Grocery conflict rooted in last strike
Shopper Peter Wormer is baffled. He can’t believe that another supermarket strike could be around the corner. He said he stopped shopping at Vons -- for good -- the last time around.
Longtime Albertsons worker Hugh Evans doesn’t get it either. “I don’t want a strike,” he said. Last time, he said, it cost him $20,000 in savings.
Even Costco executives are shaking their heads at the idea -- despite the prospect of more shoppers coming their way. “Incredulous,” said company Vice President Bob Nelson.
Southern Californians are holding their breath. They understand why grocery workers want better wages and benefits. And they know the stores are fighting more competitors than ever.
But another supermarket strike? How did we get here again, people on all sides of the dispute ask. The answers lie in the last strike and what has evolved since then.
The grocery business in Southern California is more competitive than ever. Workers say that they got a bum deal in the last settlement and that wages are increasingly hard to live on. And rising healthcare costs are alarming both employers and workers.
All of these concerns have come together in the high-anxiety caldron of collective bargaining -- a little more than three years after an acrimonious 141-day strike and lockout rattled workers, shoppers and retailers across the Southland.
“It is out of control,” said Kelly Pierce, an Albertsons worker in Anaheim. “Are we going to have to go through this every three years now to get a contract?”
Some shoppers say they also dread the possibility. “I’m very concerned,” said Ronald Ross of West Los Angeles. “The last time, it put consumers in a bad position.”
Negotiations resumed April 16, 12 days after talks collapsed. Both the union and the employers say they hope to reach an agreement without a work stoppage.
But in the last month, the two sides have traded threats of strikes and lockouts.
Albertsons workers voted March 25 to strike the chain if negotiations deadlocked. The grocery companies fired back about a week later. They declared that if the United Food and Commercial Workers union called a strike at only one chain, the two others would lock out their own union workers. And talks broke down.
But after a cooling-off period, the two sides went back to the table, where they are wrestling over wages, health benefits and work rules.
Both sides say they don’t want a strike.
“In 2003-2004, we learned that nobody wins in a strike. We do not want that to happen again,” Dave Hirz, president of Ralphs Grocery Co., wrote in a posting on the company’s website.
Said Greg Conger, president of UFCW Local 324 in Buena Park, “Any strike would be measured in days and not months. Immediately there would be a desire on both sides to settle quickly.”
Pressure to settle is a result of the competitive nature of the grocery business in Southern California, where pennies per item can add up to millions of dollars in profits or losses.
More stores, more rivals
Five years ago, Ralphs, Vons and Albertsons controlled nearly 57% of supermarket shopping in Los Angeles County, according to data from industry newsletter Shelby Report and market research firm ACNielsen. Now the big three grocers have barely a 49% share of that spending. (Ralphs is a division of Kroger Co. of Cincinnati; Vons and its Pavilions stores are owned by Safeway Inc. of Pleasanton, Calif.; and Albertsons is owned by Supervalu Inc. of Eden Prairie, Minn.)
Meanwhile, business surged at rivals not part of the labor battle. They now have nearly 27% of the market, up more than 6 percentage points from before the strike. (Those figures do not include membership warehouse stores such as Costco Wholesale Corp. or the Sam’s Club division of Wal-Mart Stores Inc.)
“During the strike, many of our customers were forced to shop elsewhere and they discovered other options,” said Hirz of Ralphs, which has 262 stores in Southern California.
Before the dispute, he said, Ralphs customers in surveys talked of as many as four shopping alternatives convenient to their home. Now they mention as many as eight choices, Hirz said.
More options open every day.
Trader Joe’s has grown about 20% in Southern California since the start of the strike and will soon have 86 stores in the region.
Whole Foods Markets, which has 20 stores in the metropolitan area, has nine more in development.
Later this year, British retailer Tesco will open the first of hundreds of stores planned for Southern California and the southwestern United States.
New pact, new frustration
As competitors multiply, pressure grows on the big chains to keep down costs -- especially labor costs. And in high-cost Southern California, nothing frustrates workers more.
Worker discontent remains high with the two-tier wage structure approved after the last bitter labor dispute. And health benefits remain a worry as well.
The chains would be content to sign a contract similar to what’s now in place, because it slashed their labor expenses and made them more competitive with nonunion discounters.
The union, however, doesn’t like the agreement, saying it split the grocery workers into a group of haves and a second tier of have-nots.
It wants to win higher wages for all of its members and a better healthcare insurance plan for that second tier of about 33,000 workers hired in the last 3 1/2 years.
Veteran workers’ wages top out in a range that averages from $12.17 to $17.90 an hour, according to the employers. The exact pay depends on classifications such as general merchandise clerk, food clerk and meat cutter and how often the employee works Sundays and other shifts with premium pay. Second-tier employees top out at about $1 to $3 less.
Starting pay for second-tier workers begins at $7.55 for a clerk’s helper, a nickel above the minimum wage. Workers with better-paying classifications can take home as much as $11.05 an hour.
New hires at Costco, by comparison, start at $11 to $11.50 an hour and rise to $17.80 to $19.50 after five years. Costco workers become eligible for health insurance after 90 days of employment. Trader Joe’s employees start in the $9 to $11 range.
The three chains have made little progress in several months of bargaining. The contract was set to expire March 5 but has been extended twice by mutual agreement. And now it goes day to day. Either side can terminate the contract with 72 hours’ notice, a move that could prompt a strike or a lockout.
Certainly the stores don’t appear to be ready for any type of work stoppage.
Although they could bring workers from nonunion markets in other regions to help out, they are not gearing up as they did three years ago, when they compiled rosters of potential replacement workers.
Federal labor relations experts are monitoring the situation. The Federal Mediation and Conciliation Service has its No. 2 official, acting Deputy Director Scot L. Beckenbaugh, working to help the chains and the union reach an agreement.
“This is a real significant negotiation, and there is the potential for an economically disruptive work stoppage,” said John Arnold, spokesman for the agency.
On Friday, Arnold said negotiations had yielded “some progress,” but he did not elaborate.
Wormer, the shopper who ditched the companies during the last go-round, said he didn’t know why the chains and the union would even talk about lockouts and strikes at a time when the competitive landscape is changing so quickly.
“Each side has to give a bit,” Wormer said.
Negotiations are secret. But there’s no sense yet that either side will budge, said Dave Smith, associate professor of economics at Pepperdine University’s Graziadio School of Business and Management.
“Both sides are fighting for principles that are to a certain extent mutually exclusive,” he said. The grocery stores want to protect themselves from new competition and the workers want the type of wages and benefits that can support a Southern California household, he said. “It is all very reminiscent of three years ago.”
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Before and after the strike
Together, the three supermarket chains lost market share to other grocers since the strike, but Albertsons made a small gain.
Share of Los Angeles County grocery market
Vons includes Pavilions
Source: Shelby Report/ACNielsen
Union workers per store
Number of supermarket workers covered under union contract*
*--* No. of # of union Union workers Chain stores employees per store Albertsons 249 22,319 89.6 Vons** 274 23,762 86.7 Ralphs 262 19,545 74.6 *--*
*as of Dec. 31, 2006 **Includes Pavilions
Sources: Supermarket companies