In 2018, Kroger founded its Zero Hunger | Zero Waste Foundation and initiative to “create communities free from hunger and waste by 2025.” Once the grocer created the foundation, Kroger also updated and changed many of its policies around food waste, product reclamation, and donations.
These changes affected the Kroger food and nonfood reclamation policy. If you are interested in becoming a Kroger supplier, it’s a good idea to get familiar with its reclamation policies first.
This article reviews the details of Kroger’s food and nonfood reclamation policies, how it calculates reimbursements, and how it affects the cost and burden on Kroger suppliers.
It is important to note with both food and nonfood reclamation, Kroger will default to a billable reclaim agreement if the vendor has not established swell allowances or reclaim policies.
Since its national Zero Hunger Zero Waste initiative, Kroger no longer destroys unsaleable products except in what they deem “extraordinary circumstances.” Even in those extraordinary circumstances, Kroger Company must give prior approval before product destruction. The supermarket giant’s goal is to reduce waste and landfill use.
Kroger also claims it will work together with the vendor to mitigate costs of product destruction. It encourages its vendors to participate in reducing waste, which applies to both the Kroger food and nonfood reclamation policy.
In the case of unsaleable or damaged food products, the following guidelines apply.
When Kroger deems a product as damaged or unsaleable, it will calculate the total cost of reimbursement based on the item’s financial cost billing (FCB) costs plus the total cost incurred by Kroger in moving the product through the supply chain of distribution.
Kroger puts the additional costs incurred through the supply chain into three separate categories:
Pre-Damage Direct Product Costs (DPC): DPC refers to any costs incurred during the distribution process before Kroger identifies the damage and moves the product out. DPC could include warehouse expenses, transport to the retail site, and costs at the grocery or retail store itself. DPC is always 6% of the product’s total cost.
Post-Damage Handling Costs (PDC): PDC refers to any costs incurred once Kroger identifies the damage but before the item arrives at the reclamation center. These costs include supermarket or grocer expenses, storage, and transport costs.
Reclamation Center Costs (RCC): RCC costs are any costs that occur at the reclamation center. In most cases, the supplier can choose how to handle or dispose of the product to control some of those costs.
The supplier can choose specific processing methods and logistics. Each processing chute will incur different fees.
Kroger provides a table of costs from 2019 comparing various processing chutes:
|Processing Chute||DPC||PDC||RCC||Total Cost|
|Scan & Center||$0.060||$0.128||$0.120||$0.328|
|Scan & Donate||$0.060||$0.128||$0.180||$0.388|
|Scan & Hold for Review||$0.060||$0.128||$0.250||$0.458|
Kroger’s Table of Costs by Processing Chute
Kroger vendors will also be responsible for freight charges if they choose “Scan & Hold for Review.”
Kroger’s policy includes an addendum for any hazardous materials and hazardous waste. The state and federal governments define hazardous waste, and suppliers and retailers must handle this type of waste according to governmental regulations.
Handling and disposing of hazardous materials incur a high extra cost, including compliance with government regulations, additional equipment like hazmat suits, and sometimes specialty disposal or storage.
When suppliers need to dispose of damaged, returned, or unsaleable products, Kroger will charge up to $3.00 more per item for hazardous materials. According to the addendum, Kroger will invoice the vendor for these fees monthly, outlining the total number of items processed for disposal, as well as any additional costs incurred.
As part of its Zero Hunger Zero Waste initiative, Kroger has a partnership with Feeding America. Feeding America is a nonprofit organization working to end hunger through a network of food banks across the United States. The organization partners with Kroger to donate reclaimed food and distribute it to communities in need.
Kroger encourages their vendors to consider a similar donation plan as well.
What about general merchandise or any nonfood products?
If one of Kroger’s vendors doesn’t have its own standard reclamation policy, Kroger will apply its national nonfood reclamation policy as a default. Any prior agreements about the disposal of unsaleable or damaged products are subject to this policy.
Reimbursement for nonfood items is very straightforward and applies to damaged, returned, or unsaleable products. Kroger calculates reimbursements based on the unit’s total cost plus any fees or costs incurred in the unit’s movement through the supply chain.
Additional handling or storage at a Reclamation Center will also incur fees for the vendor. The total reimbursement depends on the agreement each vendor has set up. Let’s look at the various options.
To give suppliers more flexibility, Kroger traditionally provided four different options:
Automatic Disposition: Kroger scans the product and bills the vendor for the full price plus a 9% handling fee. Kroger will then dispose of the product or determine the reclamation process.
Off-Invoice Disposition: This applies to any unsaleable product that goes beyond the agreed-upon amount in the off-invoice percentage. Kroger will scan and bill the vendor for the full cost of these units plus a 10% handling fee. Kroger will then dispose of the product or determine the reclamation process.
Hold for Automatic Return to Vendor: Kroger scans the product and bills the vendor for the full price plus a 10% handling fee. After invoicing the process, Kroger holds the product for an automatic return to the vendor. The vendor must pay any freight charges.
Hold for Return to Vendor – Return Authorization from Vendor Required: Kroger scans the product and bills the vendor for the full price plus a 12% handling fee. Kroger holds the product until the vendor sends a return authorization and then returns the product to the vendor. Kroger sends the authorization within 21 days. The vendor must pay any freight charges.
As of 2018, Kroger has suspended the first two options to protect its Zero Hunger Zero Waste commitments. If a manufacturer wants Kroger to destroy the product, it must choose one of the two “Hold” options and have the item returned to its site for disposal.
If there is a product recall or withdrawal from the market, Kroger requires that the vendor receive the products back.
Kroger will send an invoice, and then the vendor should send a return authorization within 21 days. If the vendor doesn’t meet this 21-day deadline, Kroger will automatically deduct the cost and determine the next steps. Kroger adds deductions to an automatic handling fee of 12% for any returned products.
Any products that are leaking or broken may pose a threat to environmental or transport safety regulations. Kroger’s policy is to manage this waste at the retail store and not transport them. All other fees incurred by a product recall or withdrawal are the responsibility of the vendor.
If you’re a new Kroger vendor or hoping to become a supplier, understanding the Kroger food and nonfood reclamation policy is critical to a long partnership.
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