Bagging a Career : Superstores May Cut Grocery Prices, but They Also Gut Jobs, Union Workers Say
When the Super Kmart Center opened here in November, Dan Kettridge solemnly told his wife to forget about trading in their ’87 Toyota. Then the 45-year-old Ralphs market checker rushed to renew his state insurance license. And he started taking courses to be a certified financial planner.
“If Super Kmart has the impact it says it will, I definitely need to have Plan B,” said Kettridge, a bear of a man with a bushy mustache.
Once confident he would work until retirement for Ralphs, his employer for 15 years, Kettridge now fears losing his job and the comfortable living standard he and his family have enjoyed.
“To anybody who sits back and looks at the big picture, it’s very scary,” he says.
Four Super Kmart Centers have opened in California so far, including a 170,000-square-foot store here. The arrival of the superstores--which sell discount general merchandise and lots of groceries--and the continued growth of warehouse-style supermarkets are threatening to reshape the market.
And they are causing anxiety for Kettridge and thousands of other grocery workers.
Because Southern California’s supermarkets have long been mostly unionized, its grocery workers are among the best paid in the nation. Experienced union checkers earn more than $15 an hour and have excellent benefits. Indeed, the grocery industry is one of the last segments of the economy in which people without college degrees or technical training can hold jobs that pay well and offer full medical coverage, even for part-time work.
But the United Food and Commercial Workers, the supermarket workers union, has come under increasing pressure. Non-union independent grocers and warehouse stores--all paying lower wages and offering fewer benefits--have been cutting into the market shares of big unionized chains such as Ralphs and Lucky. Layoffs have cost the union more than 12,000 members in the region since 1991.
Now Kmart, Wal-Mart and Target, which operate without union contracts, are getting into the grocery business in a big way, building supercenters across the nation. These big retailers are almost certain to grab a growing portion of California’s $40-billion grocery trade.
“As more and more Kmarts and Wal-Marts come in here, there’s going to be one big fight,” said Don Beaver, president of the California Grocers Assn. The labor costs of unionized markets are practically double those of retailers such as Kmart, Beaver said. “It just won’t work. Something’s got to give.”
Leaders of the UFCW--with 1.4 million members, the largest U.S. private-sector union--are trying to turn the tide before it is too late.
The union, which represents 84,000 grocery workers in Southern California, has been picketing the four Super Kmart Centers daily. It is buying billboard space, placing newspaper ads and mailing leaflets to tens of thousands of households, with messages such as “Super Kmart means Super Hassle.”
Kmart says it will open several new supercenters in California this year. Neither Wal-Mart (the nation’s largest retailer and fiercely anti-union) nor Target has announced further openings, but both are almost certain to follow suit, analysts say.
Supercenters are three to five times bigger than the typical supermarket and are usually open 24 hours. The Super Kmart in La Habra has 28 aisles of general merchandise and 17 of groceries, an auto service shop, a Little Caesar’s pizza restaurant, a pharmacy, a hair salon and a photo department. Its 28 checkout stands are all on the general merchandise side.
*
“They’re being built because people are time-constrained and they like one-stop shopping,” said Mary Lorencz of Kmart.
If the discount retailers can capitalize on the labor cost advantage and sufficiently build up grocery sales, the United Food and Commercial Workers will have to try either to organize its workers or somehow stave off demands from unionized supermarkets to close the wage gap.
The choice is a grim one for the unionized markets as well, since no one wants labor strife.
While the big chains are well prepared to defend their turf against invaders, labor costs loom as a big problem. In an industry where companies are happy to earn a penny for every dollar of sales, even a small wage gap can make for a wide competitive edge.
“If different formats come into the marketplace and have a substantial advantage in cost, especially labor costs, then every supermarket chain in Southern California will be demanding the ability to be competitive in wage rates,” said Jack Brown, chairman and president of Colton-based Stater Bros., which operates 111 stores and is the market leader in the Inland Empire . “If the marketplace is inundated with lower-wage type retailers,” he said, “it will be a very difficult time for the retail labor force.”
The battle lines are already being drawn.
Earlier this year, all of the major unionized supermarket chains in Southern California pulled out of the Food Employers Council, a 50-year-old organization that had negotiated a single master contract with the UFCW--on behalf of the chains. That setup had removed labor cost as a way of gaining a competitive advantage and had helped the union maintain a uniform pay rate for grocery workers.
The council’s breakup as a bargaining force reflects the upheaval caused by the warehouse stores and the emergence of other supermarket formats. Analysts say it indicates that some companies may try to extract concessions. The UFCW’s contract with eight Southern California chains will expire in October, 1996.
Vons meat cutter Fred Salazar is already worried about a strike, something the supermarkets here have not seen in a decade. “Having to negotiate separately--I really don’t know,” he said. “It’s something we’ve never had to face.”
Salazar, 47, typifies the career market employee. After high school, he started as a box boy at his neighborhood Safeway in Monterey Park. He joined Vons in the mid-1980s, when the chain bought out the area’s Safeway stores. In 28 years he has endured a dozen transfers, tendinitis, regular bouts with bronchitis, even pneumonia.
“I spend an hour every morning making hamburger in the cooler, which is 28 to 30 degrees,” he said, breaking into a fit of coughing.
Still, Salazar has no complaints. With overtime, Sunday and night premium pay he earns about $50,000 a year. That has enabled him and his wife to raise two daughters in a spacious house in Rowland Heights. Recently transferred to the La Habra store across the street from the Super Kmart, he figures he’ll make it to retirement in a few years.
But others aren’t so fortunate.
Salazar says his 38-year-old cousin was laid off from one of Vons’ eight Expo warehouse stores, which are being closed. “Well, he’s got 15 years,” Salazar says. “He’s got a couple of kids. I tell him to hang on. There’s nothing else out there.”
The proliferation of warehouse stores such as Price Club, which can sell bulk groceries cheaper because they have fewer workers and no frills, has already forced the UFCW to give ground.
Grocery clerks who work at warehouse-style stores owned by union companies, most notably Yucaipa Cos.’ Food 4 Less, are under a “B” contract and thus earn about $1.25 an hour less than employees at conventional supermarkets. (Price Club has a contract with the Teamsters union that likewise pays lower wages, and also offers fewer fringe benefits and requires more years of service to reach top scale.)
Yucaipa, which also owns the Alpha Beta chain and earlier this month won regulatory approval of its merger with Ralphs, says it will double the number of its Food 4 Less stores to 80 by the end of next year. Meanwhile, a number of Alpha Beta stores--which pay higher wages than Food 4 Less counterparts--are expected to be sold as part of the Ralphs merger.
The shift will put more pressure on other unionized chains. “We would love to have a different contract where we compete with warehouse stores,” said Roger Hughes, chairman and chief executive of Hughes Markets.
UFCW United Food and Commercial Workers’ leaders are mindful, too, of what happened in Kansas City and Houston, where once dominant unionized chains were crushed by non-union warehouse and independent supermarkets operating with much lower labor costs.
Those markets, however, have been exceptions. For the most part, the UFCW has weathered the economic turbulence of the last 20 years better than industrial unions such as the United Auto Workers and the United Steel Workers. And despite turmoil in its meatpacking division, the United Food and Commercial Workers has not been roiled by the problems of corruption or internal strife that have plagued the Teamsters and some other unions.
“They’ve done a good job,” said a top executive of a local supermarket chain who requested anonymity. But in Southern California, he noted, “they’re not as strong as before. They face a real challenge now to hold their membership.”
Union leaders worry most about Wal-Mart and Kmart because those firms have enormous resources and have driven back past organizing efforts. Sean Harrigan, the UFCW’s western regional director, does not see organizing such stores as a feasible option.
He said he hopes the union’s publicity campaign will win community support and that fewer people will shop at Super Kmart. Then Wal-Mart and others might be discouraged from coming to California.
“If food isn’t profitable for them,” Harrigan said, “they’ll give it up.”
But that’s a long-shot bet in an economy where cities are hungry for sales tax dollars and residents are desperate for jobs. The city of La Habra, for example, sold Kmart the site for its supercenter for about $5 million after having paid about $8 million for the property. Several thousand people applied for the store’s 600 job openings.
“I’m happy with what I get here,” snapped an elderly employee at the Super Kmart, who said she makes between $5 and $6 an hour, works 15 to 20 hours a week and has no medical coverage. “It’s adequate, and I don’t see anything wrong here,” she said.
Wal-Mart, too, is expanding in California. Last year, the Arkansas-based retailer, whose annual sales approach $100 billion, bought two dozen Pace membership warehouse stores in the state and converted them into Sam’s Clubs membership warehouses. There were already 76 Wal-Marts in California, all siphoning sales of candy, drinks and other non-food items away from grocers.
“For every five Wal-Marts that open it’s like one grocery store,” said Brown of Stater Bros.
Union leaders worry that Wal-Mart will convert stores into supercenters or open Sam’s Clubs next to them, as it has done elsewhere. Wal-Mart, which would not comment on its strategy, late last year soundly defeated a Teamsters effort to unionize a Sam’s Club in Fullerton.
One hopeful sign for the union is that Kmart and Wal-Mart superstores have had mixed results in other states. Their enormity, vast parking lots and the heavy traffic around them have turned off some customers and may be especially annoying to Californians, said Jonathan Ziegler, an analyst with New York brokerage Salomon Bros.
Still, Ziegler predicts that supercenters will grow faster than the rest of the supermarket industry--and that lower labor costs will be one of the driving forces.
“It gives you an advantage going in,” agreed Douglas Tigert, a retail marketing professor at Babson College in Massachusetts who has studied Wal-Mart superstores in other parts of the country.
*
Kmart would say only that its salaries are competitive. Workers at Kmart’s supercenter in La Habra said they generally earn between $5 and $12 an hour, with those on the food side at the higher end. As at Wal-Mart, most Kmart employees work part time, and many said they do not qualify for medical benefits.
Union food clerks in Southern California start at about $9 an hour but can be earning more than $15 an hour within two years. All union grocery workers and their dependents are covered by a health plan provided entirely by the employer, and they receive other benefits. Vons, now the region’s market leader with about 335 stores, paid $137 million--or more than $5,000 per employee--for medical and pension benefits in 1993.
Outside the Super Kmart in La Habra, pickets hired at $6 and $7 an hour by UFCW Local 324 in Buena Park try to tell shoppers about the wage gap and suggest that Kmart’s arrival jeopardizes good-paying union jobs.
Picket captain Maria Quezada said her crew of demonstrators, in place from 10 a.m. until 5 p.m. every day, has dissuaded many shoppers.
Even so, Kmart’s name, the supercenter’s hulking presence and special sales continue to draw customers.
Cara Manderville, a 31-year-old mother of six, said she came to Super Kmart’s grand opening in November for the 9-cent loaves of bread and 10-cents-a-dozen eggs. She has been coming ever since because prices are low.
“I feel bad it’s not union,” Manderville said on a recent Saturday as she carted off $72 worth of groceries. But, she added, “I save a lot of money here.”
Super Kmart has been running specials on a broad range of items, selling some goods, grocers say, at or below cost. Union officials, workers and managers say that has nipped sales at the Vons across the street, and also at the Lucky, Smith’s Food & Drugs and Ralphs stores nearby.
Rick Icaza, president of Local 770 in Los Angeles, the biggest of the seven UFCW locals in Southern California, is urging his 30,000 members to tell their families, friends and neighbors not to shop at non-union stores. And the local is beefing up its publicity campaign, largely through a dues increase of $1 a month.
But union leaders know there are limits to what they can achieve against a big corporation that can afford to engage in trench warfare.
Icaza said he believes the union will eventually have to organize non-union stores--the small independents as well as the emerging superstores. “If we can’t,” he said, “it’s going to be a rocky road in the future.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Tale of the Tape
The supermarket business has been one of the last strongholds of union strength in Southern California, assuring relatively high wages for grocery store workers. But the growth of non-union merchants, including warehouse clubs and a new breed of supercenters, is putting severe pressure on unionized chains and their employees.
Union membership is falling
Overall, grocery employment has shrunk in Southern California during the ‘90s, but membership in the United Food and Commercial Workers union has slid even faster.
Year: 1994
Unionized grocery workers: 83,044
All grocery workers: 160,900
Year: 1993
Unionized grocery workers: 90,361
All grocery workers: 165,200 Year: 1992
Unionized grocery workers: 95,076
All grocery workers: 170,600 Year: 1991
Unionized grocery workers: 95,839
All grocery workers: 176,000
*
Note: Union membership figures are for January of each year, except 1994, which is for November. Grocery worker figures are annual averages.
Sources: United Food and Commercial Workers, California Employment Development Dept.
Union contracts are strong
Wages and benefits of union supermarket workers in Southern California:
Wages
Experienced food clerk: $15.15 an hour
Apprentice food clerk: $9.09 to $13.64 an hour
Benefits
Comprehensive health plan, employer-paid health plan
Employer contributes 78.5 cents per straight-time hour worked per employee to pension plan
Sunday and night premium pay
Nine paid holidays per year.
Three personal holidays after a year of service.
Vacation: One year of service, one week; two years, two weeks; five years, three weeks; 15 years, four weeks; 20 years, five weeks.
Six days of sick leave with pay after a year of service.
Source: UFCW labor contract
Pay scales in the region are high
On average, grocery workers in the West are the best paid in America, a consequence, in great measure, of the extent of unionization in the region.
Region Starting full-time clerk Journeyman meat cutter Chain Independent Chain Independent North Atlantic $7.45 $6.45 $12.14 $10.47 Great Lakes 5.39 5.33 9.57 9.32 Plains 6.38 6.18 10.48 9.53 South Atlantic 5.87 5.45 8.20 7.90 South Central 5.41 5.11 8.54 8.24 West 8.09 6.53 13.54 11.83
Source: Progessive Grocer magazine, April, 1994
