Kroger's 5% Shrink Trigger and 100% Liability, Both From a 2024 Court Filing

A Kroger buyer sent a plant nursery 403 succulents to one store. The store sold 236. A third-party merchandiser culled 4. The other 163 were never sold, never returned and never accounted for, and the gap came to $1,230.34, a 40% shrink number at a single store.

The only public document that defines how Kroger calculates shrink is the complaint a Michigan supplier filed against it in federal court on 22 January 2024. Not a supplier manual. Not a portal page. Kroger publishes no supplier or EDI documentation at all: the portal, the 180-day window and the deduction codes in our reference are our compilation, not Kroger's. The one Kroger supplier document that is genuinely public is a 2018 payment-terms letter, and that number is bigger than this one.

That matters because shrink is not a number you argue with afterwards. It is a formula, and it runs on the retailer's data.

Shrink is a gap between two numbers, not a count

Theut's Flower Barn signed a Scan Based Trading Agreement with Kroger on 12 December 2022, after the nursery had already bought in for the coming growing season. Under scan-based trading the supplier keeps title to inventory until a consumer buys it at the register, and payment follows the scan.

Section 5(b) builds shrink out of six lines:

The number that decides the argument is the one you do not produce. The counts bracket it, your shipments feed it, and the sales side is the retailer's register.

The document that settles this kind of dispute is the one named in the formula, and it is not the ship notice. The filing calls it 852 scan data and never expands the transaction set. A clean 856 ASN proves what left your dock and what arrived; the 852 reports what the consumer bought afterwards.

The percentage divides by net units shipped for the period, not units sold. The store you ship the fewest units to is the store where the same number of missing units costs you the most percentage. Four against 403 is one point; the same four against 40 is ten.

In the worked example, 163 over 403 is 40%, with the merchandiser's culled 4 taken out of the loss and left in the shipped count, which way a disputed unit lands in that ratio is the argument. $1,230.34 across 163 units is $7.55 each, our arithmetic on the filing's two figures rather than a price it states. The complaint alleges 47% at some stores, 2023 losses above $5,000,000, and treble damages under MCL 600.2919a.

5% does not charge you. It starts a process

Read the clause rather than the number. Where shrink at a store exceeds 5%, the filing says, the parties are required to perform an immediate joint analysis to diagnose the cause of the shrink, and take corrective actions.

5% is not a penalty band. It is the point at which the retailer owes you a process, and it is the only clause of this agreement anyone has published.

It is easy to mistake that for the service threshold our own record carries:

A 5% liability trigger is not a 95% service target, and defending one with the other is how you argue the wrong number in the wrong queue. A case fill miss says you under-delivered. A 5% shrink breach says come and look at the store. Only one has a process attached.

100% liability, and the category that keeps you out of it

Section 5(b) puts full responsibility on the party whose employees, representatives or agents caused the shrink by negligent acts or wilful misconduct. Section 6 takes natural causes out: fire, flood, wind, natural disaster and loss of public utility service stay with the supplier until title passes at the register, and loss due to natural causes is not in the shrink number at all.

The calculation includes theft and physical destruction other than by natural causes, and the per-store calculation sits with the supplier. You compute the retailer's liability, store by store, from the retailer's data.

The filing shows the gap the joint analysis has to close. Theut's alleged that Kroger staff negligently failed to water plants correctly, causing them to rot. Rot is what happens to a plant nobody waters, so whether that is excluded damage or 100% liability is not arithmetic, it is which side of Section 6 the loss falls on, and the complaint does not answer it. That determination is the joint analysis.

Nobody has published how a joint analysis concludes, who decides, or what happens if it never happens. The filing does not say, and the supplier is the party said to have pressed for it.

The perishable problem the formula does not solve

The perpetual count only moves when the register reports a sale or a shipment is netted in. Between those events the expected inventory is a straight line, and anything that takes product off a sales floor without producing a scan drops into the gap at the next count.

On a perishable line that gap is where your argument lives, and it widens with the interval between scans. The filing never says how often that data was cut or what the period was. Those answers are in your agreement's definition of the period, and the public copy does not contain it.

What this is, and what it is not

One agreement, one Michigan plant nursery, one retailer, one pleading. It is not Kroger's standard contract and not a template. The document we hold is the complaint: no decision, no dismissal, no settlement, no opinion, and we will not characterise an outcome we have not read. The 40%, the 47% and the $5,000,000 are allegations by a party, not findings by a court.

The UK's Groceries Supply Code of Practice, published 4 August 2009 and still operative with the page updated 13 July 2026, is the only published grocery supplier framework and it runs the other way. Paragraph 7 bars a supply agreement requiring a supplier to pay the retailer for shrinkage; paragraph 17 gives you a Senior Buyer review on written request.

None of it reaches you. The Code's own definition of groceries excludes plants and flowers, and every payment it forbids runs from supplier to retailer rather than the reverse. A floral or plant supplier gets nothing from it.

What to do on Monday

Pull Sections 5(b) and 6 out of your own agreement and read them together: one is the formula and the liability, the other is the carve-out.

Ask your buyer in writing for the 852 data behind your worst stores, per store, for one period, and run the ratio yourself. Section 5(b) puts that calculation on you, so you need the inputs before the analysis is somebody else's opinion.

If your agreement carries a 5% line, the joint analysis is a right you can invoke on a date you choose, and the agreement does not say how long you have to ask.

The trigger, the formula and the 100% were all fixed in an agreement signed on 12 December 2022. The only date in this argument that decides anything is the one on your own signature page.