provide a more personalized associate experience. We want to meet our associates where they are and provide them with tools and pathways to grow as individuals and with our company because the jobs of the future will grow and evolve just like our business. Today's growth-minded associates will deliver tomorrow's solutions for our customers.
Leading with Fresh and Accelerating with Digital
Kroger is in a position of strength today because of our talent and transformation. We've deepened our connection with customers and associates. We accelerated digital sales and profitability by several years and identified new customer-centric innovations for tomorrow. As a result of the strong foundation we built, we've invested in our associates and communities, gained share, and delivered record-breaking sales, which enabled us to deliver above our Total Shareholder Return model commitments in 2020. We are committed to delivering consistent and attractive TSR of 8 - 11%, underpinned by a financial model that now includes a higher operating profit base, a clear path to delivering earnings growth of 3-5%, and strong and growing free cash flow to invest in our growth initiatives.
Last year, we more than doubled digital sales to reach and exceed the $10 billion mark and more than doubled the number of customers using at least one of our e-commerce services and that includes delivery - which experienced a 150% increase over the last year. This change in customer behavior accelerated by COVID-19 was, of course, a major factor in our results last year, but we expect that by the end of 2023, we will double the size of our digital business using 2020 as a baseline. Concurrently, we will continue to increase the profitability of our digital business and plan to double our pass-through profitability rate by the end of 2023.
Digital and Fresh matter to our customers, and we have continued to invest in and grow our capabilities in both areas, leading to significant share of wallet gains in both digital and total food at home. The evolution of the Kroger
Delivery network and expansion of our partnership with Ocado is an important part of accelerating our cost- effective seamless ecosystem underpinned by an industry-leading supply chain and our ability to consistently deliver the freshest food. We are opening two Customer Fulfillment Centers (CFC) this year in Monroe, OH and Groveland, FL and each will employ more than 400 associates. We have also announced plans to open CFCs in Dallas, TX; Forest Park, GA (Atlanta); Frederick, MD; Phoenix, AZ; Pleasant Prairie, WI; Romulus, MI (Detroit); and Pacific Northwest and West regions. As the network expands, we will announce additional locations.
Kroger's seamless ecosystem is helping us provide what customers need and want in a way that fits the context of their day - whether it's coming to our stores, picking it up, delivering to a convenient location, or directly shipping to their homes. We are providing the right product assortment through these options and the modalities that fit our customers' lives. We are also leveraging our mature personalization platform to meet customer needs. In 2020, we presented nearly 11 billion personalized recommendations every week, or more than half a trillion offered for the year.
The comprehensive and connected nature of the Kroger experience is a key differentiator. Our seamless customers
which we define as customers who are engaging with us across more than one modality - shop with us more frequently, spend more than twice as much, and are more loyal. In fact, retention rates for our seamless customers has reached 98%.
Food Innovation and Our Brands Growth
A big part of our fresh approach is helping answer the daily customer dilemma of ''What's for Dinner?'' with simple, convenient, and delicious meal solutions. As customers look for food inspiration, we continue to develop new products to meet their needs, including ready-to-heat and ready-to eat food. For example, our Home Chef meal kit subscription platform - which experienced accelerated growth in 2020 and continues to show great momentum going into 2021 - is on track to become our next billion-dollar brand.
Our Brands achieved its best year ever in 2020, exceeding $26.2 billion in sales. Our Simple Truth brand also achieved a major milestone, exceeding $3 billion in annual sales for the first time. Truth be told, Our Brands is consumer packaged goods (CPG) tucked inside our business. But, it's anything but small - it's a business that's eight times larger than the sales of the largest CPG company selling products in our stores.
This year, we will launch more than 660 exciting, new Our Brands items. Nearly 60% of these will be under the Simple Truth or Private Selection brands. At Kroger, innovation is not limited to Our Brands; innovation is critical to our national brand partnerships as well. We will continue working with national brands to bring innovative, first-to- market items to our shelves that grow our collective businesses.
Live Our Purpose Every Day
This past year, every action we've taken has been anchored in Our Purpose, to Feed the Human Spirit. From providing hundreds of thousands of unemployed workers with a new bridge job when the pandemic first hit and feeding our neighbors most in need, to speaking out against racism and discrimination, to uplifting our associates and communities after unimaginable natural disasters and tragedies - we strive to live Our Purpose, every day.
Earlier this year, we lost three associates from our distribution center in Oconomowoc, Wisconsin to senseless violence. And then our world was again turned upside down by another horrific act of violence in our King Soopers store in Boulder, Colorado. This tragedy resulted in the deaths of ten people, including three of our associates, six of our customers and a police officer.
Despite the darkness and uncertainty of the past year, we know there is light and hope. I'm incredibly proud of our associates who have shown strength and resilience beyond measure. They are the heart and soul of our organization, and we will always be here to provide support and a helping hand.
Helping people and the planet is at the core of who we are as a company − and this focus has never been more relevant. Kroger is acutely focused on advancing Diversity, Equity, and Inclusion within our workplace and neighborhoods and creating communities free of hunger and waste through Zero Hunger | Zero Waste, Kroger's bold social and environmental impact plan.
Diversity and inclusion are among our longstanding core values. Last October, we introduced a 10-point Framework for Action plan to accelerate Diversity, Equity, and Inclusion and promote greater change in the workplace and in our communities. As part of this Framework, we created an internal Advisory Council - comprised of diverse leaders and associates across the company - to help set priorities and drive meaningful change. The Kroger Co. Foundation also established a $5 million Racial Equity Fund to align philanthropy to our expanded
The Kroger Company published this content on 04 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 June 2021 12:28:04 UTC.