KROGER'S HELPING HANDS

MARK HAMSTRA

At a time when many food retailers are cutting back on spending, Kroger Co. has found ways to increase its charitable giving.

The Cincinnati-based retailer's approach to corporate giving encompasses a broad range of activities, from helping local scout troops raise money to giving donations to national organizations. But it is a philanthropic strategy that is very much locally driven. Individual stores and regions work with local nonprofit organizations, schools and other groups at their own discretion, within the broad framework that Kroger has established for such activities.

"We look to our divisions to tell us what is important, within the corporate priorities," said Lynn Marmer, vice president, corporate affairs, Kroger.

Kroger's charitable activities fall into five main areas: support for community organizations, schools, hunger relief, diversity and women's health.

Kroger's $129 million in charitable giving last year -- including donations from the company's three foundations, from Kroger itself and from customer contributions raised in Kroger stores -- was up from $114 million in 2000 and $103 million in 1999.

Although the actual giving of cash has declined, the company has stepped up its donations of food and other contributions and is increasing its in-store fund-raising efforts with its customers.

"We give less cash and we give more donated gift certificates," said Marmer. "We give more in terms of product, and we continue to operate our fund-raising support programs, and we've increased the fund raising that we do in our stores."

Marmer, who oversees the charitable activities of the company, described the decrease in cash giving as "part of our overall corporate strategy to reduce expenses."

She said many of Kroger's most successful charitable programs have evolved at the local level within Kroger's 18 operating divisions.

"Kroger is very decentralized," she said. "Each division sets its own budget in terms of how much they are going to spend every year in cash and fund-raising gift certificates."

The gift certificate program is the company's primary fund-raising vehicle for local charities. The $19 million-a-year program involves selling gift certificates at a discount to local schools and other nonprofit groups, who then sell them at face value and pocket the difference, which is generally 5%, Marmer said.

About 60% to 70% of the funds raised from those gift certificate sales go to local schools, while the rest go to other community nonprofits like church groups.

In addition, local stores and divisions can request grants of $500 or more from The Kroger Co. Foundation to support local causes. Stores can donate smaller amounts themselves from their own community budgets.

The Fred Meyer Foundation and Ralphs/Food 4 Less Foundation also respond to grant requests from the local level, and they have employee grant committees that also make recommendations for organizations to receive foundation grants.

At the Kroger Foundation, which covers all the other banners, each Kroger division forwards its local grant requests directly to the foundation.

"It's not somebody in Cincinnati deciding, 'In Houston we should do this, and in Atlanta we should do that, and in Indianapolis we should do this,"' Marmer explained.

Some examples of the company's locally based initiatives include:

Kroger's Cincinnati Division and general office support Crayons to Computers, a free store offering school supplies to teachers in underprivileged schools in Cincinnati. The store has provided about $13 million in free supplies since 1997. (See story, Page 22.)

Dillon Stores and Kwik Shop have raised more than $769,000 for school and education in Reno County, Kan., through an annual race.

In Indianapolis, Kroger supports a local inner-city school to provide scholarships, mentoring and other services aimed to help the students improve their scores on Indiana's standardized tests. (See story, opposite page.)

In Houston, Kroger provides smoke detectors and batteries to low-income families, and Kroger employees volunteer to install the detectors.

Earlier this year the Ralphs/Food 4 Less Foundation donated $10,000 to help fund the Watts Friendship Sports League's summer youth baseball program for underprivileged children.

The company's support of America's Second Harvest, the Chicago-based network of food banks and food-rescue organizations, exemplifies Kroger's synergy between local and national charitable activity.

The company works closely with about 40 of Second Harvest's 214 local affiliates, and was named National Retailer of the Year in two of the last three years by the organization.

"Hunger relief is in the top three or four activities that consumers talk about as being a charity that supermarkets should support," said Marmer. "It's just a natural connection."

Eric Davis, unsaleables manager, America's Second Harvest, said that while the organization receives contributions from many different retailers, Kroger distinguishes itself through its multifaceted involvement. Each of the local food banks, he explained, is like a warehouse, and companies like Kroger with distribution expertise can offer a lot of assistance.

"We get donations from a lot of retailers, and we run cause marketing programs with a lot of retailers, but one thing we do hear from our affiliates about Kroger is that they make sure they get people at the executive level involved as board members or advisers to food banks," Davis said. "So, we get a lot of 'soft' benefits there in terms of getting their industry knowledge. We get a lot of help from Kroger in making sure we're running efficient operations, making sure our costs are in line with the industry and those kinds of things. A lot of food banks will tell you that kind of donation is really invaluable. You can't put a price tag on it."

For example, Kroger lends its warehouse manuals to some Second Harvest affiliates, Davis said, and assists the food banks in such areas as getting forklift drivers certified. And, although most of the product that the food banks receive is donated, they sometimes buy food with the cash donations they receive, and Kroger sometimes lends its expertise in making such purchases, he said.

Last year Kroger stepped up its involvement with Second Harvest through the creation of the Grocery Alliance, a partnership between the two organizations that is seeking to increase the donations of food, and collect and disseminate best practices throughout Kroger's local divisions.

Davis said he has been meeting with individual food banks around the country on a monthly or quarterly basis to determine how to enhance their relationship with Kroger, then bringing those ideas to Marmer at the corporate level.

Among the projects that the alliance has undertaken is an effort to capture more perishable products that would otherwise be discarded because they have reached their sell-by dates.

"What's been donated to food banks are things like day-old bread, canned goods and dry grocery, but hungry people are just like the rest of us and would like other things as well," said Marmer. "They'd like perishables: fruit, vegetables, even meat."

In order to get more of those types of foods onto the plates of the nation's needy, Kroger created specific procedures that its employees can follow to inspect and safely transfer edible perishables that have been deemed too old to remain on the store's shelves to the various local food banks.

"That's an example of a Grocery Alliance project that has shown some real results," said Marmer.

Davis said the project is in the pilot stage with Kroger's QFC division in Seattle and with Kroger's Atlanta division.

Last year Kroger donated 25 million pounds of food and products to Second Harvest affiliates, up 6 million pounds from the preceding year. The donation was valued at $38 million, the largest in Kroger's history.

Another initiative that's evolved from the

alliance is a standardization of the coupon-scanning programs that individual stores use to obtain donations at the checkout.

Second Harvest and Kroger recently completed putting a program together called "Easy as 1-2-3," which was designed to facilitate the implementation of such scan programs within individual Kroger regions.

"We're in the process now of giving that program to our affiliates, who will work with the various Kroger divisions to get that product in their market," said Davis.

One of the more successful ways in which Kroger and Second Harvest are working together to obtain donations is by assembling prepackaged baskets of products that local food banks need. Customers can actually purchase the baskets rather than simply give cash.

Marmer said the packages offer several advantages that both help the food banks and encourage customers to donate.

"The customers can actually see what they're buying, and that makes the customer feel good," she said.

It helps the food banks because they receive the supplies they need and want, she explained, rather than being at the mercy of the donors.

"Having spent lots of hours in a food bank myself, I know you get lots of cans of sardines," Marmer said. "These are prepackaged, nutritionally balanced food supplies."

The company often uses Kroger brands when assembling the prepacked meals, "because you can buy more for your money by using our corporate-brand products," she said.

While the company's hunger-relief efforts help burnish its image in the community, some of its other charitable activities also serve more practical purposes for the company's individual supermarkets. Its YouthWorks program, for example, not only provides job-skills training for urban teenagers, but it also helps the Kroger stores find qualified employees.

Marsha Watts, vice president, Urban League of Greater Cincinnati, said Kroger has hired and trained about 600 to 700 children in Kroger's headquarters city since the program began there in 1998. It has since spread to 12 other markets.

"It has served as a model for other cities around the country where Kroger has stores," she said.

About 80% of the students who come through the program are 14 or 15 years old, and they all start as part-time baggers, Watts explained. Some are quickly promoted to cashiers, and others go on to work in other departments, such as photo and floral.

In Cincinnati, Kroger hosts training sessions for interested students twice a year, once in the spring as students are looking for summer jobs and once in the fall to get ready for the holiday season.

The potential employees attend three, three-hour training sessions on Saturday mornings in which they are taught about basic job and financial skills and specific skills needed to work at Kroger. They are also taught about other potential careers at Kroger Co. that could be available to them if they continue their education.

Watts said members of the local graduate chapter of her college sorority, Zeta Phi Beta, volunteer to provide some of the training along with managers from Kroger's Cincinnati-Dayton division.

Marmer said that after three weeks the students have completed enough pre-employment training that they are attractive to other retailers and other employers.

"It's a great example of a program where everybody's a winner," she said. "The young people who attend are winners, because they get the kind of training they need to go out and seek and be attractive for an entry-level position, and we obviously are a winner because we are contributing to the community, our folks are interacting with young people, and we oftentimes get great entry-level employees."

As part of the partnership, Kroger donates to the sorority's scholarship fund and also pays the Urban League to hire a retention specialist, who Watts said intervenes to make sure the new employees do what they need to do to keep their jobs. Watts estimated that 20% of the students have remained on the job for at least three years.

Lately, Kroger has been seeking to gain more recognition for its charitable activities, Marmer said.

"It used to be that we were just in the community doing good, and we really didn't focus on whether or not we were communicating very well about what we were doing," she said.

Kroger's mass-merchant rivals during the past several years have been heavily touting their community involvement, Marmer explained, and Kroger wants to make sure that its own activities in this area are not lost on its customers or its employees.

"[The mass merchants] have caused us to look at ourselves and say, 'Are we communicating effectively to our customers and our communities about what we're doing?"' she said. "And sometimes we said, 'The answer is no, we aren't."'

She said the effort to seek more publicity for the company's community efforts has been an especially difficult transition for some of the Kroger banners that previously had been regional independents.

"Some of our divisions started out as family-owned companies, and they gave back to their communities because they knew it was the right thing to do, and they didn't really focus on getting any recognition or publicity," she said. "Given the intense competition for the grocery retail dollar today, that's changing."

Donations by the Numbers

Kroger Co. contributed $129 million in goods and cash in 2001 to various charities and community groups. Among the efforts:

Donating cash and product in response to customer requests to support youth activities, Scout troops, children's reading programs and other local, nonprofit organizations.

Partnering with regional food banks affiliated with America's Second Harvest to provide food, raise money, and provide logistical and advisory support.

Donating $18 million in gift certificate and rebate programs to assist in fund raising for thousands of schools and other community organizations.

Raising $38 million through employee donations and in-store fund raising to support Sept. 11 relief efforts, local United Way campaigns, children's hospitals and other charities.

Providing more than $4.5 million through 2,000 grants from The Kroger Co. Foundation, Ralphs/Food 4 Less Foundation and the Fred Meyer Foundation.