WinCo Has a Plan for SoCal Market Share
At WinCo, customers bag their own groceries. There are no butchers or bakers. And credit cards aren’t accepted.
If you’re a shopper, you might view those as shortcomings. If you’re an employee, you might consider them benefits.
WinCo Foods Inc., an employee-owned discount warehouse chain with 47 jumbo-sized supermarkets in five Western states, claims it has figured out how to compete with Wal-Mart Stores Inc. on prices and with nearly all players in the grocery business on wages.
WinCo -- which opened a store last fall in Temecula, its first in Southern California -- pays a new hire $8.99 an hour, whereas starting pay is $8.90 for a United Food and Commercial Workers union member in Southern California and $8 at a Wal-Mart Supercenter.
What’s more, the company boasts, WinCo employees are eligible for a potentially rich pension plan.
“I’ve never heard of a clerk retiring with a million dollars in their pension” from Albertsons, said WinCo spokesman Michael Read, who worked at Albertsons Inc. for 16 years. “That happens here.”
With 14 nonunion stores in Central and Northern California, and expansion plans for Southern California, WinCo is drawing attention. The UFCW, in fact, has asked shoppers to boycott the chain.
“We consider any nonunion store a threat,” said Phil Tucker, a special projects director for UFCW 1179 in Martinez, Calif. He said WinCo employees had no guaranteed rate of advancement and weren’t protected in the workplace.
WinCo veterans don’t see it that way, and a lot of them point to the stock ownership plan. Anyone who works at least 1,000 hours a year receives about 15% of his or her gross pay in company stock under the plan, and a worker is vested after five years. After retirement, a pension can be withdrawn in one lump sum or dribbled out over five or 10 years.
Karen Davis, 60, a longtime WinCo meat wrapper in Salem, Ore., plans to retire this fall. If she sells a little more than half her WinCo shares, her financial planner estimates, she’ll clear about $5,000 a month -- more than she now earns and far above the $2,000 a month that a UFCW supermarket checker with 30 years on the job receives.
WinCo, Davis said, has “given me everything they promised.”
The company got its start more than 35 years ago in Idaho. Headquartered in Boise, it remained a family-owned operation called Waremart until 1985, when squabbling among heirs led to a takeover by William Long, a former Safeway store manager who had been chief executive at Waremart since 1978.
Long introduced an employee stock ownership plan in 1986, and now retirees and employees own 83% of the company.
Each year WinCo’s shares are valued by an outside firm. Over the last 19 years its stock has appreciated an average of 21.2% annually, WinCo said, far outperforming the overall stock market.
“Can you imagine if a public company has said its stock had gone up even 15% for the last 15 years? Where else could you find an investment like this?” said David Leach, managing director of Los Angeles compensation firm ECG Advisors.
Employee committees at WinCo stores negotiate their wages as part of a multiyear contract.
Employees who work more than 19 hours a week receive health benefits that are slightly more modest than for UFCW workers.
To keep costs down, WinCo rarely advertises. A typical store is 92,000 square feet, twice the size of the average supermarket.
At the 24-hour WinCo in Temecula, big block-lettered signs guide customers down maze-like aisles. Huge metal racks are stacked with pallets of toilet paper, canned goods and other items. Drums of bulk food, such as pretzels, dog food and nuts, run along a back wall. The racks allow manufacturers to display goods in their own cases, so WinCo doesn’t need to hire an extra clerk to arrange items on a shelf.
Opening stores in Southern California will account for “the bulk” of WinCo’s growth in the next few years, Long said. The company will break ground soon on a store in Pomona.
WinCo’s expansion plan is bold, some analysts said, given Wal-Mart’s campaign to open as many as 40 Supercenter stores in California in the next several years. They also noted that since the Central and Southern California supermarket strike ended last February, Kroger Co.’s Ralphs and Safeway Inc.’s Vons chains have shuttered dozens of stores and, along with Albertsons, have struggled to rebound financially.
But Jonathan Ziegler, a grocery industry analyst with investment firm J.M. Dutton & Associates in Santa Barbara, said WinCo had found “a winning formula” by offering customers a mix of higher-end products and those found in bulk and warehouse stores such as Food 4 Less and Costco Wholesale Corp. locations.
The Temecula store, located across from a Ralphs, has attracted a steady following. “We don’t shop anywhere else. I know I can come here and find great prices, especially in the produce and meat departments,” said Carlos Flores, a human resources consultant from Winchester.
Daisy Lusung, a medical assistant, likes the roomy aisles -- and, she added, the fact that WinCo is cheaper than the Kroger-owned Food 4 Less she used to patronize.
Stater Bros. Holdings Inc., operator of 160 California supermarkets, has noticed that: It cut prices in its Temecula-area stores after WinCo opened. Said Stater CEO Jack Brown: WinCo is “going to take [market share] from somebody.”
