Stores Facing Hard Sell to Refill Aisles

When the supermarket strike ends, another headache will begin for the major grocery chains in Central and Southern California. They’ll have to deal with the likes of Ronnie Bertrand.

The 69-year-old Bakersfield resident, a self-described “person who doesn’t like change,” was a longtime Vons patron until picket lines sent her to check out alternative aisles. At some point after the strike began 4 1/2 months ago, Vons lost her to a Foods Co. store in her neighborhood.

“As time went on, I found I was spending less money,” Bertrand said. Once the pickets are gone, she might visit Vons to buy fresh vegetables, she added, but “I really think I’m going to continue shopping at Foods Co.”

Luring back once-loyal customers will be a major task for Vons, Pavilions, Ralphs and Albertsons. A new Los Angeles Times poll indicates they have their work cut out: Among people who shopped at the three chains before the labor dispute, 59% said they had stopped shopping there during the picketing. And 14% of the chains’ total pre-strike customers said they would continue to shop elsewhere after a settlement.

In the competitive supermarket business, that is a big percentage. As negotiations with the United Food and Commercial Workers union wrapped up their 14th straight day Tuesday, fueling hope in some quarters that the labor dispute may soon end, the markets were already plotting to regain the allegiance of customers they’ve lost.

Albertsons, for instance, plans to finally join Ralphs and Vons by offering a “club” or “loyalty” card in Southern California that rewards returning shoppers with discounts. Albertsons has the cards in other parts of the country but hasn’t offered them in Southern California, preferring instead to promote its prices as being routinely low.

Albertsons spokeswoman Lilia Rodriguez said Tuesday that the introduction of the card and the labor turmoil were unrelated. But Albertsons, which has started advertising the new card and taking applications, won’t kick off the program until after the strike ends.

Once a new contract with the UFCW is signed, all the chains probably will slash prices and offer come-ons.

“I would expect a very intense promotional environment once the strike ends,” said Andrew Wolf, a grocery analyst at BB&T; Capital Markets. “The affected chains want to get their customers back as soon as they can.”

The strike’s effect probably will be felt mostly by Safeway Inc.’s Vons and Pavilions, and stores in the Albertsons Inc. chain. That’s because pickets have remained at those stores throughout the dispute, which began the second week of October. Pickets were removed from Ralphs stores, owned by Kroger Co., early in the fight, though pickets have since returned to selected Ralphs in the region.

The Times poll queried 1,936 people from last Wednesday to Sunday. Its margin of sampling error was plus or minus two percentage points.

Some experts in consumer behavior cautioned against reading too much into the poll results. “What people say in polls and what they do are often two different things,” said George Whalin, president of Retail Management Consultants in San Marcos, Calif.

Even people who believe they are committed to markets they have discovered since the strike began might, because of convenience or the difficulty of firmly breaking old habits, find themselves drifting back to the stores that were once part of their shopping routines.

Still, even a single-digit percentage loss in business spells trouble for a supermarket. Because grocery profit margins are so thin -- often just a penny or two for every dollar of sales -- supermarkets depend heavily on sales volume to keep growing.

What’s more, some believe the strike has a particularly good chance of triggering permanent defections among shoppers because it has lasted for so long.

Shoppers have “had to change their behavior,” said Elizabeth Martin, president of the American Assn. for Public Opinion Research.

The UFCW struck Safeway’s Vons and Pavilions on Oct. 11. Ralphs and Albertsons, which are bargaining jointly with Safeway, locked out their union workers the next day. About 59,000 people have been idled at 852 stores in Central and Southern California.

The three companies already have suffered a combined sales loss of about $1.5 billion, based on figures from the companies and analysts.

Much of that business has gone to well-known competitors: Stater Bros., Trader Joe’s, Whole Foods Markets, Costco and Gelson’s. Latino and other ethnic markets also have enjoyed windfalls.

“The strike in Southern California introduced many new customers to alternative food outlets, many of whom will likely continue to shop there,” analyst Lisa Cartwright of Smith Barney said in a report in January.

One of those who switched is Jennifer Lac Kamp of Los Angeles, a former Ralphs customer who is a regular these days at Trader Joe’s and Whole Foods.

“Initially, I did stop going to Ralphs because I support the strikers,” she said. Now, she likes the variety of fresh fare at the other stores, “and I’ve been cooking a little more, rather than getting prepackaged food.”

In its fiscal first quarter ended Dec. 28, Stater Bros.’ profit soared elevenfold from a year earlier while sales were up 51%, mainly because of the strike. In fact, Stater Bros. made more during the three-month period, $34.6 million, than it did in the last three years combined.

Another chain, Wild Oats Markets, said Tuesday that the strike also boosted fourth-quarter sales at its 22 Wild Oats and Henry’s stores in the region. “We expect that we will retain a healthy level of customer traffic beyond the strike as customers add our stores to their weekly shopping routines,” said Perry Odak, chief executive of the seller of organic and natural foods.

For Albertsons, Ralphs, Pavilions and Vons, price-cutting and other promotions aimed at winning back customers will cost tens of millions of dollars, curbing profit gains for at least the next few months, analysts said. That’s why some on Wall Street remain bearish on their parent companies’ stocks for 2004.

Safeway Chief Executive Steven Burd said this month that the company’s experience with other strikes showed that in some cases, most shoppers came back within two weeks. In others, it took nine months.

In Southern California, “the real answer is somewhere between those two weeks and three quarters, which would be 36 weeks,” Burd said. “We have a marketing plan ready.”

Whalin, the consultant, said the giant supermarket companies have an advantage over the alternative chains because the majors own hundreds of stores. He predicted that “they’ll get most of their customers back. Grocery stores are always about convenience.”

“But,” he added, “it’s going to take longer than they think, and it’s going to be more costly than they think.”