The Kroger Co Annual Report 2020

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FY2020 Annual Report · The Kroger Co

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Notice of 2021 Annual Meeting of Shareholders

2021 Proxy Statement

and

2020 Annual Report on Form 10-K

FAMILY
OF
COMPANIES

Supermarkets

Price-Impact Stores

Multi-Department Stores

Bring it all home.

Jewelry Stores

Specialty Retailers

Services

Fellow Shareholders:

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

iii

commitment. To date, the Foundation has directed $3 million in grants to several organizations with innovative
approaches to building stronger, more equitable communities. It’s also important for me to share that our nominees
for your board of directors is now 40% women and 30% people of color.

The economic impact of COVID-19 has highlighted not only racial disparities but food inequities as well. We remain
dedicated to building a more resilient and equitable food system and global supply chain, using our scale,
resources, and platform. Last year, we continued to deliver on the principles of our Zero Hunger | Zero Waste
commitment, focusing on ways to support food-insecure households and reduce waste across our organization. We
have made considerable progress. In 2020 alone, we directed a record one-year total of 640 million meals to fight
increased food insecurity in the U.S. At the same time, we achieved our highest year ever for waste diversion from
landfills company-wide − a record 81%, up 1% from the prior year.

We are grateful for the effort of every Zero Hero and our entire community for lifting up Zero Hunger | Zero Waste,
which is driving meaningful outcomes in our communities. There are still too many people experiencing hunger in
our country. We remain committed to doing our part to create a future with zero hunger and zero waste.

As We Look Ahead

***

It’s been said that hindsight is always 20/20. But for us it is our 138 years of insight that keeps us focused on our
customers, associates, and communities. During a year like no other, our team kept its eyes on the future –
working, planning, and innovating to be there for our associates, communities, and customers with anything,
anytime, anywhere.

With the power of our talent and transformation, Kroger is well-positioned to compete – and win – in a post-COVID
world. We are stronger today than yesterday. But not as strong as we will be tomorrow. Stay tuned.

Thank you for your partnership,Rodney McMullen
Chairman and CEO, The Kroger Co.

Safe Harbor Statement

This letter contains ‘‘forward-looking statements’’ within the meaning of the safe harbor provisions of the United
States Private Securities Litigation Reform Act of 1995 about future performance of Kroger, including with respect
to Kroger’s ability to achieve sustainable net earnings growth, strategic capital deployment, strong and attractive
total shareholder return, strong free cash flow and ability to increase the dividend, ability to achieve certain
operational goals, among other statements. These statements are based on management’s assumptions and
beliefs in light of the information currently available to it. These statements are indicated by words such as ‘‘will,’’
‘‘aim,’’ ‘‘aspiration,’’ ‘‘transformation,’’ ‘‘model,’’ ‘‘driving,’’ ‘‘advancing,’’ ‘‘plan,’’ ‘‘continue,’’ ‘‘remain,’’ ‘‘dedicated,’’
‘‘committed,’’ and ‘‘confidence,’’ as well as similar words or phrases. These statements are subject to known and
unknown risks, uncertainties and other important factors that could cause actual results and outcomes to differ
materially from those contained in the forward-looking statements, including the specific risk factors identified in
‘‘Risk Factors’’ in Kroger’s most recent Annual Report on Form 10-K and any subsequent filings with the Securities
and Exchange Commission. Kroger assumes no obligation to update the information contained herein, unless
required to do so by applicable law.

FOOD DONATION HEROES: These are the leading teams across the country that have implemented Kroger’s
Zero Hunger | Zero Waste Food Rescue program exceptionally well and redirected thousands of pounds of surplus
food to their communities.

Store 224
Alaska

Store 755
California

Store 970
Indiana

Store 392
Kentucky

Store 492
Mississippi

Store 671
South Carolina

Store 594
Texas

Mid-South D.C.
Supply Chain

Store 673
Arizona

Store 059
Colorado

Store 537
Illinois

Store 407
Kentucky

Store 341
Nevada

Store 686
Tennessee

Store 501
Virginia

Winchester Dairy
Manufacturing

Store 359
California

Store 263
Indiana

Store 015
Kansas

Store 737
Michigan

Store 891
Ohio

Store 014
Texas

Store 857
Washington

ASSOCIATE FUNDRAISING HEROES: These are the cashiers across the Kroger Family of Companies’ retail
footprint who led the way in activating donations by asking customers to help end hunger by rounding up their order
at checkout to benefit The Kroger Co. Zero Hunger | Zero Waste Foundation.

Jen Tudor
Cincinnati-Dayton Division

Beth Tipton
Columbus Division

Julie Wolff
Dallas Division

Anatoli Bondarchuk
Fred Meyer Division

Kelly Standley
Fred Meyer Division

Patty Kuzma
Fred Meyer Division

Judith Lesliepatton
Fred Meyer Division

Dee Dee Hamby
Mid-Atlantic Division

Colleen Burrows
Columbus Division

Candice Peterson
Dallas Division

Rockie Ubleman
Dallas Division

Sonja Smith
Fred Meyer Division

Michelle Rankin
Fred Meyer Division

Anton Nordberg
Fred Meyer Division

Robin Morris
Fred Meyer Division

Kathy Lange
QFC Division

Nick Damico
Columbus Division

Steve Pounds
Dallas Division

Mahin Boca
Dallas Division

Sandy Carmichael
Fred Meyer Division

Kim Tucker
Fred Meyer Division

Debra Bilyeu
Fred Meyer Division

Debra Van Matre
Houston Division

Kurt Mincin
QFC Division

Fellow Kroger Shareholders:

Notice of 2021 Annual Meeting of Shareholders

We are pleased to invite you to join us for Kroger’s 2021 Annual Meeting of
Shareholders on June 24, 2021 at 11:00 a.m. eastern time. Due to the public health
impact of COVID-19, the 2021 Annual Meeting of Shareholders will be a completely virtual
meeting conducted via webcast. You will be able to participate in the virtual meeting
online, vote your shares electronically, and submit questions during the meeting by
visiting www.virtualshareholdermeeting.com/KR2021.

When:

Where:

Items of Business:

Thursday, June 24, 2021, at 11:00 a.m. eastern time.

Webcast at www.virtualshareholdermeeting.com/KR2021

1. To elect 10 director nominees.
2. To approve our executive compensation, on an advisory basis.
3. To ratify the selection of our independent auditor for fiscal year 2021.
4. To vote on one shareholder proposal, if properly presented at the meeting.
5. To transact other business as may properly come before the meeting.

Who can Vote:

Holders of Kroger common shares at the close of business on the record date
April 26, 2021 are entitled to notice of and to vote at the meeting.

How to Vote:

Your vote is important! Please vote your proxy in one of the following ways:

1. Via the internet, by visiting www.proxyvote.com.
2. By telephone, by calling the number on your proxy card, voting instruction form,

or notice.

3. By mail, by marking, signing, dating, and mailing your proxy card if you requested
printed materials, or your voting instruction form. No postage is required if mailed
in the United States.

4. By mobile device, by scanning the QR code on your proxy card, notice of internet

availability of proxy materials, or voting instruction form.
5. By voting electronically during the virtual Annual Meeting at

www.virtualshareholdermeeting.com/KR2021.

Shareholders holding shares at the close of business on the record date may attend
the virtual meeting. You will be able to attend the Annual Meeting, vote and submit
your questions in advance of and real-time during the meeting via a live audio
webcast by visiting www.virtualshareholdermeeting.com/KR2021. To participate in the
meeting, you must have your sixteen-digit control number that is shown on your
Notice of Internet Availability of Proxy Materials or on your proxy card if you receive
the proxy materials by mail. You will not be able to attend the Annual Meeting in
person.

Attending the Meeting:

We appreciate your continued confidence in Kroger, and we look forward to your participation in our virtual

meeting.

May 13, 2021
Cincinnati, Ohio

By Order of the Board of Directors,
Christine S. Wheatley, Secretary

Proxy Statement

May 13, 2021

We are providing this notice, proxy statement, and annual report to the shareholders of The Kroger Co.
(‘‘Kroger’’, ‘‘we’’, ‘‘us’’, ‘‘our’’) in connection with the solicitation of proxies by the Board of Directors of Kroger
(the ‘‘Board’’) for use at the Annual Meeting of Shareholders to be held on June 24, 2021, at 11:00 a.m. eastern
time, and at any adjournments thereof. The Annual Meeting will be held virtually and can be accessed online at
www.virtualshareholdermeeting.com/KR2021. There is no physical location for the Annual Meeting of Shareholders.

Our principal executive offices are located at 1014 Vine Street, Cincinnati, Ohio 45202-1100. Our telephone

number is 513-762-4000. This notice, proxy statement, and annual report, and the accompanying proxy card were
first furnished to shareholders on May 13, 2021.

Why are you holding a virtual meeting?

In light of the COVID-19 pandemic, for the safety of all of our shareholders, associates, and community, our
2021 Annual Meeting is being held on a virtual-only basis with no physical location. Our goal for the Annual Meeting
is to enable the broadest number of shareholders to participate in the meeting, while providing substantially the
same access and exchange with the Board and Management as an in-person meeting. We believe that we are
observing best practices for virtual shareholder meetings, including by providing a support line for technical
assistance and addressing as many shareholder questions as time allows.

Who can vote?

You can vote if, as of the close of business on April 26, 2021, you were a shareholder of record of Kroger

common shares.

Who is asking for my vote, and who pays for this proxy solicitation?

Your proxy is being solicited by Kroger’s Board of Directors. Kroger is paying the cost of solicitation. We have

hired D.F. King & Co., Inc., a proxy solicitation firm, to assist us in soliciting proxies and we will pay them a fee
estimated not to exceed $17,500, plus reasonable expenses for the solicitation.

We also will reimburse banks, brokers, nominees, and other fiduciaries for postage and reasonable expenses

incurred by them in forwarding the proxy material to beneficial owners of our common shares.

Proxies may be solicited personally, by telephone, electronically via the Internet, or by mail.

Who are the members of the Proxy Committee?

Anne Gates, W. Rodney McMullen, and Ronald L. Sargent, all Kroger Directors, are the members of the Proxy

Committee for our 2021 Annual Meeting.

How do I vote my proxy?

You can vote your proxy in one of the following ways:

1. Via the internet, by visiting www.proxyvote.com.

2. By telephone, by calling the number on your proxy card, voting instruction form, or notice.

3. By mail, by marking, signing, dating, and mailing your proxy card if you requested printed materials, or

your voting instruction form. No postage is required if mailed in the United States.

4. By mobile device, by scanning the QR code on your proxy card, notice of internet availability of proxy

materials, or voting instruction form.

5. By voting electronically during the virtual Annual Meeting at www.virtualshareholdermeeting.com/KR2021.

How can I participate and ask questions at the Annual Meeting?

We are committed to ensuring that our shareholders have substantially the same opportunities to participate in

the virtual Annual Meeting as they would at an in-person meeting. In order to submit a question at the Annual
Meeting, you will need your 16-digit control number that is printed on the Notice or proxy card that you received in
the mail, or via email if you have elected to receive material electronically. You may log in 15 minutes before the
start of the Annual Meeting and submit questions online. You will be able to submit questions during the Annual

Meeting as well. We encourage you to submit any question that is relevant to the business of the meeting.
Questions asked during the Annual Meeting will be read and addressed during the meeting. Shareholders are
encouraged to log into the webcast at least 15 minutes prior to the start of the meeting to test their Internet
connectivity. You may also submit questions in advance of the meeting via the internet at www.proxyvote.com when
you vote your shares.

What documentation must I provide to be admitted to the virtual Annual Meeting and how do I attend?

If your shares are registered in your name, you will need to provide your sixteen-digit control number included

on your Notice or your proxy card (if you receive a printed copy of the proxy materials) in order to be able to
participate in the meeting. If your shares are not registered in your name (if, for instance, your shares are held in
‘‘street name’’ for you by your broker, bank or other institution), you must follow the instructions printed on your
Voting Instruction Form. In order to participate in the Annual Meeting, please log on to
www.virtualshareholdermeeting.com/KR2021 at least 15 minutes prior to the start of the Annual Meeting to provide
time to register and download the required software, if needed. The webcast replay will be available at
www.virtualshareholdermeeting.com/KR2021 until the 2022 Annual Meeting of Shareholders. If you access the
meeting but do not enter your control number, you will be able to listen to the proceedings, but you will not be able
to vote or otherwise participate.

What if I have technical or other ‘‘IT’’ problems logging into or participating in the Annual Meeting
webcast?

We have provided a toll-free technical support ‘‘help line’’ that can be accessed by any shareholder who is

having challenges logging into or participating in the virtual Annual Meeting. If you encounter any difficulties
accessing the virtual meeting during the check-in or meeting time, please call the technical support line number that
will be posted on the virtual Annual Meeting login page.

What documentation must I provide to vote online at the Annual Meeting?

If you are a shareholder of record and provide your sixteen-digit control number when you access the meeting,

you may vote all shares registered in your name during the Annual Meeting webcast. If you are not a shareholder
of record as to any of your shares (i.e., instead of being registered in your name, all or a portion of your shares are
registered in ‘‘street name’’ and held by your broker, bank or other institution for your benefit), you must follow the
instructions printed on your Voting Instruction Form.

How do I submit a question at the Annual Meeting?

If you would like to submit a question during the Annual Meeting, once you have logged into the webcast at

www.virtualshareholdermeeting.com/KR2021, simply type your question in the ‘‘ask a question’’ box and click
‘‘submit’’. You may also submit questions in advance of the meeting via the internet at www.proxyvote.com when
you vote your shares.

When should I submit my question at the Annual Meeting?

Each year at the Annual Meeting, we hold a question-and-answer session following the formal business

portion of the meeting during which shareholders may submit questions to us. We anticipate having such a
question-and-answer session at the 2021 Annual Meeting. You can submit a question up to 15 minutes prior to the
start of the Annual Meeting and up until the time we indicate that the question-and-answer session is concluded.
However, we encourage you to submit your questions before or during the formal business portion of the meeting
and our prepared statements, in advance of the question-and-answer session, in order to ensure that there is
adequate time to address questions in an orderly manner. You may also submit questions in advance of the
meeting via the internet at www.proxyvote.com when you vote your shares.

Can I change or revoke my proxy?

The common shares represented by each proxy will be voted in the manner you specified unless your proxy is

revoked before it is exercised. You may change or revoke your proxy by providing written notice to Kroger’s
Secretary at 1014 Vine Street, Cincinnati, Ohio 45202, by executing and sending us a subsequent proxy, or by
voting your shares while logged in and participating in the 2021 Annual Meeting of Shareholders.

How many shares are outstanding?

As of the close of business on April 26, 2021, the record date, our outstanding voting securities consisted of

757,100,868 common shares.

How many votes per share?

Each common share outstanding on the record date will be entitled to one vote on each of the 10 director
nominees and one vote on each other proposal. Shareholders may not cumulate votes in the election of directors.

What voting instructions can I provide?

You may instruct the proxies to vote ‘‘For’’ or ‘‘Against’’ each proposal, or you may instruct the proxies to

‘‘Abstain’’ from voting.

What happens if proxy cards or voting instruction forms are returned without instructions?

If you are a registered shareholder and you return your proxy card without instructions, the Proxy Committee

will vote in accordance with the recommendations of the Board.

If you hold shares in street name and do not provide your broker with specific voting instructions on

proposals 1, 2, and 4, which are considered non-routine matters, your broker does not have the authority to vote on
those proposals. This is generally referred to as a ‘‘broker non-vote.’’ Proposal 3, ratification of auditors, is
considered a routine matter and, therefore, your broker may vote your shares according to your broker’s discretion.

The vote required, including the effect of broker non-votes and abstentions for each of the matters presented

for shareholder vote, is set forth below.

What are the voting requirements and voting recommendation for each of the proposals?

Proposals

No. 1 Election of Directors

No. 2 Advisory Vote to Approve
Executive Compensation

No. 3 Ratification of

Independent Auditors

No. 4 Shareholder Proposal

Board
Recommendation

Voting Approval
Standard

Effect of
Abstention

Effect of
broker
Non-vote

FOR each
Director Nominee

FOR

AGAINST

More votes ‘‘FOR’’ than
‘‘AGAINST’’ since an
uncontested election

Affirmative vote of the
majority of shares
participating in the voting

No Effect

Not Applicable

No Effect

Important Notice Regarding the Availability of Proxy Materials for the Shareholder
Meeting to be Held on June 24, 2021

The Notice of 2021 Annual Meeting, Proxy Statement and 2020 Annual Report and the means to vote by internet
are available at www.proxyvote.com.

Kroger’s Corporate Governance Practices

Kroger is committed to strong corporate governance. We believe that strong governance builds trust and
promotes the long-term interests of our shareholders. Highlights of our corporate governance practices include the
following:

Board Governance Practices

✓ Strong Board oversight of enterprise risk.

✓ All director nominees are independent, except for the CEO.

✓ All five Board committees are fully independent.

✓ Robust code of ethics.

✓ Annual evaluation of the Chairman and CEO by the independent directors, led by the independent Lead

Director.

✓ Annual Board and committee self-assessments.

✓ Commitment to Board refreshment and diversity, with 4 of 10 director nominees being women, including

the chairs of the Audit, Financial Policy, and Public Responsibilities Committees.

✓ Regular executive sessions of the independent directors, at the Board and committee level.

✓ Strong independent Lead Director with clearly defined role and responsibilities.

✓ High degree of Board interaction with management to ensure successful oversight and succession

planning.

Shareholder Rights

✓ All directors are elected annually with a simple majority standard for all uncontested director elections and

by plurality in contested director elections.

✓ No poison pill (shareholder rights plan).

✓ Shareholders have the right to call a special meeting.

✓ Regular engagement with shareholders to understand their perspectives and concerns on a broad array of

topics, including corporate governance matters.

✓ Responsive to shareholder feedback.

✓ Adopted proxy access for director nominees, enabling a shareholder, or group of up to 20 shareholders,
holding 3% of the Company’s common shares for at least three years to nominate candidates for the
greater of two seats or 20% of board nominees.

Compensation Governance

✓ Pay program tied to performance and business strategy.

✓ Majority of pay is long-term and at-risk with no guaranteed bonuses or salary increases.

✓ Stock ownership guidelines align executive and director interests with those of shareholders.

✓ Prohibition on all hedging, pledging, and short sales of Kroger securities by directors and executive

officers.

✓ No tax gross-up payments to executives.

Proposals to Shareholders

Item No. 1. Election of Directors

You are being asked to elect 10 director nominees for a one-year term. The Board of Directors
recommends that you vote FOR the election of all director nominees.

As of the date of this proxy statement, Kroger’s Board of Directors consists of 11 members. All 10 nominees, if
elected at the 2021 Annual Meeting, will serve until the annual meeting in 2022, or until their successors have been
elected by the shareholders or by the Board pursuant to Kroger’s Regulations, and qualified. The Board has not
nominated Susan Kropf for re-election as she has reached her retirement date under the Company’s Guidelines on
Issues of Corporate Governance (the ‘‘Guidelines’’), which includes a policy that a director’s normal retirement
occurs at the Annual Meeting of Shareholders following the year in which the director reaches the age of 72.

Kroger’s Articles of Incorporation provide that the vote required for election of a director nominee by the
shareholders, except in a contested election or when cumulative voting is in effect, is the affirmative vote of a
majority of the votes cast for or against the election of a nominee.

The experience, qualifications, attributes, and skills that led the Corporate Governance Committee and the
Board to conclude that the following individuals should serve as directors are set forth opposite each individual’s
name. The committee memberships stated below are those in effect as of the date of this proxy statement.

Nominees for Directors for Terms of Office Continuing until 2022

Nora A. Aufreiter

Age 61

Director Since 2014

Committees:
Financial Policy
Public Responsibilities*

Ms. Aufreiter is Director Emeritus of McKinsey & Company, a global management consulting
firm. She retired in June 2014 after more than 27 years with McKinsey, most recently as a
director and senior partner. During that time, she worked extensively in the U.S., Canada,
and internationally with major retailers, financial institutions, and other consumer-facing
companies. Before joining McKinsey, Ms. Aufreiter spent three years in financial services
working in corporate finance and investment banking. She is a member of the Board of
Directors of The Bank of Nova Scotia. She is also on the board of a privately held company,
Cadillac Fairview, a subsidiary of Ontario Teachers Pension Plan, which is one of North
America’s largest owners, operators, and developers of commercial real estate.
Ms. Aufreiter also serves on the boards of St. Michael’s Hospital and the Canadian Opera
Company, and is a member of the Dean’s Advisory Board for the Ivey Business School in
Ontario, Canada.

Ms. Aufreiter has over 30 years of broad business experience in a variety of retail sectors.
Her vast experience in leading McKinsey’s North American Retail Practice, North American
Branding service line and the Consumer Digital and Omnichannel service line is of particular
value to the Board. She also brings to the Board valuable insight on commercial real estate.
Ms. Aufreiter serves as Chair of the Public Responsibilities Committee.

* Denotes Committee Chair

Kevin M. Brown

Age 58

Director Since 2021

Committees:
Audit
Public Responsibilities

Mr. Brown is the Executive Vice President and Chief Supply Chain Officer at Dell
Technologies, a leading global technology company. His previous roles at Dell include
senior leadership roles in procurement, product quality, and manufacturing. Mr. Brown
joined Dell in 1998 and has held roles of increasing responsibility throughout his
career, including Chief Procurement Officer and Vice President, ODM Fulfillment &
Supply Chain Strategy before being named Chief Supply Chain Officer in 2013.
Before Dell, he spent 10 years in the shipbuilding industry, directing U.S. Department
of Defense projects. Mr. Brown currently serves on the National Committee of the
Council on Foreign Relations and on the Boards of the Congressional Black Caucus
Foundation and the Howard University Center for Supply Chain Excellence. He is also
a member of the Executive Leadership Council.

Mr. Brown is a global leader with over twenty years of leadership experience and
supply chain innovation experience. His efforts led Dell to be recognized as having
one of the most efficient, sustainable, and innovative supply chains. He brings to the
Board his vast experience in sustainability and circular economic business practices.
His deep expertise in all matters related to supply chain, supply chain resilience, and
risk and crisis management are of particular value to the Board.

Anne Gates

Age 61

Director Since 2015

Committees:
Audit*
Public Responsibilities

Ms. Gates was President of MGA Entertainment, Inc., a privately-held developer,
manufacturer, and marketer of toy and entertainment products for children, from 2014
until her retirement in 2017. Ms. Gates held roles of increasing responsibility with The
Walt Disney Company from 1992-2012. Her roles included Executive Vice President,
Managing Director, and Chief Financial Officer for Disney Consumer Products, and
Senior Vice President of Operations, Planning and Analysis. Prior to joining Disney,
Ms. Gates worked for PepsiCo and Bear Stearns. She is currently a director of
Tapestry, Inc. and Raymond James Financial, Inc.

Karen M. Hoguet

Age 64

Director since 2019

Committees:
Audit
Financial Policy*

Ms. Gates has over 25 years of experience in the retail and consumer products
industry. She brings to Kroger financial expertise gained while serving as President of
MGA and CFO of a division of The Walt Disney Company. Ms. Gates has a broad
business background in finance, marketing, strategy and business development,
including international business. Her expertise in toy and entertainment products is of
particular value to the Board. Ms. Gates has been designated an Audit Committee
financial expert and serves as Chair of the Audit Committee.

Ms. Hoguet served as the Chief Financial Officer of Macy’s, Inc. from October 1997
until July of 2018 when she became a strategic advisor to the Chief Executive Officer
until her retirement on February 1, 2019. Ms. Hoguet serves on the Board of Directors
of Nielsen Holdings plc. She also serves on the boards of Hebrew Union College and
UCHealth. In the past five years, she also served as a director of The Chubb
Corporation.

Ms. Hoguet has over 30 years of retail and commercial experience. Her long tenure as
a senior executive of a publicly traded company with financial, audit, strategy, and risk
oversight experience is of particular value to the Board as is her public company
experience, both as a long serving executive, and as a board member. Ms. Hoguet
has been designated an Audit Committee financial expert and serves as Chair of the
Financial Policy Committee.

* Denotes Committee Chair

W. Rodney McMullen
Chairman and Chief
Executive Officer

Age 60

Director Since 2003

Clyde R. Moore

Age 67

Director Since 1997

Committees:
Compensation &
Talent Development*
Corporate Governance

Ronald L. Sargent

Lead Director

Age 65

Director Since 2006

Committees:
Audit
Corporate Governance*
Public Responsibilities

Mr. McMullen was elected Chairman of the Board in January 2015 and Chief
Executive Officer of Kroger in January 2014. He served as Kroger’s President and
Chief Operating Officer from August 2009 to December 2013. Prior to that,
Mr. McMullen was elected to various roles at Kroger including Vice Chairman in 2003,
Executive Vice President, Strategy, Planning, and Finance in 1999, Senior Vice
President in 1997, Group Vice President and Chief Financial Officer in June 1995, and
Vice President, Planning and Capital Management in 1989. He is a director of VF
Corporation. In the past five years, he also served as a director of Cincinnati Financial
Corporation.

Mr. McMullen has broad experience in the supermarket business, having spent his
career spanning over 40 years with Kroger. He has a strong background in finance,
operations, and strategic partnerships, having served in a variety of roles with Kroger,
including as our CFO, COO, and Vice Chairman. His service as chair of Cincinnati
Financial Corporation’s compensation committee and on its executive and investment
committees, as well as his service on the audit and governance and corporate
responsibilities committees of VF Corporation, adds depth to his extensive retail
experience.

Mr. Moore was the Chairman of First Service Networks, a national provider of facility
and maintenance repair services, until his retirement in 2015. Prior to his retirement,
he was Chairman and Chief Executive Officer of First Service Networks from 2000 to
2014.

Mr. Moore has over 30 years of general management experience in public and private
companies. He has sound experience as a corporate leader overseeing all aspects of
a facilities management firm and numerous manufacturing companies. Mr. Moore’s
expertise broadens the scope of the Board’s experience to provide oversight to
Kroger’s facilities, digital, and manufacturing businesses. Additionally, his expertise
and leadership as Chair of the Compensation and Talent Development Committee is
of particular value to the Board.

Mr. Sargent was Chairman and Chief Executive Officer of Staples, Inc., a business
products retailer, where he was employed from 1989 until his retirement in 2017. Prior
to joining Staples, Mr. Sargent spent 10 years with Kroger in various positions. He is a
director of Five Below, Inc. and Wells Fargo & Company. In the past five years, he
served as a director of Staples, Inc.

Mr. Sargent has over 35 years of retail experience, first with Kroger and then with
increasing levels of responsibility and leadership at Staples, Inc. His efforts helped
carve out a new market niche for the international retailer. His understanding of retail
operations, consumer insights, and e-commerce are of particular value to the Board.
Mr. Sargent has been designated an Audit Committee financial expert and serves as
Chair of the Corporate Governance Committee and Lead Director of the Board.

* Denotes Committee Chair

J. Amanda Sourry
Knox (Amanda
Sourry)

Age 57

Director Since 2021

Committees:
Compensation & Talent
Development
Financial Policy

Mark S. Sutton

Age 59

Director Since 2017

Committees:
Compensation &
Talent Development
Financial Policy

Ashok Vemuri

Age 53

Director Since 2019

Committees:
Financial Policy
Public Responsibilities

Ms. Sourry was President of North America for Unilever, a personal care, foods,
refreshment, and home care consumer products company, from 2018 until her
retirement in December 2019. She held leadership roles of increasing responsibility
during her more than 30 years at Unilever, both in the U.S. and Europe, including
president of global foods, executive vice president of global hair care, and executive
vice president of the firm’s UK and Ireland business. From 2015 to 2017, she served
as President of their Global Foods Category. Ms. Sourry currently serves on the board
for PVH Corp., where she chairs the Compensation Committee and serves on the
Nominating, Governance & Management Development Committee. Ms. Sourry has
over thirty years of experience in the CPG and retail industry. She brings to the Board
her extensive global marketing and business experience in consumer packaged
goods as well as customer development, including overseeing Unilever’s digital
efforts.

Ms. Sourry was actively involved in Unilever’s global diversity, gender balance, and
sustainable living initiatives which is of particular value to the Board.

Mr. Sutton is Chairman and Chief Executive Officer of International Paper, a leading
global producer of renewable fiber-based packaging, pulp, and paper products. Prior
to becoming CEO in 2014, he served as President and Chief Operating Officer with
responsibility for running the company’s global business. Mr. Sutton joined
International Paper in 1984 as an Electrical Engineer. He held roles of increasing
responsibility throughout his career, including Mill Manager, Vice President of
Corrugated Packaging Operations across Europe, the Middle East and Africa, Vice
President of Corporate Strategic Planning, and Senior Vice President of several
business units, including global supply chain. Mr. Sutton is a member of The Business
Council, serves on the American Forest & Paper Association board of directors, the
Business Roundtable board of directors, and the international advisory board of the
Moscow School of Management – Skolkovo. He was appointed chairman of the U.S.
Russian Business Council. He also serves on the board of directors of Memphis
Tomorrow and the board of governors for New Memphis Institute.

Mr. Sutton has over thirty years of leadership experience with increasing levels of
responsibility and leadership at International Paper. He brings to the Board the critical
thinking that comes with an electrical engineering background as well as his
experience leading a global company. His strong strategic planning background and
manufacturing and supply chain experience are of particular value to the Board.

Mr. Vemuri was Chief Executive Officer and a Director of Conduent Incorporated, a
global digital interactions company, since the company’s inception as a result of the
spin-off from Xerox Corporation in January 2017, until 2019. He previously served as
Chief Executive Officer of Xerox Business Services, LLC and as an Executive Vice
President of Xerox Corporation from July 2017 to December 2017. Prior to that, he
was President, Chief Executive Officer, and a member of the Board of Directors of
IGATE Corporation, a New Jersey-based global technology and services company
now part of Capgemini, from 2013 to 2015. Before joining IGATE, Mr. Vemuri spent
14 years at Infosys Limited, a multinational consulting and technology services
company, in a variety of leadership and business development roles and served on
the board of Infosys from 2011 to 2013. Prior to joining Infosys in 1999, Mr. Vemuri
worked in the investment banking industry at Deutsche Bank and Bank of America. In
the past five years, he served as a director of Conduent Incorporated.

Mr. Vemuri brings to the Board a proven track record of leading technology services
companies through growth and corporate transformations. His experience as CEO of
global technology companies is of particular value to the Board as he brings a unique
operational, financial, and client experience perspective.

The Board of Directors Recommends a Vote For Each Director Nominee.

Board Diversity, Succession Planning, and Refreshment Mechanisms

Our director nominees reflect a wide array of experience, skills, and backgrounds. Each director is individually
qualified to make unique and substantial contributions to Kroger. Collectively, our directors’ diverse viewpoints and
independent-mindedness enhance the quality and effectiveness of Board deliberations and decision making. Our
Board is a dynamic group of new and experienced members, providing an appropriate balance of institutional
knowledge and fresh perspectives about Kroger due to the varied length of tenure on the Board. This blend of
qualifications, attributes, and tenure results in highly effective board leadership.

The Corporate Governance Committee considers racial, ethnic, and gender diversity to be important elements

in promoting full, open, and balanced deliberations of issues presented to the Board. The Corporate Governance
Committee considers director candidates who help the Board reflect the diversity of our shareholders, associates,
customers, and the communities in which we operate. Mr. Brown, Ms. Gates, and Mr. Vemuri self-identify as
racially/ethnically diverse. Some consideration is also given to the geographic location of director candidates in
order to provide a reasonable distribution of members from Kroger’s operating areas.

Board succession planning is an ongoing, year-round process. The Corporate Governance Committee
recognizes the importance of thoughtful Board refreshment and engages in a continuing process of identifying
attributes sought for future Board members. The Corporate Governance Committee takes into account the Board
and committee evaluations regarding the specific qualities, skills, and experiences that would contribute to overall
Board and committee effectiveness, as well as the future needs of the Board and its committees in light of Kroger’s
current and long-term business strategies, and the skills and qualifications of directors who are expected to retire in
the future including as a result of our Board retirement policy, which requires directors to retire at the annual
meeting following their 72nd birthday.

The Corporate Governance Committee believes that it has been successful in its efforts to promote gender

and ethnic diversity on our Board. The Corporate Governance Committee and Board believe that our director
nominees for election at our 2021 Annual Meeting bring to our Board a variety of different experiences, skills, and
qualifications that contribute to a well-functioning diverse Board that effectively oversees the Company’s strategy
and management. The charts below show the diversity of our director nominees and the skills and experience that
we consider important for our directors in light of our current business, strategy, and structure:

Business
Management

Retail

Consumer

Financial
Expertise

Risk
Management

Operations
& Technology

Sustainability

Manufacturing

Nora
Aufreiter

Kevin
Brown

Anne
Gates

Karen
Hoguet

Rodney
McMullen

Clyde
Moore

Ronald
Sargent

Amanda
Sourry

Mark
Sutton

Ashok
Vemuri

Total
(of 10)

●

Gender Diversity

Ethnic Diversity

40%
Women

30% of
Board is
ethnically
diverse

Information Concerning the Board of Directors

Board Leadership Structure and Lead Independent Director

As of the date of this proxy statement, Kroger’s Board is composed of ten independent non-employee directors

and one management director, Mr. McMullen, the Chairman and CEO. In accordance with Kroger’s director
retirement policy, Susan J. Kropf will be retiring from the Board immediately prior to the 2021 Annual Meeting and
has not been nominated for re-election. In connection with Ms. Kropf’s retirement, the Board will reduce its size to
ten directors. All nominees, if elected at the 2021 Annual Meeting, will serve until the annual meeting in 2022, or
until their successors have been elected by the shareholders or by the Board pursuant to Kroger’s Regulations,
and qualified. Kroger has a governance structure in which independent directors exercise meaningful and vigorous
oversight.

As provided in Kroger’s Guidelines, the Board has designated one of the independent directors as Lead

Director. The Lead Director works with the Chairman to share governance responsibilities, facilitate the
development of Kroger’s strategy, and grow shareholder value. The Lead Director serves a variety of roles,
consistent with current best practices, including:

•

reviewing and approving Board meeting agendas, materials, and schedules to confirm that the appropriate
topics are reviewed, with sufficient information provided to directors on each topic and appropriate time is
allocated to each;

serving as the principal liaison between the Chairman, management, and the independent directors;

presiding at the executive sessions of independent directors and at all other meetings of the Board at
which the Chairman is not present;

calling meetings of independent directors at any time; and

serving as the Board’s representative for any consultation and direct communication, following a request,
with major shareholders.

The Lead Director carries out these responsibilities in numerous ways, including:

•

facilitating communication and collegiality among the Board members;

soliciting direct feedback from non-employee directors;

overseeing the succession planning process, including meeting with a wide range of employees including
corporate and division management associates;

• meeting with the CEO frequently to discuss strategy;

•

serving as a sounding board and advisor to the CEO; and

discussing Company matters with other directors between meetings.

Unless otherwise determined by the independent members of the Board, the Chair of the Corporate

Governance Committee is designated as the Lead Director. Ronald L. Sargent, an independent director and the
Chair of the Corporate Governance Committee, was appointed Lead Director in June 2018. Mr. Sargent is an
effective Lead Director for Kroger due to, among other things:

•

his independence;

his deep strategic and operational understanding of Kroger obtained while serving as a Kroger director;

his insight into corporate governance;

his experience as the CEO of an international ecommerce and brick and mortar retailer;

his experience on the boards of other large publicly traded companies; and

his engagement and commitment to carrying out the role and responsibilities of the Lead Director.

With respect to the roles of Chairman and CEO, the Guidelines provide that the Board will determine whether it

is in the best interests of Kroger and its shareholders for the roles to be combined. The Board exercises this
judgment as it deems appropriate in light of prevailing circumstances. The Board believes that this leadership
structure improves the Board’s ability to focus on key policy and operational issues and helps the Company operate
in the long-term interest of shareholders. Additionally, this structure provides an effective balance between strong

Company leadership and appropriate safeguards and oversight by independent directors. Our CEO’s strong
background in finance, operations, and strategic partnerships is particularly important to the Board given Kroger’s
current growth strategy. His consistent leadership, deep industry expertise, and extensive knowledge of the
Company are also especially critical in the midst of the rapidly evolving retail and digital landscape. The Board
believes that the structure of the Chairman and independent Lead Director position should continue to be
considered as part of the succession planning process.

Annual Board Evaluation Process

The Board and each of its committees conduct an annual evaluation to determine whether the Board is
functioning effectively both at the Board and at the committee levels. As part of this annual evaluation, the Board
assesses whether the current leadership structure and function continues to be appropriate for Kroger and its
shareholders. The Guidelines provide the flexibility for the Board to modify our leadership structure in the future as
appropriate. We believe that Kroger, like many U.S. companies, is well-served by this flexible leadership structure.

The Board recognizes that a robust evaluation process is an essential component of strong corporate
governance practices and ensuring Board effectiveness. The Corporate Governance Committee oversees an
annual evaluation process led by the Lead Independent Director.

Each director completes a detailed written annual evaluation of the Board and the committees on which he or

she serves and the Lead Director conducts interviews with each of the directors. These Board evaluations are
designed to assess the skills, qualifications, and experience represented on the Board and its committees, and to
determine whether the Board and its committees are functioning effectively. The process also evaluates the
relationship between management and the Board, including the level of access to management, responsiveness of
management, and the effectiveness of the Board’s evaluation of management performance. The results of this
Board evaluation are discussed by the full Board and each committee, as applicable, and changes to the Board’s
and its committees’ practices are implemented as appropriate.

Committees of the Board of Directors

To assist the Board in undertaking its responsibilities, and to allow deeper engagement in certain areas of

company oversight, the Board has established five standing committees: Audit, Compensation and Talent
Development (‘‘Compensation’’), Corporate Governance, Financial Policy, and Public Responsibilities. All
committees are composed exclusively of independent directors, as determined under the New York Stock
Exchange (‘‘NYSE’’) listing standards. The current charter of each Board committee is available on our website at
ir.kroger.com under Investors – Governance – Guidelines on Issues of Corporate Governance.

Name of Committee, Number of
Meetings, and Current Members

Committee Functions

Audit Committee

Meetings in 2020: 5

Members:

Anne Gates, Chair
Kevin M. Brown
Karen M. Hoguet
Ronald L. Sargent

• Oversees the Company’s financial reporting and accounting matters,
including review of the Company’s financial statements and the audit
thereof, the Company’s financial reporting and accounting process,
and the Company’s systems of internal control over financial reporting

• Selects, evaluates, and oversees the compensation and work of the

independent registered public accounting firm and reviews its
performance, qualifications, and independence

• Oversees and evaluates the Company’s internal audit function,
including review of its audit plan, policies and procedures, and
significant findings

• Oversees risk assessment and risk management, including review of
cybersecurity risks as well as legal or regulatory matters that could
have a significant effect on the Company, including from regular
reports received from management

• Reviews and monitors the Company’s compliance programs, including

the whistleblower program

Name of Committee, Number of
Meetings, and Current Members

Committee Functions

Compensation Committee

• Recommends for approval by the independent directors the

Meetings in 2020: 6

Members:

Clyde R. Moore, Chair
Susan J. Kropf
Amanda Sourry
Mark S. Sutton

compensation of the CEO and approves the compensation of senior
officers

• Administers the Company’s executive compensation policies and

programs, including determining grants of equity awards under the
plans

• Has sole authority to retain and direct the committee’s compensation

consultant

• Assists the full Board with senior management succession planning

Corporate Governance Committee

• Oversees the Company’s corporate governance policies and

Meetings in 2020: 2

Members:

Ronald L. Sargent, Chair
Susan J. Kropf
Clyde R. Moore

procedures

• Develops criteria for selecting and retaining directors, including

identifying and recommending qualified candidates to be director
nominees

• Designates membership and Chairs of Board committees

• Reviews the Board’s performance and director independence

• Establishes and reviews the practices and procedures by which the

Board performs its functions

Financial Policy Committee

• Reviews and recommends financial policies and practices

Meetings in 2020: 4

Members:

Karen M. Hoguet, Chair
Nora A. Aufreiter
Amanda Sourry
Mark S. Sutton
Ashok Vemuri

Public Responsibilities Committee

Meetings in 2020: 2

Members:

Nora A. Aufreiter, Chair
Kevin M. Brown
Anne Gates
Ronald L. Sargent
Ashok Vemuri

Director Nominee Selection Process

• Oversees management of the Company’s financial resources

• Reviews the Company’s annual financial plan, significant capital

investments, plans for major acquisitions or sales, issuance of new
common or preferred stock, dividend policy, creation of additional debt
and other capital structure considerations including additional leverage
or dilution in ownership

• Monitors the investment management of assets held in pension and

profit sharing plans administered by the Company

• Reviews the Company’s policies and practices affecting its social and
public responsibility as a corporate citizen, including: community
relations, charitable giving, supplier diversity, sustainability,
government relations, political action, consumer and media relations,
food and pharmacy safety and the safety of customers and employees

• Reviews and examines the Company’s evaluation of and response to
changing public expectations and public issues affecting the business

The Corporate Governance Committee is responsible for recommending to the Board a slate of nominees for

election at each annual meeting of shareholders. The Corporate Governance Committee recruits candidates for
Board membership through its own efforts and through recommendations from other directors and shareholders. In
addition, the Corporate Governance Committee retains an independent search firm to assist in identifying and
recruiting director candidates who meet the criteria established by the Corporate Governance Committee.

These criteria are:

•

demonstrated ability in fields considered to be of value to the Board in the deliberation and long-term
planning of the Board and Kroger, including business management, public service, education, science,
technology, e-commerce, law, and government;

•

experience in high growth companies and nominees whose business experience can help the Company
innovate and derive new value from existing assets;

highest standards of personal character and conduct;

willingness to fulfil the obligations of directors and to make the contribution of which he or she is capable,
including regular attendance and participation at Board and committee meetings, and preparation for all
meetings, including review of all meeting materials provided in advance of the meeting; and

ability to understand the perspectives of Kroger’s customers, taking into consideration the diversity of our
customers, including regional and geographic differences.

The Corporate Governance Committee also considers the specific experience and abilities of director

candidates in light of our current business, strategy and structure, and the current or expected needs of the Board
in its identification and recruitment of director candidates.

Shareholder Engagement

Maintaining ongoing relationships with our shareholders, and understanding our shareholders’ views, is a

priority for both our Board and management team. We have a longstanding history of engaging with our
shareholders through our investor relations team’s year-round outreach program. At the direction of our Board, we
expanded our shareholder engagement program in 2016 to include outreach to our largest shareholders’
governance teams. In 2020, we requested meetings with shareholders representing 43% of our outstanding shares
during proxy season and off-season engagement and ultimately engaged with shareholders representing 27% of
our outstanding shares.

During these engagements we discussed and solicited feedback on a range of topics, including business

strategy, corporate governance, executive compensation, human capital management, and sustainability. In
addition, we attended virtual industry events to further engage with shareholders and subject matter experts. These
conversations provided valuable insights into our shareholders’ perspectives and their feedback was shared with,
and considered by, our full Board.

Candidates Nominated by Shareholders

The Corporate Governance Committee will consider shareholder recommendations for director nominees for
election to the Board. If shareholders wish to nominate a person or persons for election to the Board at our 2022
annual meeting, written notice must be submitted to Kroger’s Secretary, and received at our executive offices, in
accordance with Kroger’s Regulations, not later than March 29, 2022. Such notice should include the name, age,
business address and residence address of such person, the principal occupation or employment of such person,
the number of Kroger common shares owned of record or beneficially by such person and any other information
relating to the person that would be required to be included in a proxy statement relating to the election of directors.
The Secretary will forward the information to the Corporate Governance Committee for its consideration. The
Corporate Governance Committee will use the same criteria in evaluating candidates submitted by shareholders as
it uses in evaluating candidates identified by the Corporate Governance Committee, as described above. See
‘‘Director Nominee Selection Process.’’

Eligible shareholders have the ability to submit director nominees for inclusion in our proxy statement for the
2022 annual meeting of shareholders. To be eligible, shareholders must have owned at least 3% of our common
shares for at least three years. Up to 20 shareholders are able to aggregate for this purpose. Nominations must be
submitted to our Corporate Secretary at our principal executive offices no earlier than December 14, 2021 and no
later than January 13, 2022.

Corporate Governance Guidelines

The Board has adopted the Guidelines which include copies of the current charters for each of the five
standing committees of the Board. The Guidelines are available on our website at ir.kroger.com under Investors –
Governance – Guidelines on Issues of Corporate Governance. Shareholders may also obtain a copy of the
Guidelines by making a written request to Kroger’s Secretary at our executive offices.

Independence

The Board has determined that all of the non-employee directors have no material relationships with Kroger
and satisfy the criteria for independence set forth in Rule 303A.02 of the NYSE Listed Company Manual. Therefore,
all non-employee directors are independent for purposes of the NYSE listing standards. The Board made its
determination based on information furnished by all members regarding their relationships with Kroger and its
management, and other relevant information. The Board considered, among other things, that

•

the value of any business transactions between Kroger and entities with which the directors are affiliated
falls below the thresholds identified by the NYSE listing standards, and

none had any material relationships with Kroger other than serving on our Board.

Audit Committee Expertise

The Board has determined that Anne Gates, Karen M. Hoguet, and Ronald L. Sargent, independent directors

who are members of the Audit Committee, are ‘‘audit committee financial experts’’ as defined by applicable
Securities and Exchange Commission (‘‘SEC’’) regulations and that all members of the Audit Committee are
‘‘financially literate’’ as that term is used in the NYSE listing standards and are independent in accordance with
Rule 10A-3 of the Securities Exchange Act of 1934.

Code of Ethics

The Board has adopted The Kroger Co. Policy on Business Ethics, applicable to all officers, employees and
directors, including Kroger’s principal executive, financial and accounting officers. The Policy on Business Ethics is
available on our website at ir.kroger.com under Investors – Governance – Policy on Business Ethics. Shareholders
may also obtain a copy of the Policy on Business Ethics by making a written request to Kroger’s Secretary at our
executive offices.

Communications with the Board

The Board has established two separate mechanisms for shareholders and interested parties to communicate

with the Board. Any shareholder or interested party who has concerns regarding accounting, improper use of
Kroger assets, or ethical improprieties may report these concerns via the toll-free hotline (800-689-4609) or website
(ethicspoint.com) established by the Board’s Audit Committee. The concerns are investigated by Kroger’s Vice
President, Chief Ethics and Compliance Officer and the Vice President of Internal Audit and reported to the Audit
Committee as deemed appropriate.

Shareholders or interested parties also may communicate with the Board in writing directed to Kroger’s
Secretary at our executive offices. Communications relating to personnel issues, ordinary business operations, or
companies seeking to do business with us, will be forwarded to the business unit of Kroger that the Secretary
deems appropriate. Other communications will be forwarded to the Chair of the Corporate Governance Committee
for further consideration. The Chair of the Corporate Governance Committee will take such action as he or she
deems appropriate, which may include referral to the full Corporate Governance Committee or the entire Board.

Executive Officer Succession Planning

The Guidelines provide that the Compensation Committee will review Company policies and programs for
talent development and evaluation of executive officers, and will review management succession planning. In
connection with the use of a third-party search firm to identify external candidates for executive officer positions,
including the chief executive officer, the Board and/or the Company, as the case may be, will instruct the third-party
search firm to include in its initial list qualified female and racially/ethnically diverse candidates.

Attendance

The Board held five meetings in fiscal year 2020. During fiscal 2020, all incumbent directors attended at least

75% of the aggregate number of meetings of the Board and committees on which that director served. Members of
the Board are expected to use their best efforts to attend all annual meetings of shareholders. All Board members
attended last year’s virtual annual meeting.

Independent Compensation Consultants

The Compensation Committee directly engages a compensation consultant to advise the Compensation
Committee in the design of Kroger’s executive compensation. The Committee retained Korn Ferry Hay (US) (‘‘Korn
Ferry’’) beginning in December 2017. Retained by and reporting directly to the Compensation Committee, Korn
Ferry provided the Committee with assistance in evaluating Kroger’s executive compensation programs and
policies.

In fiscal 2020, Kroger paid Korn Ferry $479,893 for work performed for the Compensation Committee. Kroger,

on management’s recommendation, retained Korn Ferry to provide other services for Kroger in fiscal 2020 for
which Kroger paid $17,500. These other services primarily related to salary surveys and benchmarking. The
Compensation Committee expressly approved Korn Ferry performing these additional services. After taking into
consideration the NYSE’s independence standards and the SEC rules, the Compensation Committee determined
that Korn Ferry was independent, and their work has not raised any conflict of interest.

The Compensation Committee may engage an additional compensation consultant from time to time as it

deems advisable.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee was an officer or employee of Kroger during fiscal 2020, and no

member of the Compensation Committee is a former officer of Kroger or was a party to any related person
transaction involving Kroger required to be disclosed under Item 404 of Regulation S-K. During fiscal 2020, none of
our executive officers served on the board of directors or on the compensation committee of any other entity that
has or had executive officers serving as a member of Kroger’s Board of Directors or Compensation Committee of
the Board.

Board Oversight of Enterprise Risk

While risk management is primarily the responsibility of Kroger’s management team, the Board is responsible

for strategic planning and overall supervision of our risk management activities. The Board’s oversight of the
material risks faced by Kroger occurs at both the full Board level and at the committee level.

The Board receives presentations throughout the year from various department and business unit leaders that
include discussion of significant risks as necessary, including newly identified and evolving high priority risks, such
as those presented by the COVID-19 pandemic. At each Board meeting, the CEO addresses matters of particular
importance or concern, including any significant areas of risk that require Board attention. Additionally, through
dedicated sessions focusing entirely on corporate strategy, the full Board reviews in detail Kroger’s short- and long-
term strategies, including consideration of significant risks facing Kroger and their potential impact. The
independent directors, in executive sessions led by the Lead Director, address matters of particular concern,
including significant areas of risk, that warrant further discussion or consideration outside the presence of Kroger
employees. At the committee level, reports are given by management subject matter experts to each committee on
risks within the scope of their charters.

The Audit Committee has oversight responsibility not only for financial reporting of Kroger’s major financial

exposures and the steps management has taken to monitor and control those exposures, but also for the
effectiveness of management’s processes that monitor and manage key business risks facing Kroger, as well as
the major areas of risk exposure, and management’s efforts to monitor and control the major areas of risk exposure
including cybersecurity risk. The Audit Committee incorporates its risk oversight function into its regular reports to
the Board and also discusses with management its policies with respect to risk assessment and risk management.

Management provides regular updates throughout the year to the respective Board committees regarding
management of the risks they oversee. For example, our Vice President, Chief Ethics and Compliance Officer
provides regular updates to the Audit Committee on our compliance risks and actions taken to mitigate that risk;
and our Senior Vice President and Chief Information Officer and our Chief Information Security Officer provide
regular updates at least annually and more often as needed on our cybersecurity risks and actions taken to
mitigate that risk to the Audit Committee. The Audit Committee reports on risk to the full Board at each regular
meeting of the Board following an Audit Committee meeting.

Throughout 2020, the Board and its Committees oversaw the specific risks associated with COVID-19. The
COVID-19 pandemic created new risks and brought historically low risks to the forefront. The Company’s business
resilience team began meeting daily in March 2020 to identify new and emerging risks and develop and implement
mitigating action plans. Management conducted, and the Audit Committee reviewed and discussed, a COVID-19

enterprise risk assessment, which included human capital, supply chain, associate and customer health and safety,
legal, regulatory, and other risks. Management and the Board discussed the relative severity of each category of
risk as well as mitigating actions. In addition to discussing at the five regularly scheduled board meetings, the
Board conducted five additional calls specifically to update the Board on Kroger’s response to the pandemic and
the associated business challenges.

We believe that our approach to risk oversight, as described above, optimizes our ability to assess inter-

relationships among the various risks, make informed cost-benefit decisions, and approach emerging risks in a
proactive manner for Kroger. We also believe that our risk structure complements our current Board leadership
structure, as it allows our independent directors, through the five fully independent Board committees, and in
executive sessions of independent directors led by the Lead Director, to exercise effective oversight of the actions
of management, in identifying risks and implementing effective risk management policies and controls.

Environmental, Sustainability, and Governance Oversight

We are aligned with the desire of our customers, associates, and shareholders that we engage in our

communities and reduce our impacts on the environment while continuing to create positive economic value over
the long-term. Given the breadth of topics and their importance to us, most of our Board committees have direct
oversight of environmental, social and governance (‘‘ESG’’) topics. Among the other key responsibilities for each
committee: the Audit Committee oversees risk management and compliance with legal, financial, and regulatory
requirements; the Public Responsibilities Committee oversees our responsibilities as a corporate citizen and efforts
to engage stakeholders and manage issues that affect our business, including sustainability, supplier diversity and
food safety, among other topics; the Corporate Governance Committee oversees our good governance practices;
and the Compensation and Talent Development Committee oversees talent development. We discuss the
responsibilities of each committee further above. Throughout the year, Kroger leaders update the Public
Responsibilities Committee on important ESG topics, which may relate to our sustainability initiatives such as our
Zero Hunger | Zero Waste campaign, our food safety programs, and community and customer engagement. At
each Board meeting, Kroger’s CEO addresses matters of particular importance or concern, including any
significant areas of oversight that require Board attention.

For the past fourteen years, our Company has prepared and produced an annual report describing our
progress and initiatives regarding sustainability and other ESG matters. For the most recent information regarding
our ESG initiatives and related matters, please visit http://sustainability.kroger.com. The information on, or
accessible through, this website is not part of, or incorporated by reference into, this proxy statement.

In addition, our full Board oversees issues related to diversity and inclusion within the Kroger workplace.
Diversity and inclusion have been deeply rooted in Kroger’s values for decades. We are committed to fostering an
environment of inclusion in the workplace, marketplace, and workforce where the diversity of cultures,
backgrounds, experiences, perspectives and ideas are valued and appreciated. Kroger’s corporate team and retail
divisions have strategic partnerships with universities, educational institutions, and community partners to improve
how we attract candidates from all backgrounds and ethnicities for jobs at all levels. Diversity and inclusion will
continue to be a key ingredient in feeding Kroger’s innovation, long-term sustainability, and the human spirit.

The Kroger family of companies provides inclusion training to all management and many hourly associates.
Most work locations (stores, plants, distribution centers, and offices) have an inclusion-focused team, called Our
Promise team. The teams work on projects that reflect Kroger’s values, offer leaders valuable feedback and
suggestions on improving diversity and inclusion, and facilitate communication to champion business priorities.

Director Compensation

2020 Director Compensation

The following table describes the fiscal year 2020 compensation for non-employee directors. Mr. McMullen

does not receive compensation for his Board service.

Name

Nora A. Aufreiter

Kevin M. Brown

Anne Gates

Karen M. Hoguet

Susan J. Kropf
Jorge P. Montoya(4)

Clyde R. Moore
James A. Runde(4)

Ronald L. Sargent
Bobby S. Shackouls(4)

Amanda Sourry

Mark S. Sutton

Ashok Vemuri

Fees
Earned or
Paid in
Cash

$ 98,209

$ 8,064

$124,305

$108,150

$ 89,499

$ 43,448

$109,388

$ 43,448

$151,652

$ 99,444

$ 7,258

$ 93,636

$ 89,499

Change in Pension
Value
And Nonqualified
Deferred Compensation
Earnings(3)

Stock
Awards(1)(2)

$172,598

$ 87,498

$172,598

$ 87,498

$172,598

$11,150

$ 4,424

Total

$270,807

$ 95,562

$296,903

$280,748

$262,097

$ 43,448

$293,136

$ 43,448

$328,674

$272,042

$ 94,756

$266,234

$262,097

(1) Amounts reported in the Stock Awards column represent the aggregate grant date fair value of the annual

incentive share award, computed in accordance with FASB ASC Topic 718. On July 15, 2020, each non-
employee director then serving received 5,111 incentive shares with a grant date fair value of $172,598, except
Mr. Brown and Ms. Sourry, who received 2,258 incentive shares on the day of their election to the Board,
January 27, 2021, with a grant date fair value of $87,498.

(2) Options are no longer granted to non-employee directors. The aggregate number of previously granted stock

options that remained unexercised and outstanding at fiscal year-end was as follows: Mr. Sargent and
Ms. Kropf each held 26,000 options and Mr. Runde held 13,000 options.

(3) The amount reported for Mr. Sargent represent preferential earnings on nonqualified deferred compensation.
For a complete explanation of preferential earnings, please refer to footnote 5 to the Summary Compensation
Table. The amount reported for Mr. Moore represents the change in actuarial present value of his accumulated
benefit under the pension plan for non-employee directors. Pension values may fluctuate significantly from
year to year depending on a number of factors, including age, average annual earnings, and the assumptions
used to determine the present value, such as the discount rate. The increase in the actuarial present value of
his accumulated pension benefit for 2020 is primarily due to the decrease in the discount rate, partially offset
by the change in value of the benefit due to aging and mortality project scale updates.

(4) Mr. Montoya and Mr. Runde retired from the Board on June 25, 2020 and Mr. Shackouls retired from the Board

on January 27, 2021.

Annual Compensation

Each non-employee director receives an annual cash retainer of $90,000. The Lead Director receives an

additional annual retainer of $37,500 per year; the members of the Audit Committee each receive an additional
annual retainer of $10,000; the Chair of the Audit Committee receives an additional annual retainer of $25,000; the
Chair of the Compensation Committee receives an additional annual retainer of $20,000; and the Chair of each of
the other committees receives an additional annual retainer of $15,000. Each non-employee director also receives
an annual grant of incentive shares (Kroger common shares) with a value of approximately $175,000.

The Board has determined that compensation of non-employee directors must be competitive on an ongoing

basis to attract and retain directors who meet the qualifications for service on the Board. Non-employee director
compensation was adjusted in 2018 and will be reviewed from time to time as the Corporate Governance
Committee deems appropriate.

Pension Plan

Non-employee directors first elected prior to July 17, 1997 receive an unfunded retirement benefit equal to the

average cash compensation for the five calendar years preceding retirement. Only Mr. Moore is eligible for this
benefit. Benefits begin at the later of actual retirement or age 65.

Nonqualified Deferred Compensation

We also maintain a deferred compensation plan for non-employee directors. Participants may defer up to
100% of their cash compensation and/or the receipt of all (and not less than all) of the annual award of incentive
shares.

Cash Deferrals

Cash deferrals are credited to a participant’s deferred compensation account. Participants may elect from

either or both of the following two alternative methods of determining benefits:

•

interest accrues until paid out at the rate of interest determined prior to the beginning of the deferral year
to represent Kroger’s cost of ten-year debt; and/or

amounts are credited in ‘‘phantom’’ stock accounts and the amounts in those accounts fluctuate with the
price of Kroger common shares.

In both cases, deferred amounts are paid out only in cash, based on deferral options selected by the

participant at the time the deferral elections are made. Participants can elect to have distributions made in a lump
sum or in quarterly instalments, and may make comparable elections for designated beneficiaries who receive
benefits in the event that deferred compensation is not completely paid out upon the death of the participant.

Incentive Share Deferrals

Participants may also defer the receipt of all (and not less than all) of the annual award of incentive shares.

Distributions will be made by delivery of Kroger common shares within 30 days after the date which is six months
after the participant’s separation of service.

Beneficial Ownership of Common Stock

The following table sets forth the common shares beneficially owned as of April 1, 2021 by Kroger’s directors,

the NEOs, and the directors and executive officers as a group. The percentage of ownership is based on
752,314,530 of Kroger common shares outstanding on April 1, 2021. Shares reported as beneficially owned include
shares held indirectly through Kroger’s defined contribution plans and other shares held indirectly, as well as
shares subject to stock options exercisable on or before May 31, 2021. Except as otherwise noted, each beneficial
owner listed in the table has sole voting and investment power with regard to the common shares beneficially
owned by such owner.

Name

Amount and Nature
of Beneficial
Ownership(1)
(a)

Options Exercisable
on or before
May 31,
2021 – included
in column (a)
(b)

Stuart Aitken(2)
Nora A. Aufreiter(3)

Kevin M. Brown

Yael Cosset

Michael J. Donnelly
Anne Gates(3)
Karen M. Hoguet(4)

Susan J. Kropf

W. Rodney McMullen

Gary Millerchip

Clyde R. Moore
Ronald L. Sargent(3)

Amanda Sourry
Mark S. Sutton(3)

Ashok Vemuri

380,698

39,407

2,258

330,102

744,971

33,997

10,806

114,277

5,349,973

349,313

116,677

183,059

2,258

29,437

16,154

173,870

—

148,530

460,498

—

13,000

2,169,466

156,707

—

13,000

—

Directors and executive officers as a group (24 persons, including

those named above)

10,149,926

4,470,734

(1) No director or officer owned as much as 1% of Kroger common shares. The directors and executive officers as

a group beneficially owned 1.35% of Kroger common shares.

(2) This amount includes 3,018 shares held by Mr. Aitken’s spouse. He disclaims beneficial ownership of these

shares.

(3) This amount includes incentive share awards that were deferred under the deferred compensation plan for

independent directors in the following amounts: Ms. Aufreiter, 9,647; Ms. Gates, 7,831; Mr. Sargent, 45,148;
Mr. Sutton, 6,640.

(4) This amount includes 2,075 shares held by Ms. Hoguet’s spouse. She disclaims beneficial ownership of these

shares.

The following table sets forth information regarding the beneficial owners of more than five percent of Kroger

common shares as of April 1, 2021 based on reports on Schedule 13G filed with the SEC.

Name

BlackRock, Inc.

State Street Corporation

Vanguard Group Inc.

Address

55 East 52nd St.
New York, NY 10055

State Street Financial Center
One Lincoln Street
Boston, MA 02111

100 Vanguard Blvd.
Malvern, PA 19355

Amount and Nature
of Ownership

Percentage
of Class

72,230,358(1)

9.5 %

41,342,422(2)

5.43%

72,090,939(3)

9.47%

(1) Reflects beneficial ownership by BlackRock Inc., as of December 31, 2020, as reported on Amendment No. 11

to Schedule 13G filed with the SEC on January 29, 2021, reporting sole voting power with respect to
62,876,553 common shares, and sole dispositive power with regard to 72,230,358 common shares.

(2) Reflects beneficial ownership by State Street Corporation as of December 31, 2020 as reported on Schedule
13G filed with the SEC on February 9, 2021, reporting shared voting power with respect to 35,206,912
common shares, and shared dispositive power with respect to 41,190,361 common shares.

(3) Reflects beneficial ownership by Vanguard Group Inc. as of December 31, 2020, as reported on Amendment
No. 6 to Schedule 13G filed with the SEC on February 8, 2021, reporting shared voting power with respect to
1,420,781 common shares, sole dispositive power of 68,544,771 common shares, and shared dispositive
power of 3,546,168 common shares.

Related Person Transactions

The Board has adopted a written policy requiring that any Related Person Transaction may be consummated

or continue only if the Audit Committee approves or ratifies the transaction in accordance with the policy. A ‘‘Related
Person Transaction’’ is one (a) involving Kroger, (b) in which one of our directors, nominees for director, executive
officers, or greater than five percent shareholders, or their immediate family members, have a direct or indirect
material interest; and (c) the amount involved exceeds $120,000 in a fiscal year.

The Audit Committee will approve only those Related Person Transactions that are in, or not inconsistent with,

the best interests of Kroger and its shareholders, as determined by the Audit Committee in good faith in
accordance with its business judgment. No director may participate in any review, approval or ratification of any
transaction if he or she, or an immediate family member, has a direct or indirect material interest in the transaction.

Where a Related Person Transaction will be ongoing, the Audit Committee may establish guidelines for

management to follow in its ongoing dealings with the related person and the Audit Committee will review and
assess the relationship on an annual basis to ensure it complies with such guidelines and that the Related Person
Transaction remains appropriate.

Compensation Discussion and Analysis

Executive Summary

Named Executive Officers

This Compensation Discussion and Analysis provides a discussion and analysis of our compensation program

for our named executive officers (‘‘NEOs’’). For the 2020 fiscal year ended January 30, 2021, the NEOs were:

Name

W. Rodney McMullen
Gary Millerchip
Stuart W. Aitken
Yael Cosset
Michael J. Donnelly

Title

Chairman and Chief Executive Officer
Senior Vice President and Chief Financial Officer
Senior Vice President and Chief Merchandising & Marketing Officer
Senior Vice President and Chief Information Officer
Executive Vice President and Chief Operating Officer

How Our 2020 Compensation Program was Affected by COVID-19

Throughout the pandemic, Kroger's most urgent priority has been to provide a safeguarded environment for
associates and customers, with open stores, stocked shelves, comprehensive digital solutions and an efficiently-
operating supply chain, so that our communities continue to have access to fresh, affordable food and essentials.
We started to see a significant shift in customer behavior during the last few days of February 2020 as shoppers
started stockpiling food and essentials. Sales sharply accelerated in March with identical sales, excluding fuel
(‘‘ID Sales’’) up approximately 30% compared to March 2019. To put this in context, the Company reported full year
2019 ID Sales of 2%. Sales remained elevated in April and May, both up approximately 20% compared to the same
months of 2019. ID Sales for Q1 2020, which ended in late May, were an unprecedented 19% compared to
Q1 2019. It was a truly monumental effort across the enterprise to meet the needs of customers in the early months
of the pandemic.

Because of these extreme circumstances, our Compensation Committee recognized that communicating
metrics for our annual incentive plan needed to be delayed past March as would be our normal practice. In March,
the Company did not know how long the pandemic would last or what the impact on customer behavior would be.
The Compensation Committee addressed the unique situation by implementing a two-part plan for 2020: a
Q1 Bonus and a Q2 – Q4 2020 Corporate Incentive Plan, and for the executive officers, including the NEOs,
modified the normal cash payout to include cash and restricted stock. The plan has a wide eligibility across the
enterprise, comprising all or part of annual cash incentive compensation for 53,300 associates, including the NEOs.

•

Q1 Bonus. In response to the extraordinary associate effort in supporting the business results that
occurred in the intense initial months of the coronavirus pandemic, the Compensation Committee
determined to establish a Q1 Bonus attributable to the first fiscal quarter. The Compensation Committee
made the decision to ring fence, or separately delineate Q1 to ensure the significant overperformance in
Q1 due to customer stockpiling did not carry forward and inappropriately influence incentive plan results
for the remainder of the year. The Compensation Committee determined the Q1 Bonus to be earned at an
amount equal to 200% of the Q1 prorated amount of the eligible associates’ (including NEOs’) annual
incentive plan target. This Q1 Bonus was paid out to NEOs in March 2021 in accordance with the normal
payout schedule.

Q2 – Q4 2020 Corporate Incentive Plan. For the balance of the year, the Compensation Committee
established the Q2 – Q4 2020 Corporate Incentive Plan, which measured ID Sales, excluding Fuel, and
Adjusted FIFO Operating Profit, including Fuel, for the second through fourth quarters of 2020. The goals
put in place for these two metrics targeted a 100% payout amount based on the Company’s original pre-
pandemic Q2 – Q4 quarterly budgets. Based on their understanding of the pandemic’s potential impact on
the business, the Compensation Committee decided to make the goals more rigorous, increasing the
Q2 – Q4 ID Sales performance goals that were required for a payout greater than 100%. The results of
the Q2 – Q4 2020 Corporate Incentive Plan produced a 200% payout, which was applied to the Q2 – Q4
prorated amount of the eligible associates’ (including NEOs’) annual incentive plan target. This was paid to
NEOs in March 2021 in accordance with the normal payout schedule.

Cash/Equity Payout. The combined results of the Q1 Bonus and the Q2 – Q4 2020 Corporate Incentive
Plan led to a payout at 200% of the eligible participants’, including NEOs’, annual incentive plan target for
the year. The annual incentive plan is typically an all cash plan, however in light of the extraordinary

results in this unique and challenging pandemic year, as well as the Compensation Committee’s desire to
create ongoing alignment with shareholders and reward sustained performance beyond 2020, the
Compensation Committee determined to pay 2020 plan awards to the NEOs as follows: for the CEO, half
in cash and half in restricted stock vesting in one year; and for the other NEOs: three-quarters in cash and
one-quarter in restricted stock vesting in one year.

Summary of Key Compensation Practices

What we do:

What we do not do:

✓ Alignment of pay and performance

✘ No employment contracts with executive officers

✓ Significant share ownership guidelines of 5x salary

✘ No special severance or change in control

for our CEO

programs applicable only to executive officers

✓ Multiple performance metrics under our short- and
long-term performance-based plans discourage
excessive risk taking at the expense of long-term
results

✓ Double trigger change in control provisions in all

equity awards beginning in 2019

✓ All long-term compensation is equity-based

beginning in 2019

✘ No single trigger cash severance benefits upon

a change in control

✘ No cash component of the new long-term incentive

plans

✘ No tax gross-up payments for executives

✘ No special executive life insurance benefit

✘ No re-pricing or backdating of options without

✓ Engagement of an independent compensation

shareholder approval

consultant

✓ Robust clawback policy

✓ Ban on hedging, pledging, and short sales of

Kroger securities

✓ Minimal perquisites

✘ No guaranteed salary increases or bonuses

✘ No payment of dividends or dividend equivalents

until performance units are earned

✘ No evergreen or reload feature; no shares added to

stock plan without shareholder approval

Summary of Fixed and At-Risk Pay Elements

The fixed and at-risk pay elements of the NEO compensation program are reflected in the following table and

charts.

-
T
R
O
H
S

L
A
U
N
N
A

E
V

T
N
E
C
N

M
R
E
T

E
V

T
N
E
C
N

M
R
E
T
-

G
N
O
L

Element

Form

Description

Base Salary

Cash

• Attract, incentivize, retain talented executives
• Benchmarked to peer group median
• Fixed cash component

• Reviewed annually
• No automatic or guaranteed increases
• Based on individual performance & experience

Annual
Incentive
Plan

• Metrics and targets align with annual business goals; payout depends on actual performance against

each goal

Cash Bonus

• Rewards and incentivizes Kroger employees, including NEOs, for annual performance on key financial

and operational metrics

• Benchmarked to peer group median

Performance
-Based
Equity

Performance
Units

• Performance units are equity grants which are “paid out” in Kroger common shares, dependent upon

company performance against each goal, at the end of the 3-year performance period

• Measures performance on key financial and operational metrics over a 3-year period
• Designed to create shareholder value, foster executive retention, and align NEO and shareholder

interests

Time-Based
Equity

Restricted
Stock

Stock
Options

• Stock options and restricted stock for NEOs vest ratably over 4 years; exercise price of stock options is

closing price on day of grant

• Provides direct alignment to stock price appreciation and rewards executives for the achievement of

long-term business objectives and providing incentives for the creation of shareholder value

D
E
X

K
S

-
T
A

E
L
B
A

R
A
V

Fiscal Year 2020 CEO Compensation Decisions

In fiscal year 2020, the Compensation Committee made the following key decisions about Mr. McMullen’s

compensation:

•

3.0% increase to base salary

No increase to the annual cash incentive target

No increase in the total long-term incentive opportunity

A total increase to target total direct compensation of 0.3%

The table below compares fiscal 2020 to 2019 target direct compensation. Target total direct compensation is a

more accurate reflection of how the Compensation Committee benchmarks and establishes CEO compensation
than the disclosure provided in the Summary Compensation Table, which table includes a combination of actual
compensation earned in the fiscal year, the current value of at-risk equity compensation to be earned in future fiscal
years, and the actuarial value of future pension benefits.

The Compensation Committee establishes Mr. McMullen’s target direct compensation such that only 9% of his
compensation is fixed. The remaining 91% of target compensation is at-risk, meaning that the actual compensation
Mr. McMullen receives will depend on the extent to which the Company achieves the performance metrics set by
the Compensation Committee, and with respect to all of the equity vehicles, the future value of Kroger common
shares.

($000s)

Year

2020

2019

Base
Salary

$1,355

$1,316

Target
Annual
Incentive

$2,500

Performance
Units

Restricted
Stock

Stock
Options

Total
LTI

Target
TDC

Increase

$5,250

$3,150

$2,100

$10,500

$14,355

0.3%

$2,100

$10,500

$14,316

CEO and Named Executive Officer Target Pay Mix

The amounts used in the charts below are based on 2020 target total direct compensation for the CEO and the
average of other Named Executive Officers. As illustrated below, 91% of the CEO’s target total direct compensation
is at-risk. On average, 83% of the other Named Executive Officers’ compensation is at risk.

CEO

Base
Salary
9%

Perf. Units
37%

Stock
Options
15%

Target
Annual
Incentive
17%

Restricted
Stock
22%

Average of Other NEOs

Perf. Units
33%

Base Salary
17%

Target
Annual
Incentive
17%

Stock
Options
13%

Restricted
Stock
20%

At Risk = 91%

At Risk = 83%

Our Compensation Philosophy and Objectives

As one of the largest retailers in the world, our executive compensation philosophy is to attract and retain the

best management talent as well as motivate these employees to achieve our business and financial goals. Kroger’s
incentive plans are designed to reward the actions that lead to long-term value creation. The Compensation
Committee believes that there is a strong link between our business strategy, the performance metrics in our short-
term and long-term incentive programs, and the business results that drive shareholder value.

We believe our strategy creates value for shareholders in a manner consistent with Kroger’s purpose: To Feed

the Human Spirit.

To achieve our objectives, the Compensation Committee seeks to ensure that compensation is competitive

and that there is a direct link between pay and performance. To do so, it is guided by the following principles:

•

A significant portion of pay should be performance-based, with the percentage of total pay tied to
performance increasing proportionally with an NEO’s level of responsibility.

Compensation should include incentive-based pay to drive performance, providing superior pay for
superior performance, including both a short- and long-term focus.

Compensation policies should include an opportunity for, and a requirement of, significant equity
ownership to align the interests of NEOs and shareholders.

•

Components of compensation should be tied to an evaluation of business and individual performance
measured against metrics that directly drive our business strategy.

Compensation plans should provide a direct line of sight to company performance.

Compensation programs should be aligned with market practices.

Compensation programs should serve to both motivate and retain talent.

The Compensation Committee has three related objectives regarding compensation:

•

First, the Compensation Committee believes that compensation must be designed to attract and retain
those individuals who are best suited to be an executive officer at Kroger.

Second, a majority of compensation should help align the interests of our NEOs with the interests of our
shareholders.

Third, compensation should create strong incentives for the NEOs to achieve the annual business plan
targets established by the Board, and to achieve Kroger’s long-term strategic objectives.

Components of Executive Compensation at Kroger

For 2020, compensation for our NEOs was comprised of the following:

•

Annual Compensation:

○

Salary

○ Q1 Bonus

○ Q2 – Q4 2020 Corporate Incentive Plan

•

Long-Term Compensation:

○

Performance units

Non-qualified stock options

Restricted stock

•

Retirement and other benefits

• Minimal perquisites

The annual and long-term performance-based compensation awards described herein were made pursuant to

our 2019 Long-Term Incentive and Cash Bonus Plan, which was approved by our shareholders in June 2019.

Establishing Each Component of Executive Compensation

The Compensation Committee recommends, and the Board determines, each component of the CEO’s
compensation. The CEO recommends, and the Compensation Committee determines, each component of the
remaining NEOs’ compensation. The Compensation Committee and the Board reviewed compensation in March of
2020. Equity awards were granted in March and salary and annual incentive plan increases were effective as of
April 1, 2020.

The amount of each NEO’s salary, annual cash incentive plan target, and long-term equity compensation is

influenced by numerous factors including:

•

An assessment of individual contribution and performance;

Benchmarking with comparable positions at peer group companies;

Level in organization and tenure in role; and

Relationship to other Kroger executives’ compensation.

The assessment of individual contribution and performance is a qualitative determination, based on the

following factors:

•

Leadership;

Contribution to the executive officer group;

•

Achievement of established objectives;

Decision-making abilities;

Performance of the areas or groups directly reporting to the NEO;

Increased responsibilities;

Strategic thinking; and

Promotion of Kroger’s Values: Safety, Honesty, Integrity, Respect, Diversity, and Inclusion.

Annual Compensation – Salary

Our philosophy with respect to salary is to provide a sufficient and stable source of fixed cash compensation.

All of our compensation cannot be at-risk or long-term. It is important to provide a meaningful annual salary to
attract and retain a high caliber leadership team, and to have an appropriate level of cash compensation that is not
variable.

Annual Compensation – Performance-Based Annual Cash Incentive

The NEOs participate in a corporate performance-based annual cash incentive plan. The value of annual cash
incentive awards that the NEOs earn each year is based upon Kroger’s overall company performance compared to
goals established by the Compensation Committee based on the business plan adopted by the Board of Directors.

A minimum level of performance must be achieved before any payouts are earned, while a payout of up to
210% of target incentive potential can be achieved for superior performance on the corporate plan metrics. There
are no guaranteed or minimum payouts; if none of the performance goals are achieved, then none of the incentive
amount is earned and no payout is made.

The annual cash incentive plan is designed to encourage decisions and behavior that drive the annual

operating results and the long-term success of the Company. Kroger’s success is based on a combination of
factors, and accordingly the Compensation Committee believes that it is important to encourage behavior that
supports multiple elements of our business strategy.

2020 Annual Cash Incentive Plan

The corporate annual cash incentive plan is a broad-based plan used across the Kroger enterprise.

Approximately 53,300 associates are eligible to receive incentive payouts based all or in part on the incentive plan
described below.

Because of the unique circumstances created by the pandemic, the Compensation Committee modified the

annual incentive plan in two ways.

First, the 2020 incentive plan was comprised of two parts:

(1) A Q1 Bonus, which was earned at an amount equal to 200% of the Q1 proration of a participant’s annual
incentive target; the actual amounts of Q1 Bonus paid to the NEOs for 2020 are reported in the Summary
Compensation Table in the ‘‘Bonus’’ column; and

(2) The Q2 – Q4 2020 Corporate Incentive Plan, which also paid out at 200% and was applied to the Q2 – Q4
proration of a participant’s annual incentive target. The Q2 – Q4 2020 Corporate Incentive Plan was based
on a grid with two metrics: ID Sales, excluding Fuel, and Adjusted FIFO Operating Profit, including Fuel,
with the opportunity for a 10% ‘‘kicker’’ based on improvement in produce share as described below.
These are the same metrics used for the 2019 annual incentive plan.

Second, the annual incentive plan is typically an all cash plan, however in light of the extraordinary results in

this unique and challenging pandemic year, as well as the Compensation Committee’s desire to create ongoing
alignment with shareholders and reward sustained performance beyond 2020, the Committee determined to pay
2020 plan awards to the NEOs as follows: for the CEO, half in cash and half in restricted stock vesting in one year;
and for the other NEOs: three-quarters in cash and one-quarter in restricted stock vesting in one year.

To illustrate the 2020 incentive plan:

• Mr. McMullen’s annual incentive plan target is $2,500,000, resulting in $5,000,000 total payout at 200%.

•

The Compensation Committee determined to pay out that amount half in equity and half in cash.

The $2,500,000 cash payment is attributable to:

○ Q1 Bonus = $769,231

○ Q2-Q4 2020 Corporate Incentive Plan = $1,730,769

Q2 – Q4 2020 Corporate Incentive Plan Metrics

Metric

Rationale for Use

Sales and Profit Grid, maximum payout of 200%

ID Sales, excluding Fuel

•

Identical Sales (‘‘ID Sales’’) represent sales, excluding fuel, at our
supermarkets that have been open without expansion or relocation for
five full quarters, plus sales growth at all other customer-facing non-
supermarket businesses, including Kroger Specialty Pharmacy and ship
to home solutions.

Adjusted FIFO Operating Profit,
including Fuel

Produce Kicker

• We believe that ID Sales are the best measure of real growth of our

sales across the enterprise. A key driver of our model is ID Sales growth.

•

This financial metric equals gross profit, excluding the LIFO charge,
minus OG&A, and minus depreciation and amortization.

Adjusted FIFO Operating Profit, including fuel, is a key measure of
company success as it tracks our earnings from operations, and it
measures our day-to-day operational effectiveness. It is a useful
measure to investors because it reflects the revenue and expense that a
company can control.

Kicker, worth an additional 10%

Produce is a primary driver of where customers choose to shop, and it is
a key component of our ability to be Fresh for Everyone.

An additional 10% is earned if Kroger achieves certain pre-determined
goals with respect to produce share.

Q2 – Q4 2020 Corporate Incentive Plan Results

The Q2 – Q4 2020 goals established by the Compensation Committee, the actual results, and the incentive
percentage earned for the performance metrics of the Q2 – Q4 2020 Corporate Incentive Plan were as follows.

The Q2 – Q4 2020 Corporate Incentive Plan payout metric is ID Sales, excluding Fuel, and Adjusted FIFO
Operating Profit, including Fuel, determined on the following grid, with payouts interpolated for actual performance
levels between the defined goals on the grid:

Q2 – Q4 2020 Corporate Incentive Plan Metrics Grid – ID Sales and Adjusted FIFO Operating
Profit

Adjusted FIFO Operating Profit,

including Fuel

($ in millions)

≥1,640

≥1,840

≥2,040

≥2,240

1.00%

10%

20%

30%

ID Sales, excluding Fuel
3.00%

4.00%

2.00%

25%

40%

60%

90%

40%

55%

90%

135%

50%

65%

110%

165%

5.00%

60%

75%

130%

200%

Q2 – Q4 2020 Corporate Incentive Plan – Actual Results and Payout Percentages

Performance Metrics

Result

ID Sales/Adjusted FIFO Operating Profit
Produce Kicker2

ID Sales = 12.0%/Adjusted FIFO OP = $2,620 million

Total Earned

(1) See grid above.

Payout
Percentage1

200%

(2) An additional 10% would have been earned if Kroger had achieved a certain goal with respect to produce share. That goal was

established by the Compensation Committee but is not disclosed because it is competitively sensitive.

Following the close of the 2020 fiscal year, the Compensation Committee reviewed Kroger’s performance
against each of the metrics outlined above and determined the extent to which Kroger achieved those objectives.
Our performance compared to the goals established by the Compensation Committee resulted in a payout on the
Q2 – Q4 2020 Corporate Incentive Plan of 200% of the participant’s incentive plan target for all of the participants,
including the NEOs.

The Compensation Committee maintains the ability to reduce the annual cash incentive payout for all

executive officers, including the NEOs, and the independent directors retain that discretion for the CEO’s incentive
payout if they determine for any reason that the incentive payouts were not appropriate given their assessment of
Company performance. However, no adjustments were made in 2020. The Compensation Committee and the
independent directors also retained the ability to adjust the goals for each metric under the plan should
unanticipated developments arise during the year – however no adjustments were made to the Q2 – Q4 2020
goals.

As described above, the corporate annual cash incentive payout percentage is applied to each NEO’s
incentive plan target which is determined by the Compensation Committee, and the independent directors in the
case of the CEO. The actual amounts of performance-based annual incentive paid to the NEOs for 2020 are
reported in the Summary Compensation Table in the ‘‘Stock Awards’’ and ‘‘Non-Equity Incentive Plan
Compensation’’ columns and footnotes 2 and 4 to that table.

Long-Term Compensation Program

The Compensation Committee believes in the importance of providing an incentive to the NEOs to achieve the

long-term goals established by the Board. As such, a majority of NEO compensation is dependent on the
achievement of the Company’s long-term goals. Long-term compensation promotes long-term value creation and
discourages the over-emphasis of attaining short-term goals at the expense of long-term growth.

The long-term incentive program is structured to be a combination of performance- and time-based

compensation that reflects elements of financial and common share performance to provide both retention value
and alignment with company performance. As of 2019, in response to feedback from shareholders and market
practices, our Compensation Committee determined that all long-term compensation would be equity-based as
follows; 50% of equity granted under the program would be performance-based and the remaining 50% of equity
would be time-based consisting of 30% in the form of restricted stock and 20% in the form of stock options.

Each year, NEOs receive grants under the long-term compensation program, which is structured as follows:

•

Performance-Based (50% of NEO long-term target compensation)

○

Long-term performance-based compensation is provided under a Long-Term Incentive Plan adopted
by the Compensation Committee. The Committee adopts a new plan every year, measuring
improvement on the Company’s long-term goals over successive three-year periods. Accordingly, at
any one time there are three plans outstanding, which are summarized below.

Under the Long-Term Incentive Plans, NEOs receive grants of equity called performance units, and
until 2019 received cash ‘‘grants’’ as well. A fixed number of performance units based on level and
individual performance is awarded to each participant at the beginning of the three-year performance
period and prior to 2019 a cash incentive target was set as well.

○

Payouts under the plan are contingent on the achievement of certain strategic performance and
financial measures and incentivize recipients to promote long-term value creation and enhance
shareholder wealth by supporting the Company’s long-term strategic goals.

The payout percentage, based on the extent to which the performance metrics are achieved, is
applied to both the long-term cash incentive potential (for plans prior to 2019) and the number of
performance units awarded.

Performance units are ‘‘paid out’’ in Kroger common shares based on actual performance, along with
a cash amount equal to the dividends paid during the performance period on the number of issued
common shares.

•

Time-Based (50% of NEO long-term target compensation)

○

Long-term time-based compensation consists of stock options and restricted stock, which are linked
to common share performance creating alignment between the NEOs’ and our shareholders’
interests.

Stock options have no initial value and recipients only realize benefits if the value of our common
shares increases following the date of grant, further aligning the NEOs’ and our shareholders’
interests.

Amounts of long-term compensation awards issued and outstanding for the NEOs are set forth in the

Executive Compensation Tables section.

Summary of Three Long-Term Incentive Plans Outstanding During 2020

The Compensation Committee adopts a new Long-Term Incentive Plan each year, which provides for

overlapping three-year performance periods. Additional detail regarding each of the three plans is provided below,
and a summary of the design of the plans outstanding during 2020 is as follows:

Cash Component

Performance Units and
Dividends

Performance Metrics

2020-2022 LTIP
No cash component

2019-2021 LTIP
No cash component

2018-2020 LTIP
Cash incentive potential
set by Compensation
Committee
Performance units are equity grants which are ‘‘paid out’’ in Kroger common shares,
based on actual performance at the end of the 3-year performance period, along
with a cash amount equal to the dividends paid during the performance period on
the number of issued common shares ultimately earned.
Restock Kroger metrics +
ROIC multiplier

Restock Kroger metrics +
ROIC multiplier

○ Total Sales without

Fuel + Fuel Gallons;

○ Growth in Adjusted

FIFO Operating Profit,
including Fuel

○ Cumulative Adjusted
Free Cash Flow;
○ Fresh Equity metric;

and

○ Relative Total

Shareholder Return
modifier

The payout percentage,
based on the extent to
which the performance
metrics are achieved, is
applied to number of
performance units
awarded.
125%
March 2023

Determination of Payout

The payout percentage, based on the extent to which
the performance metrics are achieved, is applied to
both the long-term cash incentive potential and the
number of performance units awarded.

Maximum Payout
Payout Date

120%
March 2021

120%
March 2022

2018-2020 Long-Term Incentive Plan – Results

For the 2018-2020 Long-Term Incentive Plan, which was paid out in cash and equity, performance was

measured on the Restock Kroger metrics of Cumulative Restock Savings & Benefits and Cumulative Adjusted Free
Cash Flow, with each metric accounting for 50% of the payout, and then an ROIC multiplier was applied.

The Restock Kroger metrics are calculated as follows:

•

Cumulative Restock Savings & Benefits is an internal calculation that is a combination of cost savings
generated under our Kroger Way Plans; incremental profits from ID sales growth; and incremental net
operating profit from our alternative profit streams.

Cumulative Restock Savings &

Benefits

Cumulative Adjusted Free Cash

Flow(1)

Unadjusted Payout

Threshold =
50%
Payout

Target =
100%
Payout

Payout

Result

Percentage Weight

Payout
Amount

$3.0B

$4.45B

$5.24B

100%

50%

$4.875B

$6.50B

$7.54B

100%

50%

100%

(1) Cumulative Adjusted Free Cash Flow is a non-GAAP measure calculated as net cash provided by operating

activities minus net cash used by investing activities plus, in this case, an amount equal to cash taxes paid on
the gain on the sale of Turkey Hill Dairy and You Technology.

After the calculation of the two metrics above, a Return on Invested Capital multiplier is applied, as follows:

ROIC Modifier Component

ROIC(1) Results

Less than 12.12%

12.12% - 12.32%

Greater than 12.32%

Payout Modifier

80%

100%

120%

(1) Return on invested capital is a non-GAAP measure. We calculate return on invested capital (“ROIC”) by

dividing adjusted ROIC operating profit for the prior four quarters by the average invested capital. Adjusted
operating profit for ROIC purposes is calculated by excluding certain items included in operating profit,
and adding back our LIFO charge (credit), depreciation and amortization and rent to our U.S. GAAP
operating profit of the prior four quarters. Average invested capital is calculated as the sum of: (i) the
average of our total assets, (ii) the average LIFO reserve, and (iii) the average accumulated depreciation
and amortization; minus (i) the average taxes receivable, (ii) the average trade accounts payable, (iii) the
average accrued salaries and wages, (iv) the average other current liabilities, excluding accrued income
taxes, (v) the average liabilities held for sale and (vi) certain other adjustments. Averages are calculated
for ROIC by adding the beginning balance of the first quarter and the ending balance of the fourth quarter,
of the last four quarters, and dividing by two

Final Payout. The actual ROIC result is 12.87%. Accordingly, the Unadjusted Payout percentage of 100% was

modified to 120%.

The NEOs received long-term cash incentive payments in an amount equal to 120% of that executive’s long-

term cash incentive potential and were issued the number of Kroger common shares equal to 120% of the number
of performance units awarded to that executive, along with a cash amount equal to the dividends paid on that
number of common shares during the three-year performance period.

The cash payout and dividends paid on common shares earned under the 2018-2020 Long-Term Incentive
Plan are reported in the ‘‘Non-Equity Incentive Plan Compensation’’ and ‘‘All Other Compensation’’ columns of the

Summary Compensation Table and footnotes 4 and 6 to that table, respectively, and the common shares issued
under the plan are reported in the 2020 Option Exercises and Stock Vested Table and footnote 2 to that table.

2019-2021 Long-Term Incentive Plan Metrics

The 2019-2021 Long-Term Incentive Plan reflects existing Restock Kroger metrics for the final two years of the

2018-2020 Restock Kroger financial plan, along with an ROIC component for fiscal year 2021. Each of the
following plan components account for 50% of the potential payout percentage.

Plan Component

2019-2020

Cumulative Restock Savings & Benefits

Threshold = 50% payout

Target = 100% payout

Threshold = 50% payout

Target = 100% payout

Cumulative Adjusted Free Cash Flow

$2.050B

$3.434B

$3.675B

$4.640B

After the calculation of the two metrics above, a 2021 Return on Invested Capital multiplier is applied, as

follows:

ROIC Modifier Component

FY 2021 ROIC Results
Less than 12.12%
12.12% - 12.32%
Greater than 12.32%

Payout Modifier

80%
100%
120%

The payout percentage will be applied to the number of performance units granted under the plan to determine

the payout amount.

2020-2022 Long-Term Incentive Plan Metrics

With respect to our long-term performance-based compensation, since 2018, Kroger’s metrics in its Long-Term

Incentive Plans have focused on key Restock Kroger metrics. With the three-year financial targets of the 2018-
2020 Restock Kroger plan concluding in 2020, the Compensation Committee reconsidered the long-term incentive
plan framework. In November 2019, Kroger committed to investors an 8-11% Total Shareholder Return (TSR)
target. The Compensation Committee determined that going forward, the Long-Term Incentive Plan metrics should
align with Kroger’s long-term business plans and growth model that we communicated to shareholders.

Accordingly, the 2020-2022 Long-Term Incentive Plan has the following components which support our long-

term business plans, each accounting for 25% of the payout calculation:

Metric

Rationale for Use

Total Sales without Fuel + Fuel
Gallons

Growth in Adjusted FIFO
Operating Profit, including Fuel

•

This metric represents total revenue dollars without fuel + the
number of fuel gallons sold over the three-year term of the plan.
It represents the important metric of top line growth of the
business from all channels.
This financial metric equals gross profit, excluding the LIFO
charge, minus OG&A, and minus depreciation and
amortization.
Adjusted FIFO Operating Profit, including fuel, is a key
measure of company success as it tracks our earnings from
operations, and it measures our day-to-day operational
effectiveness. It is a useful measure to investors because it
reflects the revenue and expense that a company can control. It
is particularly important to focus on growth of this financial
measure over time.

Weighting

25%

Metric

Cumulative Adjusted Free
Cash Flow

Fresh Equity metric

Rationale for Use

•

Adjusted Free Cash Flow is an adjusted free cash flow
measure calculated as net cash provided by operating activities
minus net cash used by investing activities plus or minus
adjustments for certain items.
It is an important measure for the business because it reflects
the cash left over after the company pays for operating
expenses and capital expenditures.
Fresh is a key element of how people decide where to shop. It
drives trips and therefore delivers business results. Fresh is the
core focus of how we differentiate and drive great engagement
with customers and it will be a key driver of our growth.

Weighting

25%

The forward looking goals of each metric are not disclosed as this would create competitive harm.

After the calculation of the four metrics above, a modifier based on Relative Total Shareholder Return

compared to the S&P 500 will be applied, as follows:

TSR Relative to S&P 500

25th percentile
50th percentile
75th percentile

Modifier

75% payout

100% payout

125% payout

The payout percentage, as modified by the Relative TSR modifier, will be applied to the number of

performance units granted under the plan to determine the payout amount.

Stock Options and Restricted Stock

Stock options and restricted stock continue to play an important role in rewarding NEOs for the achievement of

long-term business objectives and providing incentives for the creation of shareholder value. Awards based on
Kroger’s common shares are granted annually to the NEOs. Kroger historically has distributed time-based equity
awards widely, aligning the interests of employees with your interest as shareholders.

The options permit the holder to purchase Kroger common shares at an option price equal to the closing price

of Kroger common shares on the date of the grant. Options are granted only on one of the four dates of Board
meetings conducted after Kroger’s public release of its quarterly earnings results.

The Compensation Committee determines the vesting schedule for stock options and restricted stock. During
2020, the Compensation Committee granted to the NEOs stock options and restricted stock, each with a four-year
rateable vesting schedule, with the exception of restricted stock granted with respect to the Q2 – Q4 2020
Corporate Incentive Plan, which vests in one year and promotion awards with three-year ratable vesting schedules.

As discussed below under Stock Ownership Guidelines, covered individuals, including the NEOs, must hold
100% of common shares issued pursuant to performance units earned, the shares received upon the exercise of
stock options or upon the vesting of restricted stock, except those necessary to pay the exercise price of the
options and/or applicable taxes, until applicable stock ownership guidelines are met, unless the disposition is
approved in advance by the CEO, or by the Board or Compensation Committee for the CEO.

Retirement and Other Benefits

Kroger maintains several defined benefit and defined contribution retirement plans for its employees. The
NEOs participate in one or more of these plans, as well as one or more excess plans designed to make up the
shortfall in retirement benefits created by limitations under the Internal Revenue Code (the ‘‘Code’’) on benefits to
highly compensated individuals under qualified plans. Additional details regarding certain retirement benefits
available to the NEOs can be found below in footnote 6 to the Summary Compensation Table and the 2020
Pension Benefits Table and the accompanying narrative.

Kroger also maintains an executive deferred compensation plan in which some of the NEOs participate. This

plan is a nonqualified plan under which participants can elect to defer up to 100% of their cash compensation each
year. Additional details regarding our nonqualified deferred compensation plans available to the NEOs can be
found below in the 2020 Nonqualified Deferred Compensation Table and the accompanying narrative.

Kroger also maintains The Kroger Co. Employee Protection Plan (‘‘KEPP’’), which covers all of our

management employees who are classified as exempt under the federal Fair Labor Standards Act and certain
administrative or technical support personnel who are not covered by a collective bargaining agreement, with at
least one year of service. KEPP has a double trigger change in control provision and it provides for severance
benefits and extended Kroger-paid health care, as well as the continuation of other benefits as described in the
plan, when an employee is actually or constructively terminated without cause within two years following a change
in control of Kroger (as defined in KEPP). Participants are entitled to severance pay of up to 24 months’ salary and
annual incentive target. The actual amount is dependent upon pay level and years of service. KEPP can be
amended or terminated by the Board at any time prior to a change in control.

With respect to awards prior to 2019, performance-based long-term cash incentive, performance unit, stock

option, and restricted stock grant agreements with award recipients provide that those awards ‘‘vest,’’ with 50% of
the long-term cash incentive potential being paid, common shares equal to 50% of the performance units being
awarded, options becoming immediately exercisable, and restrictions on restricted stock lapsing upon a change in
control as described in the grant agreements. Grants made in 2019 have double trigger change in control
provisions and the ‘‘vesting’’ described above is only triggered if an employee is actually or constructively
terminated without cause within two years following a change in control of Kroger (as defined in the grant
agreement, and consistent with KEPP).

None of the NEOs are party to an employment agreement.

Perquisites

Our NEOs receive limited perquisites as the Compensation Committee does not believe that it is necessary for
the attraction or retention of management talent to provide executives a substantial amount of compensation in the
form of perquisites.

Process for Establishing Executive Compensation

The Compensation Committee of the Board has the primary responsibility for establishing the compensation of

our executive officers, including the NEOs, with the exception of the CEO. The Compensation Committee’s role
regarding the CEO’s compensation is to make recommendations to the independent members of the Board; those
members of the Board establish the CEO’s compensation.

The Compensation Committee directly engaged Korn Ferry as a compensation consultant to advise the
Compensation Committee in the design of compensation for executive officers and to advise with respect to the
unique circumstances of the 2020 compensation cycle.

Korn Ferry conducted an annual competitive assessment of executive positions at Kroger for the

Compensation Committee. The assessment is one of several bases, as described above, on which the
Compensation Committee determines compensation. The consultant assessed:

•

base salary;

target performance-based annual cash incentive;

target annual cash compensation (the sum of salary and annual cash incentive potential);

long-term incentive compensation, comprised of performance units, stock options and restricted stock; and

total direct compensation (the sum of target annual cash compensation and long-term compensation).

In addition to the factors identified above, the consultant also reviewed actual payout amounts against the

targeted amounts.

The consultant compared these elements against those of other companies in a group of publicly traded

companies selected by the Compensation Committee. For 2020, our peer group consisted of:

Best Buy
Cardinal Health
Costco Wholesale
CVS Health
Express Scripts

Home Depot
Johnson & Johnson
Lowes
Procter & Gamble
Sysco

Target
TJX Companies
Wal-Mart
Walgreens Boots Alliance

The make-up of the compensation peer group is reviewed annually and modified as circumstances warrant. In

addition, the Compensation Committee considered data from ‘‘general industry’’ companies provided by its
independent compensation consultant, a representation of major publicly-traded companies of similar size and
scope from outside the retail industry. This data provided reference points, particularly for senior executive
positions where competition for talent extends beyond the retail sector. The peer group includes a combination of
food and drug retailers, other large retailers based on revenue size, and large consumer-facing companies. Median
2020 revenue for the peer group was $96 billion, compared to our 2020 revenue of $132 billion.

Considering the size of Kroger in relation to other peer group companies, the Compensation Committee
believes that salaries paid to our NEOs should be competitively positioned relative to amounts paid by peer group
companies for comparable positions. The Compensation Committee also aims to provide an annual cash incentive
potential to our NEOs that, if achieved at superior levels, would cause total cash compensation to be meaningfully
above the median. Actual payouts may be as low as zero if performance does not meet the baselines established
by the Compensation Committee.

The independent members of the Board have the exclusive authority to determine the amount of the CEO’s

compensation. In setting total compensation, the independent directors consider the median compensation of the
peer group’s CEOs. With respect to the annual incentive plan, the independent directors make two determinations:
(1) the annual cash incentive potential that will be multiplied by the corporate annual cash incentive payout
percentage earned that is applicable to the NEOs and (2) the annual cash incentive amount paid to the CEO by
retaining discretion to reduce the annual cash incentive percentage payout the CEO would otherwise receive under
the formulaic plan.

The Compensation Committee performs the same function and exercises the same authority as to the other

NEOs. In its annual review of compensation for the NEOs, the Compensation Committee:

•

Conducts an annual review of all components of compensation, quantifying total compensation for the
NEOs including a summary for each NEO of salary; performance-based annual cash incentive; long-term
performance-based equity comprised of performance units, stock options and restricted stock.

Considers internal pay equity at Kroger to ensure that the CEO is not compensated disproportionately.
The Compensation Committee has determined that the compensation of the CEO and that of the other
NEOs bears a reasonable relationship to the compensation levels of other executive positions at Kroger
taking into consideration performance and differences in responsibilities.

Reviews a report from the Compensation Committee’s compensation consultant reflecting a
comprehensive review of each element of pay mix, both annual and long-term and comparing NEO
compensation with that of other companies, including both our peer group of competitors and a larger
general industry group, to ensure that the Compensation Committee’s objectives of competitiveness are
met.

Takes into account a recommendation from the CEO for salary, annual cash incentive potential and long-
term compensation awards for each of the senior officers including the other NEOs. The CEO’s
recommendation takes into consideration the objectives established by and the reports received by the
Compensation Committee as well as his assessment of individual job performance and contribution to our
management team.

The Compensation Committee does not make use of a formula, but both qualitatively and quantitatively

considers each of the factors identified above in setting compensation.

Shareholder Engagement & the 2020 Advisory Vote to Approve Executive Compensation

At the 2020 annual meeting, we held our tenth annual advisory vote on executive compensation. Over 90% of

the votes cast were in favor of the advisory vote in 2020. In 2020, we also requested meetings with shareholders
representing 43% of our outstanding shares during the proxy season and off-season engagement and ultimately
engaged with shareholders representing 27% of our outstanding shares. Conversations with our shareholders in
these meetings included discussions of our compensation program, with our shareholders providing feedback that
they appreciate the pay for performance nature of our program’s structure.

Stock Ownership Guidelines

To more closely align the interests of our officers and directors with your interests as shareholders, the Board
has adopted stock ownership guidelines. These guidelines require non-employee directors, executive officers, and
other key executives to acquire and hold a minimum dollar value of Kroger common shares as set forth below:

Chief Executive Officer

President and Chief Operating Officer

Position

Executive Vice Presidents and Senior Vice Presidents

Multiple

5 times base salary

4 times base salary

3 times base salary

Group Vice Presidents, Division Presidents, and Other Designated Key

2 times base salary

Executives

Non-employee Directors

5 times annual base cash retainer

All covered individuals are expected to achieve the target level within five years of appointment to their
positions. Until the requirements are met, covered individuals, including the NEOs, must hold 100% of common
shares issued pursuant to performance units earned, shares received upon the exercise of stock options and upon
the vesting of restricted stock, except those necessary to pay the exercise price of the options and/or applicable
taxes, and must retain all Kroger common shares unless the disposition is approved in advance by the CEO, or by
the Board or Compensation Committee for the CEO.

Executive Compensation Recoupment Policy (Clawback)

Under the 2019 Long-Term Incentive and Cash Bonus Plan (the ‘‘2019 Plan’’), unless an award agreement

provides otherwise, if a participant’s employment or service is terminated for cause, or if after termination the
Compensation Committee determines either that (i) prior to termination, the participant engaged in an act or
omission that would have warranted termination for cause or (ii) after termination, the participant violates any
continuing obligation or duty of the participant with respect to Kroger, any gain realized by the participant from the
exercise, vesting or payment of any award may be cancelled, forfeited or recouped in the sole discretion of the
Committee. Under the 2019 Plan, any gain realized by the participant from the exercise, vesting or payment of any
award may also be recouped if, within one year after such exercise, vesting or payment, (i) a participant is
terminated for cause, (ii) the Compensation Committee determines that the participant is subject to recoupment
pursuant to any Kroger policy, or (iii) after a participant’s termination for any reason, the Compensation Committee
determines either that (1) prior to termination the participant engaged in an act or omission that would have
warranted termination for cause, or (2) after termination the participant violates any continuing obligation or duty of
the participant with respect to Kroger. Unless otherwise defined under 2019 Plan award agreement, ‘‘cause’’ has
the meaning as defined in The Kroger Co. Employee Protection Plan, as amended from time to time.

Additionally, if an award based on financial statements that are subsequently restated in a way that would decrease
the value of such award, the participant will, to the extent not otherwise prohibited by law, upon the written request
of Kroger, forfeit and repay to Kroger the difference between what was received and what should have been
received based on the accounting restatement, which will be repaid in accordance with any applicable Kroger
policy or applicable law, including Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
and any rules or regulations adopted thereunder.

Kroger also has a recoupment policy, which provides that if a material error of facts results in the payment to
an executive officer at the level of Group Vice President or higher of an annual cash incentive or a long-term cash
incentive in an amount higher than otherwise would have been paid, as determined by the Compensation
Committee, then the officer, upon demand from the Compensation Committee, will reimburse Kroger for the
amounts that would not have been paid if the error had not occurred. This recoupment policy applies to those
amounts paid by Kroger within 36 months prior to the detection and public disclosure of the error. In enforcing the
policy, the Compensation Committee will take into consideration all factors that it deems appropriate, including:

•

the materiality of the amount of payment involved;

the extent to which other benefits were reduced in other years as a result of the achievement of
performance levels based on the error;

individual officer culpability, if any; and

other factors that should offset the amount of overpayment.

Compensation Policies as They Relate to Risk Management

As part of the Compensation Committee’s review of our compensation practices, the Compensation

Committee considers and analyzes the extent to which risks arise from such practices and their impact on Kroger’s
business. As discussed in this Compensation Discussion and Analysis, our policies and practices for compensating
employees are designed to, among other things, attract and retain high quality and engaged employees. In this
process, the Compensation Committee also focuses on minimizing risk through the implementation of certain
practices and policies, such as the executive compensation recoupment policy, which is described above.
Accordingly, we do not believe that our compensation practices and policies create risks that are reasonably likely
to have a material adverse effect on Kroger.

Prohibition on Hedging and Pledging

The Board adopted a policy prohibiting Kroger directors and executive officers from engaging, directly or

indirectly, in the pledging of, hedging transactions in, or short sales of, Kroger securities.

Section 162(m) of the Internal Revenue Code

Prior to the effective date of the Tax Cuts and Jobs Act of 2017, Section 162(m) of the Code generally
disallowed a federal tax deduction to public companies for compensation greater than $1 million paid in any tax
year to specified executive officers unless the compensation was ‘‘qualified performance-based compensation’’
under that section. Pursuant to the Tax Cuts and Jobs Act of 2017, the exception for ‘‘qualified performance-based
compensation’’ under Section 162(m) of the Code was eliminated with respect to all remuneration in excess of
$1 million other than qualified performance-based compensation pursuant to a written binding contract in effect on
November 2, 2017 or earlier which was not modified in any material respect on or after such date (the legislation
providing for such transition rule, the ‘‘Transition Rule’’).

As a result, performance-based compensation that the Compensation Committee structured with the intent of

qualifying as performance-based compensation under Section 162(m) prior to the change in the law may or may
not be fully deductible, depending on the application of the Transition Rule. In addition, compensation
arrangements structured following the change in law will be subject to the Section 162(m) limitation (without any
exception for performance-based compensation). Consistent with its past practice, the Committee will continue to
retain flexibility to design compensation programs that are in the best long-term interests of the Company and our
shareholders, with deductibility of compensation being one of a variety of considerations taken into account.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with Kroger’s management the Compensation
Discussion and Analysis contained in this proxy statement. Based on its review and discussions with management,
the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be
included in Kroger’s proxy statement and incorporated by reference into its Annual Report on Form 10-K.

Compensation Committee:

Clyde R. Moore, Chair
Susan J. Kropf
Amanda Sourry
Mark Sutton

Executive Compensation Tables

Summary Compensation Table

The following table and footnotes provide information regarding the compensation of the NEOs for the fiscal

years presented.

Fiscal
Year
2020
2019
2018
2020
2019

Salary
($)

Bonus
($)(1)

Stock
Awards
($)(2)

Option
Awards
($)(3)

$1,341,060 $769,231 $10,900,041 $2,101,581
— $ 8,400,002 $2,100,170
$1,311,849
$1,311,984
— $ 4,999,996 $2,367,858
$ 601,050 $312,426 $ 2,498,469 $ 540,409
— $ 2,350,034 $ 775,042
$ 472,561

Non-Equity
Incentive Plan
Compensation
($)(4)
$4,888,929
$2,006,450
$2,692,833
$1,092,959
$ 442,755

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(5)
$1,795,455
$6,962,485
$ 335,955
0
$
0
$

All Other
Compensation
($)(6)
$577,277
$348,692
$329,246
$122,376
$101,888

Total
($)
$22,373,574
$21,129,648
$12,037,872
$ 5,167,689
$ 4,142,280

2020
2019
2018

$ 849,484 $323,077 $ 3,010,038 $ 540,409
— $ 2,225,025 $ 600,051
$ 822,460
— $ 1,059,224 $ 224,548
$ 724,946

$1,586,363
$ 830,446
$ 817,670

2020
2019

$ 689,567 $312,426 $ 2,998,473 $ 540,409
— $ 1,825,016 $ 500,042
$ 638,519

$1,338,239
$ 572,191

$
$
$

$
$

0
0
0

0
0

$177,900
$134,801
$107,830

$ 6,487,271
$ 4,612,783
$ 2,934,218

$121,168
$110,044

$ 6,000,282
$ 3,645,812

Name and Principal
Position
W. Rodney McMullen

Chairman and Chief
Executive Officer

Gary Millerchip

Senior Vice President
and Chief Financial Officer

Stuart Aitken

Senior Vice President and
Chief Merchandising &
Marketing Officer

Yael Cosset

Senior Vice President
and Chief Information Officer

Michael Donnelly

Executive Vice President
and Chief Operating Officer

2020
2019
2018

$ 982,973 $553,846 $ 4,200,014 $ 900,678
— $ 3,200,002 $ 800,064
$ 922,516
— $ 2,355,780 $ 769,118
$ 885,677

$2,296,154
$1,060,269
$1,344,160

$ 905,574
$ 4,111,824
$ 205,544

$255,268
$235,009
$133,014

$10,094,507
$10,329,684
$ 5,693,293

(1) Amounts reflect the Q1 Bonus amounts. See ‘‘2020 Annual Cash Incentive Plan’’ in the CD&A for information

about the Q1 Bonus.

(2) Amounts reflect the grant date fair value of restricted stock and performance units granted each fiscal year, as
computed in accordance with FASB ASC Topic 718. The following table reflects the value of each type of
award granted to the NEOs in 2020:

Name

Mr. McMullen
Mr. Millerchip
Mr. Aitken
Mr. Cosset
Mr. Donnelly

Restricted Stock
$5,650,054
$1,148,466
$1,660,035
$1,648,470
$1,950,028

Performance Units
$5,249,987
$1,350,003
$1,350,003
$1,350,003
$2,249,986

The grant date fair value of the performance units reflected in the stock awards column and in the table above
is computed based on the probable outcome of the performance conditions as of the grant date. This amount
is consistent with the estimate of aggregate compensation cost to be recognized by the Company over the
three-year performance period of the award determined as of the grant date under FASB ASC Topic 718,
excluding the effect of estimated forfeitures. The assumptions used in calculating the valuations are set forth in
Note 12 to the consolidated financial statements in Kroger’s Form 10-K for fiscal year 2020.

Assuming that the highest level of performance conditions is achieved, the aggregate fair value of the 2020
performance unit awards at the grant date is as follows:

Name

Value of Performance Units
Assuming Maximum Performance

Mr. McMullen

Mr. Millerchip

Mr. Aitken

Mr. Cosset

Mr. Donnelly

$6,562,484

$1,687,504

$2,812,483

(3) These amounts represent the aggregate grant date fair value of option awards computed in accordance with
FASB ASC Topic 718. The assumptions used in calculating the valuations are set forth in Note 12 to the
consolidated financial statements in Kroger’s Form 10-K for fiscal year 2020.

(4) Non-equity incentive plan compensation earned for 2020 consists of amounts earned under the Q2 – Q4 2020

Corporate Incentive Plan and the 2018-2020 Long-Term Incentive Plan.

Name

Mr. McMullen

Mr. Millerchip

Mr. Aitken

Mr. Cosset

Mr. Donnelly

Q2 – Q4 2020
Corporate Incentive
Plan Cash Payment

$1,730,769

$ 702,959

$ 726,923

$ 702,959

$1,246,154

Long-Term
Cash Incentive

$3,158,160

$ 390,000

$ 859,440

$ 635,280

$1,050,000

The Q2 – Q4 2020 Corporate Incentive Plan was calculated at 200% and was applied to the Q2 – Q4 prorated
amount of each NEO’s annual incentive plan target. The 200% payout was allocated one half to cash for
Mr. McMullen and three-quarters to cash for the remaining NEOs (reflected in the table above); and one half to
restricted stock for Mr. McMullen and one-quarter to restricted stock for the remaining NEOs (and reflected in
the Stock Award column of the Summary Compensation Table and footnote 2). These cash amounts were
earned with respect to performance in Q2 – Q4 2020 and paid in March 2021. See ‘‘Q2 – Q4 2020 Corporate
Incentive Plan Results’’ in the CD&A for more information on this plan.

The long-term cash incentive awarded under the 2018-2020 Long-Term Incentive Plan is a performance-based
incentive plan designed to reward participants for improving the long-term performance of the Company. See
‘‘2018-2020 Long-Term Incentive Plan – Results’’ in the CD&A for more information on this plan.

(5) For 2020, the amounts reported consist of the aggregate change in the actuarial present value of each NEO’s
accumulated benefit under a defined benefit pension plan (including supplemental plans) and preferential
earnings on nonqualified deferred compensation, which apply to Mr. McMullen and Mr. Donnelly. The
remainder of the NEOs do not participate in a defined benefit pension plan or in a nonqualified deferred
compensation plan.

Name

Mr. McMullen

Mr. Millerchip

Mr. Aitken

Mr. Cosset

Mr. Donnelly

Change in
Pension Value

$1,658,565

—

Preferential Earnings on
Nonqualified
Deferred Compensation

$136,890

—

$ 897,958

$ 7,616

Change in Pension Value. These amounts represent the aggregate change in the actuarial present value of
accumulated pension benefits. The Company froze the compensation and service periods used to calculate
pension benefits for active employees who participate in the affected pension plans, including the NEO
participants, as of December 31, 2019. Beginning January 1, 2020, the affected active employees will no
longer accrue additional benefits for future service and eligible compensation received under these plans.
Pension values fluctuate from year to year depending on the assumptions used to determine the present
value, such as the discount rate, and increase each year due to aging, as the benefits are one year closer to
being paid. Please see the 2020 Pension Benefits section for further information regarding the assumptions
used in calculating pension benefits.

Preferential Earnings on Nonqualified Deferred Compensation. Mr. McMullen and Mr. Donnelly participate in
The Kroger Co. Executive Deferred Compensation Plan (the ‘‘Deferred Compensation Plan’’). Under the plan,
deferred compensation earns interest at a rate representing Kroger’s cost of ten-year debt, as determined by
the CFO, and approved by the Compensation Committee prior to the beginning of each deferral year. For each
participant, a separate deferral account is created each year and the interest rate established for that year is
applied to that deferral account until the deferred compensation is paid out. If the interest rate established by
Kroger for a particular year exceeds 120% of the applicable federal long-term interest rate that corresponds
most closely to the plan rate, the amount by which the plan rate exceeds 120% of the corresponding federal
rate is deemed to be above-market or preferential. In eighteen of the twenty-seven years in which at least one

NEO deferred compensation, the rate set under the plan for that year exceeds 120% of the corresponding
federal rate. For each of the deferral accounts in which the plan rate is deemed to be above-market, Kroger
calculates the amount by which the actual annual earnings on the account exceed what the annual earnings
would have been if the account earned interest at 120% of the corresponding federal rate, and discloses those
amounts as preferential earnings. Amounts deferred in 2020 earn interest at a rate higher than 120% of the
corresponding federal rate; accordingly, there are preferential earnings on these amounts.

(6) Amounts reported in the ‘‘All Other Compensation’’ column for 2020 include Company contributions to defined

contribution retirement plans, dividend equivalents paid on earned performance units, and dividends paid on
unvested restricted stock. In 2020, the total amount of perquisites and personal benefits for each of the NEOs
was less than $10,000. The following table identifies the value of each element of compensation.

Name

Retirement Plan
Contributions(a)

Mr. McMullen

Mr. Millerchip

Mr. Aitken

Mr. Cosset

Mr. Donnelly

$131,283

$ 44,952

$ 65,025

$ 49,599

$ 80,869

Payment of
Dividend
Equivalents
on Earned
Performance
Units

$203,788

$ 15,045

$ 55,458

$ 15,486

$ 67,753

Dividends
Paid on
Unvested
Restricted
Stock

$242,206

$ 62,379

$ 57,417

$ 56,083

$106,646

(a) Retirement plan contributions. The Company makes automatic and matching contributions to NEOs’

accounts under the applicable defined contribution plan on the same terms and using the same formulas
as other participating employees. The Company also makes contributions to NEOs’ accounts under the
applicable defined contribution plan restoration plan, which is intended to make up the shortfall in
retirement benefits caused by the limitations on benefits to highly compensated individuals under the
defined contribution plans in accordance with the Code.

2020 Grants of Plan-Based Awards

The following table provides information about equity and non-equity incentive awards granted to the NEOs in

2020.

Name

W. Rodney McMullen

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards

Target
($)(1)
$2,500,000

Maximum
($)(1)
$5,250,000

Estimated Future
Payouts Under
Equity Incentive
Plan Awards

Target
(#)(2)

Maximum
(#)(2)

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(3)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)

Exercise
or Base
Price of
Option
Awards
($/Sh)

Grant
Date Fair
Value of
Stock
and
Option
Awards

108,174

329,154

$29.12

$ 700,000

$1,470,000

$ 700,000

$1,470,000

$ 700,000

$1,470,000

$1,200,000

$2,520,000

180,288

225,360

46,360

57,950

46,360

57,950

46,360

57,950

77,266

96,583

71,552

27,816

9,687

27,816
15,380

10,018

27,816
15,380

9,687

46,360

17,173

84,640

$29.12

84,640

$29.12

84,640

$29.12

141,066

$29.12

$3,150,027
$2,101,581
$5,249,987
$2,500,027

$ 810,002
$ 540,409
$1,350,003
$ 338,464

$ 810,002
$ 500,004
$ 540,409
$1,350,003
$ 350,029

$ 810,002
$ 500,004
$ 540,409
$1,350,003
$ 338,464

$1,350,003
$ 900,678
$2,249,986
$ 600,025

Grant
Date

3/12/2020
3/12/2020
3/12/2020
3/11/2021

3/12/2020
9/17/2020
3/12/2020
3/12/2020
3/11/2021

3/12/2020
3/12/2020
3/12/2020
3/11/2021

(1) These amounts relate to the 2020 performance-based annual cash incentive plan. The amount listed under

‘‘Target’’ represents the annual cash incentive potential of the NEO. By the terms of the plan, payouts are
limited to no more than 210% of a participant’s annual cash incentive potential; accordingly, the amount listed
under ‘‘Maximum’’ is 210% of that officer’s annual cash incentive potential amount. The amounts actually
earned under this plan were paid out in March 2021; are described in the Compensation Discussion and
Analysis; and are included in the Summary Compensation Table for 2020 in part in each of the following
columns: the ‘‘Bonus’’ column; the ‘‘Stock Awards’’ column and footnote 2; and the ‘‘Non-Equity Incentive Plan
Compensation’’ column and footnote 4. See ‘‘2020 Annual Cash Incentive Plan’’ in CD&A for more information
about the program for 2020.

(2) These amounts represent performance units awarded under the 2020 Long-Term Incentive Plan, which covers
performance during fiscal years 2020, 2021, and 2022. The amount listed under ‘‘Maximum’’ represents the
maximum number of common shares that can be earned by the NEO under the award or 125% of the target
amount. This amount is consistent with the estimate of aggregate compensation cost to be recognized by the
Company over the three-year performance period of the award determined as of the grant date under FASB
ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value reported in the last
column is based on the probable outcome of the performance conditions as of the grant date. The aggregate
grant date fair value of these awards is included in the Summary Compensation Table for 2020 in the ‘‘Stock
Awards’’ column and described in footnote 2 to that table.

(3) These amounts represent the number of shares of restricted stock granted in 2020. The aggregate grant date
fair value reported in the last column is calculated in accordance with FASB ASC Topic 718. The aggregate
grant date fair value of these awards is included in the Summary Compensation Table for 2020 in the ‘‘Stock
Awards’’ column and described in footnote 2 to that table.

(4) These amounts represent the number of stock options granted in 2020. Options are granted with an exercise
price equal to the closing price of Kroger common shares on the grant date. The aggregate grant date fair
value reported in the last column is calculated in accordance with FASB ASC Topic 718. The aggregate grant
date fair value of these awards is included in the Summary Compensation Table for 2020 in the ‘‘Option
Awards’’ column.

The Compensation Committee, and the independent members of the Board in the case of the CEO, established
the incentive potential amounts for the performance-based annual cash incentive awards (shown in this table as
‘‘Target’’) and the number of performance units awarded for the long-term incentive awards (shown in this table as
‘‘Target’’). Amounts are payable to the extent that Kroger’s actual performance meets specific performance metrics
established by the Compensation Committee at the beginning of the performance period. There are no guaranteed
or minimum payouts; if none of the performance metrics are achieved, then none of the award is earned and no
payout is made. As described in the CD&A, actual earnings under the performance-based annual cash incentive
plan may exceed the target amount if the Company’s performance exceeds the performance goals, but are limited
to 210% of the target amount. The potential values for performance units awarded under the 2020-2022 Long-Term
Incentive Plan are more particularly described in the CD&A.

The annual restricted stock and nonqualified stock options awards granted to the NEOs vest in equal amounts on
each of the first four anniversaries of the grant date, so long as the officer remains a Kroger employee, except that
(a) Mr. Aitken’s and Mr. Cosset’s September 2020 award included restricted stock awards of 15,380 shares as
special awards granted in connection with promotions that each vest in equal amounts on each of the first three
anniversaries of the grant date and (b) the restricted stock granted in March 2021 with respect to a portion of the
Q2 – Q4 2020 Corporate Incentive Plan vests on the one year anniversary of the grant date. Any dividends
declared on Kroger common shares are payable on unvested restricted stock.

2020 Outstanding Equity Awards at Fiscal Year-End

The following table provides information about outstanding equity-based incentive compensation awards for
the NEOs as of the end of 2020. The vesting schedule for each award is described in the footnotes to this table.
The market value of unvested restricted stock and unearned performance units is based on the closing price of
Kroger’s common shares of $34.50 on January 29, 2021, the last trading day of fiscal 2020.

Option Awards

Stock Awards

Name
W. Rodney McMullen

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
182,880
194,880
194,880
300,000
235,415
286,472
343,876
174,646
87,064

9,600
13,992
22,376
17,452
15,125
16,583
5,528
12,779

22,326
27,862
33,445
16,562
20,729
5,528

13,992
14,504
5,305
6,366
26,109
14,749
16,583
5,528

50,720
50,720
60,000
59,929
82,822
99,418
56,728
33,167

Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)

—
—
—
—
—

71,619(1)
229,251(2)
174,647(2)
261,195(3)
329,154(4)

—
—
5,596(1)
17,453(2)
15,126(2)
49,752(3)
11,056(5)
38,337(6)
84,640(4)

—
6,966(1)
22,297(2)
16,562(2)
62,190(3)
11,056(5)
84,640(4)

—
3,626(1)
1,327(7)
4,245(8)
17,407(2)
14,750(2)
49,752(3)
11,056(5)
84,640(4)

—
—
—
—

20,706(1)
66,280(2)
56,728(2)
99,503(3)
141,066(4)

Option
Exercise
Price
($)
$12.37
$10.98
$18.88
$24.67
$38.33
$37.48
$22.92
$28.05
$24.75
$29.12
$24.67
$38.33
$37.48
$22.92
$28.05
$24.75
$24.75
$22.08
$29.12
$38.33
$37.48
$22.92
$28.05
$24.75
$24.75
$29.12

$38.33
$37.48
$31.25
$28.83
$22.92
$28.05
$24.75
$24.75
$29.12

$10.98
$18.88
$24.67
$38.33
$37.48
$22.92
$28.05
$24.75
$29.12

Option
Expiration
Date
6/23/2021
7/12/2022
7/15/2023
7/15/2024
7/15/2025
7/13/2026
7/13/2027
7/13/2028
3/14/2029
3/12/2030
7/15/2024
7/15/2025
7/13/2026
7/13/2027
7/13/2028
3/14/2029
3/14/2029
7/15/2029
3/12/2030
7/15/2025
7/13/2026
7/13/2027
7/13/2028
3/14/2029
3/14/2029
3/12/2030

7/15/2025
7/13/2026
9/15/2026
3/9/2027
7/13/2027
7/13/2028
3/14/2029
3/14/2029
3/12/2030

7/12/2022
7/15/2023
7/15/2024
7/15/2025
7/13/2026
7/13/2027
7/13/2028
3/14/2029
3/12/2030

Number
of Shares
or Units of
Stock That
Have Not
Vested
(#)

Market Value
of Shares
or Units of
Stock That
Have Not
Vested
($)
$ 690,380
107,660(10) $3,714,270
95,455(11) $3,293,198
108,174(12) $3,732,003

20,011(9)

1,724(9)
59,478
$
10,311(10) $ 355,730
18,183(11) $ 627,314
6,061(13) $ 209,105
17,834(14) $ 615,273
27,816(12) $ 959,652

2,141(9)
73,865
$
13,115(10) $ 452,468
22,728(11) $ 784,116
6,061(13) $ 209,105
27,816(12) $ 959,652
15,380(15) $ 530,610

1,037(9)

$
640(16) $
2,220(17) $

35,777
22,080
76,590
14,131(10) $ 487,520
18,183(11) $ 627,314
6,061(13) $ 209,105
27,816(12) $ 959,652
15,380(15) $ 530,610

5,924(9)

$ 204,378
45,768(10) $1,578,996
36,364(11) $1,254,558
46,360(12) $1,599,420

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)

Equity
Incentive Plan
Awards: Market
or Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested
($)

169,697(18)
180,288(19)

$6,193,941
$6,602,147

32,323(18)
46,360(19)

$1,179,790
$1,697,703

40,404(18)
46,360(19)

$1,474,746
$1,697,703

32,323(18)
46,360(19)

$1,179,790
$1,697,703

64,646(18)
77,266(19)

$2,359,580
$2,829,481

(1) Stock options vest on 7/13/2021.

(2) Stock options vest in equal amounts on 7/13/2021 and 7/13/2022.

(3) Stock options vest in equal amounts on 3/14/2021, 3/14/2022, and 3/14/2023.

(4) Stock options vest in equal amounts on 3/12/2021, 3/12/2022, 3/12/2023, and 3/12/2024.

(5) Stock options vest in equal amounts on 3/14/2021 and 3/14/2022.

(6) Stock options vest in equal amounts on 7/15/2021, 7/15/2022, and 7/15/2023.

(7) Stock options vest on 9/15/2021.

(8) Stock options vest in equal amounts on 3/9/2021 and 3/9/2022.

(9) Restricted stock vests on 7/13/2021.

(10) Restricted stock vests in equal amounts on 7/13/2021 and 7/13/2022.

(11) Restricted stock vests in equal amounts on 3/14/2021, 3/14/2022, and 3/14/2023.

(12) Restricted stock vests in equal amounts on 3/12/2021, 3/12/2022, 3/12/2023, and 3/12/2024.

(13) Restricted stock vests in equal amounts on 3/14/2021 and 3/14/2022.

(14) Restricted stock vests in equal amounts on 7/15/2021, 7/15/2022, and 7/15/2023.

(15) Restricted stock vests in equal amounts on 9/17/2021, 9/17/2022, and 9/17/2023.

(16) Restricted stock vests on 9/15/2021.

(17) Restricted stock vests in equal amounts on 3/9/2021 and 3/9/2022.

(18) Performance units granted under the 2019 long-term incentive plan are earned as of the last day of fiscal

2021, to the extent performance conditions are achieved. Because the awards earned are not currently
determinable, in accordance with SEC rules, the number of units and the corresponding market value reflect a
representative amount based on performance through 2020, including cash payments equal to projected
dividend equivalent payments.

(19) Performance units granted under the 2020 long-term incentive plan are earned as of the last day of fiscal

2022, to the extent performance conditions are achieved. Because the awards earned are not currently
determinable, in accordance with SEC rules, the number of units and the corresponding market value reflect a
representative amount based on performance through 2020, including cash payments equal to projected
dividend equivalent payments.

2020 Option Exercises and Stock Vested

The following table provides information regarding 2020 stock options exercised, restricted stock vested, and

common shares issued pursuant to performance units earned under long-term incentive plans.

Name

W. Rodney McMullen

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

Option Awards(1)

Stock Awards(2)

Number of
Shares
Acquired on
Exercise
(#)

Value
Realized on
Exercise
($)

Number
of Shares
Acquired on
Vesting
(#)

Value
Realized
on
Vesting
($)

140,000

$3,066,341

235,467

$7,949,907

—

70,720

$1,478,024

47,600

67,923

44,874

98,406

$1,577,974

$2,284,876

$1,482,134

$3,275,901

(1) Stock options have a ten-year life and expire if not exercised within that ten-year period. The value realized on

exercise is the difference between the exercise price of the option and the closing price of Kroger’s common
shares on the exercise date.

(2) The Stock Awards columns include vested restricted stock and earned performance units, as follows:

Name

Vested Restricted Stock
Number of
Shares

Value
Realized

Earned Performance Units
Number of
Shares

Value
Realized

W. Rodney McMullen

122,877

$4,016,012

112,590

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

39,288

37,283

36,318

60,973

$1,287,553

$1,214,314

$1,183,187

$1,967,992

8,312

30,640

8,556

37,433

$3,933,895

$ 290,421

$1,070,562

$ 298,947

$1,307,909

Restricted stock. The table includes the number of shares acquired upon vesting of restricted stock and the
value realized on the vesting of restricted stock, based on the closing price of Kroger common shares on the
vesting date.

Performance Units. Participants in the 2018-2020 Long-Term Incentive Plan were awarded performance units
that were earned based on performance criteria established by the Compensation Committee as described in
‘‘2018-2020 Long-Term Incentive Plan – Results’’ in the CD&A. Actual payouts were based on the level of
performance achieved and were paid in common shares. The number of common shares issued, and the
value realized based on the closing price of Kroger common shares of $34.94 on March 11, 2021, the date of
deemed delivery of the shares, are reflected in the table above.

2020 Pension Benefits

The following table provides information regarding pension benefits for the NEOs as of the last day of

fiscal 2020.

Name

W. Rodney McMullen

Gary Millerchip(2)

Stuart Aitken(2)

Yael Cosset(2)

Michael J. Donnelly

Number of
Years Credited
Service
(#)

Present Value of
Accumulated
Benefit
($)(1)

Payments during
Last fiscal year
($)

—

$ 2,016,147

$22,696,041

—

$ 1,349,216

$10,567,419

—

Plan Name

Pension Plan

Excess Plan

Pension Plan

Excess Plan

Pension Plan

Excess Plan

Pension Plan

Excess Plan

Pension Plan

Excess Plan

(1) The discount rate used to determine the present values was 2.70% for The Kroger Consolidated Retirement

Benefit Plan Spin Off (the ‘‘Pension Plan’’) and 2.71% for The Kroger Co. Consolidated Retirement Excess
Benefit Plan (the ‘‘Excess Plan’’), which are the same rates used at the measurement date for financial
reporting purposes. Additional assumptions used in calculating the present values are set forth in Note 15 to
the consolidated financial statements in Kroger’s 10-K for fiscal year 2020.

(2) Mr. Millerchip, Mr. Aitken, and Mr. Cosset do not participate in the Pension Plan or the Excess Plan.

Pension Plan and Excess Plan

In 2020, Mr. McMullen and Mr. Donnelly were participants in the Pension Plan, which is a qualified defined

benefit pension plan. Mr. McMullen and Mr. Donnelly also participate in the Excess Plan, which is a nonqualified
deferred compensation plan as defined in Section 409A of the Code. The purpose of the Excess Plan is to make up
the shortfall in retirement benefits caused by the limitations on benefits to highly compensated individuals under the
qualified defined benefit pension plans in accordance with the Code.

Although participants generally receive credited service beginning at age 21, certain participants in the
Pension Plan and the Excess Plan who commenced employment prior to 1986, including Mr. McMullen, began to
accrue credited service after attaining age 25 and one year of service. The Pension Plan and the Excess Plan
generally determine accrued benefits using a cash balance formula but retain benefit formulas applicable under
prior plans for certain ‘‘grandfathered participants’’ who were employed by Kroger on December 31, 2000.
Mr. McMullen and Mr. Donnelly are eligible for these grandfathered benefits.

Grandfathered Participants

Benefits for grandfathered participants are determined using formulas applicable under prior plans, including
the Kroger formula covering service to The Kroger Co. and the Dillon formula covering service to Dillon Companies,
Inc. As ‘‘grandfathered participants,’’ Mr. McMullen and Mr. Donnelly will receive benefits under the Pension Plan
and the Excess Plan, determined as follows:

•

11∕2% times years of credited service multiplied by the average of the highest five years of total earnings
(base salary and annual cash incentive) during the last ten calendar years of employment, reduced by
11∕4% times years of credited service multiplied by the primary social security benefit;

normal retirement age is 65;

unreduced benefits are payable beginning at age 62; and

benefits payable between ages 55 and 62 will be reduced by 1∕3 of 1% for each of the first 24 months and
by 1∕2 of 1% for each of the next 60 months by which the commencement of benefits precedes age 62.

In 2018, we announced changes to these company-sponsored pension plans. The Company froze the
compensation and service periods used to calculate pension benefits for active employees who participate in the
affected pension plans, including the NEO participants, as of December 31, 2019. Beginning January 1, 2020, the
affected active employees will no longer accrue additional benefits for future service and eligible compensation
received under these plans.

In the event of a termination of employment other than death or disability, Mr. McMullen and Mr. Donnelly

currently are eligible for a reduced early retirement benefit, as each has attained age 55. If a ‘‘grandfathered
participant’’ becomes disabled while employed by Kroger and after attaining age 55, the participant will receive the
full retirement benefit. If a married ‘‘grandfathered participant’’ dies while employed by Kroger, the surviving spouse
will receive benefits as though a retirement occurred on such date, based on the greater of: actual benefits payable
to the participant if he or she was over age 55, or the benefits that would have been payable to the participant
assuming he or she was age 55 on the date of death.

Offsetting Benefits

Mr. Donnelly also participates in the Dillon Companies, Inc. Employees’ Profit Sharing Plan (the ‘‘Dillon Profit

Sharing Plan’’), which is a qualified defined contribution plan under which Dillon Companies, Inc. and its
participating subsidiaries may choose to make discretionary contributions each year that are allocated to each
participant’s account. Participation in the Dillon Profit Sharing Plan was frozen in 2001 and participants are no
longer able to make employee contributions, but certain participants, including Mr. Donnelly, are still eligible for
employer contributions. Participants elect from among a number of investment options and the amounts in their
accounts are invested and credited with investment earnings in accordance with their elections. Due to offset
formulas contained in the Pension Plan, Mr. Donnelly’s accrued benefits under the Dillon Profit Sharing Plan offset
a portion of the benefit that would otherwise accrue for him under the Pension Plan for his service with Dillon
Companies, Inc. Mr. Donnelly also participates in the Dillon Companies, Inc. Excess Benefit Profit Sharing Plan
(‘‘Dillon Excess Profit Sharing Plan’’) which provides Company contributions in excess of the qualified plan limits.
The Dillon Excess Profit Sharing Plan is offset by Mr. Donnelly’s benefit from the Excess Plan. The offsets are
reflected in the Pension Benefits table above.

2020 Nonqualified Deferred Compensation

The following table provides information on nonqualified deferred compensation for the NEOs for 2020. Only

Mr. McMullen and Mr. Donnelly participate in a nonqualified deferred compensation plan.

Name

Executive Contributions
in Last FY(1)

Aggregate Earnings
in Last FY(2)

Aggregate Balance
at Last FYE(3)

W. Rodney McMullen

$310,646

$776,413

$12,375,840

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

—

$ 41,596

749,466

(1) This amount includes the deferral of $110,000 of Mr. McMullen’s salary in fiscal 2020; this amount is included
in the ‘‘Salary’’ column of the Summary Compensation Table for 2020. This amount also includes $77,928 of
his long term incentive and $122,718 of his annual incentive deferred in fiscal 2020; these amounts are
included in the ‘‘Non-Equity Incentive Plan Compensation’’ column of the Summary Compensation Table for
2019.

(2) The following amounts in the Aggregate Balance column were reported in the Summary Compensation Tables

covering fiscal years 2006 – 2019: Mr. McMullen, $3,606,241; and Mr. Donnelly, $245,799.

(3) These amounts include the aggregate earnings on all accounts for each NEO, including any above-market or
preferential earnings. The following amounts earned in 2020 are deemed to be preferential earnings and are
included in the ‘‘Change in Pension Value and Nonqualified Deferred Compensation Earnings’’ column of the
Summary Compensation Table for 2020: Mr. McMullen, $136,890 and Mr. Donnelly, $7,616.

Executive Deferred Compensation Plan

Mr. McMullen and Mr. Donnelly participate in the Deferred Compensation Plan, which is a nonqualified

deferred compensation plan. Participants may elect to defer up to 100% of the amount of their salary that exceeds
the sum of the FICA wage base and pre-tax insurance and other Code Section 125 plan deductions, as well as up
to 100% of their annual and long-term cash incentive compensation. Kroger does not match any deferral or provide
other contributions. Deferral account amounts are credited with interest at the rate representing Kroger’s cost of
ten-year debt as determined by Kroger’s CFO and approved by the Compensation Committee prior to the
beginning of each deferral year. The interest rate established for deferral amounts for each deferral year will be
applied to those deferral amounts for all subsequent years until the deferred compensation is paid out. Amounts
deferred in 2020 earn interest at a rate of 4.10%. Participants can elect to receive lump sum distributions or
quarterly installments for periods up to ten years. Participants also can elect between lump sum distributions and
quarterly installments to be received by designated beneficiaries if the participant dies before distribution of
deferred compensation is completed.

Participants may not withdraw amounts from their accounts until they leave Kroger, except that Kroger has

discretion to approve an early distribution to a participant upon the occurrence of an unforeseen emergency.
Participants who are ‘‘specified employees’’ under Section 409A of the Code, which includes the NEOs, may not
receive a post-termination distribution for at least six months following separation. If the employee dies prior to or
during the distribution period, the remainder of the account will be distributed to his or her designated beneficiary in
lump sum or quarterly installments, according to the participant’s prior election.

Potential Payments upon Termination or Change in Control

Kroger does not have employment agreements that provide for payments to the NEOs in connection with a
termination of employment or a change in control of Kroger. However, KEPP, award agreements for stock options,
restricted stock and performance units, the long-term cash incentive plans, and the long-term incentive plans under
which performance units are granted provide for certain payments and benefits to participants, including the NEOs,
in the event of a termination of employment or a change in control of Kroger, as defined in the applicable plan or
agreement. Our pension plan and nonqualified deferred compensation plan also provide for certain payments and
benefits to participants in the event of a termination of employment, as described above in the 2020 Pension
Benefits section and the 2020 Nonqualified Deferred Compensation section, respectively.

The Kroger Co. Employee Protection Plan

KEPP applies to all management employees who are classified as exempt under the federal Fair Labor
Standards Act and to certain administrative or technical support personnel who are not covered by a collective
bargaining agreement, with at least one year of service, including the NEOs. KEPP provides severance benefits
when a participant’s employment is terminated actually or constructively within two years following a change in
control of Kroger, as defined in KEPP. The actual amount of the severance benefit is dependent on pay level and
years of service. Exempt employees, including the NEOs, are eligible for the following benefits:

•

a lump sum severance payment equal to up to 24 months of the participant’s annual base salary and
target annual incentive potential;

a lump sum payment equal to the participant’s accrued and unpaid vacation, including banked vacation;

continued medical and dental benefits for up to 24 months and continued group term life insurance
coverage for up to six months; and

up to $10,000 as reimbursement for eligible outplacement expenses.

In the event that any payments or benefits received or to be received by an eligible employee in connection

with a change in control or termination of employment (whether pursuant to KEPP or any other plan, arrangement
or agreement with Kroger or any person whose actions result in a change in control) would constitute parachute
payments within the meaning of Section 280G of the Code and would be subject to the excise tax under Section
4999 of the Code, then such payments and benefits will either be (i) paid in full or (ii) reduced to the minimum
extent necessary to ensure that no portion of such payments or benefits will be subject to the excise tax, whichever
results in the eligible employee receiving the greatest aggregate amount on an after-tax basis.

Long-Term Incentive Awards

The following table describes the treatment of long-term incentive awards following a termination of

employment or change in control of Kroger, as defined in the applicable agreement. In each case, the continued
vesting, exercisability or eligibility for the incentive awards will end if the participant provides services to a
competitor of Kroger.

Triggering Event

Stock Options

Restricted Stock

Performance Units

Involuntary

Termination

Voluntary

Termination/
Retirement

- Prior to minimum

age and five
years of
service(1)

Voluntary

Termination/
Retirement

- After minimum
age and five
years of
service(1)

Death

Forfeit all unvested options.
Previously vested options remain
exercisable for the shorter of one
year after termination or the
remainder of the original 10-year
term.

Unvested options held greater
than one year continue vesting
on the original schedule. All
options are exercisable for
remainder of the original 10-year
term.

Forfeit all unvested shares

Forfeit all rights to units for which
the three-year performance
period has not ended

Forfeit all unvested shares

Forfeit all rights to units for which
the three-year performance
period has not ended

Unvested shares held greater
than one year continue vesting
on the original schedule

Pro rata portion(2) of units earned
based on performance results
over the full three-year period

Unvested options are
immediately vested. All options
are exercisable for the remainder
of the original 10-year term.

Unvested shares immediately
vest

Pro rata portion(2) of units earned
based on performance results
through the end of the fiscal year
in which death occurs. Award will
be paid following the end of such
fiscal year.

Triggering Event

Stock Options

Restricted Stock

Performance Units

Disability

Change in

Control(3)

- For awards prior
to March 2019

Change in

Control(4)

- For awards

in March 2019
and thereafter

Unvested options are
immediately vested. All options
are exercisable for remainder of
the original 10-year term.

Unvested options are
immediately vested and
exercisable.

Unvested shares immediately
vest

Pro rata portion(2) of units earned
based on performance results
over the full three-year period

Unvested shares immediately
vest.

50% of the units granted at the
beginning of the performance
period earned immediately

Unvested options only vest and
become exercisable upon an
actual or constructive termination
of employment within two years
following a change in control.

Unvested shares only vest upon
an actual or constructive
termination of employment within
two years following a change in
control.

50% of the units granted at the
beginning of the performance
period earned upon an actual or
constructive termination of
employment within two years
following a change in control.

(1) The minimum age requirement is age 62 for stock options and restricted stock and age 55 for performance

units and the long-term cash incentive.

(2) The prorated amount is equal to the number of weeks of active employment during the performance period

divided by the total number of weeks in the performance period.

(3) These benefits are payable upon a change in control of Kroger, as defined in the applicable agreement, with or

without a termination of employment.

(4) These benefits are payable upon an actual or constructive termination of employment within two years after a

change in control, as defined in the applicable agreements.

Quantification of Payments upon Termination or Change in Control

The following table provides information regarding certain potential payments that would have been made to

the NEOs if the triggering event occurred on the last day of the fiscal year, January 30, 2021, given compensation,
age and service levels as of that date and, where applicable, based on the closing market price per Kroger
common share on the last trading day of the fiscal year ($34.50 on January 29, 2021). Amounts actually received
upon the occurrence of a triggering event will vary based on factors such as the timing during the year of such
event, the market price of Kroger common shares, and the officer’s age, length of service and compensation level.

W. Rodney McMullen

Name