Union grocers stuck in California pressure cooker

Reuters News
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Posted: Jul 13, 2011 3:33 PM
Union grocers stuck in California pressure cooker

By Lisa Baertlein

LOS ANGELES (Reuters) - A high-stakes supermarket labor dispute in southern California, the nation's toughest and most trend-setting food retail market, is exposing the challenges facing the grocery business and its union workers.

In 2003, the region played host to the longest work stoppage in the history of the U.S. grocery industry. That bitter, four-and-a-half-month standoff shifted more than $1 billion in sales, and the loyalty of some shoppers, to competitors.

Back then, the threat was Wal-Mart Stores Inc's push into groceries. The growth of Wal-Mart and other nonunion food sellers has turned southern California into one of the hardest markets for union supermarkets to prosper.

Now, union membership is dwindling among U.S. retail workers, along with the market share controlled by unionized grocers. As in many union battles across the country, a big issue is who should pay for rising healthcare costs.

"The grocers don't want to pick up that tab if their competitors don't have to do it," said supermarket consultant David Livingston.

Experts said many other U.S. markets may one day mirror California's diversity and hyper-competitiveness.

"California tends to be the leading indicator for the rest of the United States," said Burt Flickinger, managing director of retail consulting firm Strategic Resource Group.

Southern California workers and management side-stepped a strike in 2007, but the threat of another stoppage is back.

The 62,000 employees of Ralphs, Vons and Albertsons stores have been without a contract since it expired in March. They have authorized a strike and have been busy picketing.

Ralphs owner Kroger, Vons owner Safeway and Albertsons owner Supervalu are negotiating as a group -- adding complexity to the talks.

Grocery employees are members of seven union locals. The biggest is United Food and Commercial Workers Local 770.

This time, the retailers and the unions face unprecedented pressure, Flickinger said.

In the 1970s and 1980s, Albertsons, Vons, Ralphs and Stater Bros, a private, unionized supermarket chain not involved in the negotiations, controlled close to 90 percent of the southern California retail food market. That has fallen to less than 40 percent, Flickinger said.

The number of union retail workers also has shrunk.

Union membership among U.S. retail workers fell from a high of 933,000 in 2003 to 687,000 in 2010 -- a decline of more than 26 percent, according to the Bureau of Labor Statistics, which does not break out figures for individual states.

Southern California is now crowded with nonunion rivals including Wal-Mart, Costco, Tesco's Fresh & Easy, Whole Foods Market, Trader Joe's, Winco, Hispanic supermarkets like Superior Grocers and deep discounters such as 99 Cents Only Stores. Even Target is adding grocery sections more than 100 existing stores in the area.

WILL COOLER HEADS PREVAIL?

Those colliding trends have made southern California home to some of the most contentious supermarket labor battles.

"My hope is that cooler heads prevail ... It is in no one's interest to have a strike," said Walter Stackow, senior research analyst at Manning & Napier, which owns shares of Kroger, Safeway and Supervalu.

While Kroger has outperformed Safeway and Supervalu, analysts said supermarket profits are not growing.

Kroger and some other grocers have made progress closing the price gap with Wal-Mart, which has pulled away from short-term deep discounts and is focusing on low prices and matching rivals' advertised prices.

Labor costs remain a hot issue because every penny of expense counts when retailers compete on price.

The unions say supermarket operators want workers to shoulder a burdensome share of their own healthcare costs.

"As it is, I barely make enough money to make ends meet," said Lisa Marie Wheeler, 41, a checker at Vons in San Pedro. The single mother of four works two part-time jobs.

"If I have to pay more just to keep the insurance, and then more for the costs that they don't cover, where will I be? I'll be devastated," said Wheeler.

Kroger spokesman Keith Dailey said workers' healthcare cost increases would be modest, and that the proposal on the table will not lower the grocer's healthcare costs, only moderate future cost increases. Safeway and Supervalu declined comment.

"The irony is, the harder they each pull on the rope, the higher the likelihood that the damage to both parties will be bigger," Bill Bishop, chairman of consultancy Willard Bishop, said of the negotiations.

(Editing by Robert MacMillan)