Supermarkets, Clerks Gird for Possible Strike

Three major supermarket chains and 71,000 Southern California food clerks are locked in high-stakes contract negotiations that both sides say could lead to a regionwide strike next month.

At stake are the wages and benefits won through decades of hard bargaining and strikes by the United Food and Commercial Workers union. Cashiers earn as much as $17.90 hourly, are guaranteed a pension and pay no premiums for family health insurance.

The chains say they must lower labor costs to remain healthy -- citing slumping sales, rising health-care costs and, above all, competition from Wal-Mart Stores Inc. and other nonunion retailers that are moving into grocery sales. Stock analysts have hammered at the companies -- Safeway Inc., which owns Vons and Pavilions; Kroger Co., which owns Ralphs; and Albertson’s Inc. -- to bring employee costs down.

The region’s last supermarket strike was 25 years ago, when members of the UFCW throughout Southern California walked off the job for five days to win wage increases. In the previous three decades, area clerks staged three strikes lasting as long as a month to win pensions, health insurance and sick days.

Both labor and management have been preparing for a strike. The union has urged its members, who would collect about $200 a week in strike benefits, to set aside money. Supermarkets, meanwhile, have begun advertising for strike replacement workers in newspapers and have posted signs in stores soliciting applications.

Store managers also have been trained and licensed to drive large delivery trucks in the event that Teamsters drivers refuse to cross picket lines, union officials said. Proposals on the table call for employees to pay $1,300 a year for family insurance premiums, and to accept large increases in deductibles and co-pays for doctor visits and prescription drugs, the union said.

The markets want to slash premium pay for Sunday and night shifts and reintroduce split shifts. They also want the ability to move any jobs outside “core” areas of produce, meat and groceries to nonunion subcontractors, union negotiators said.

Wage levels would be frozen for existing employees, while new hires would take a lower rate, with a top wage of $14.90 after eight years of employment. Employees currently reach top scale in two years.

Representatives for the markets would not comment on specific proposals but confirmed they were seeking concessions.

“For us to survive in the long run, the playing field has to be leveled somewhat,” said Terry O’Neal, spokesman for Ralphs Grocery Co., a unit of Cincinnati-based Kroger, citing rising health-care and other costs that bring the total compensation package for an average clerk to about $23 an hour. “It has affected our ability to compete.”

Profits are down at both Kroger and Safeway. For the first two quarters of this year, Kroger reported net income totaling $542 million on sales of $28.6 billion, a slight decrease from the $569 million it earned on sales of $27.6 billion in the same period last year.

Safeway saw its net income drop 50% in the first half of this year, to $323.6 million, from $641.1 million for the same period in 2002.

Albertson’s had combined net income of $334 million for its first and second quarters this year, a big increase from the $92 million it earned for the same period in 2002. But the profit largely was driven by closing stores and exiting unprofitable markets.

In its latest quarter, Albertson’s reported a 1.3% drop in sales at stores open at least a year, compared with the same period a year earlier. Kroger’s same-store sales were down 0.1% for the latest quarter, while Safeway’s dipped 2.2%.

Along with pressure to post stronger numbers, the supermarkets are feeling the heat from Wal-Mart’s expansion into groceries.

“The retail environment is changing, not just in Southern California but around the country,” said Stacia Levenfeld, a spokeswoman for Boise, Idaho-based Albertson’s. “We have to make sure that our labor contracts as well as our operating structure are competitive.” She added, however, that “we are still optimistic that we can reach a settlement.”

Vons, a unit of Pleasanton, Calif.-based Safeway, would not comment on the negotiations. But in a July newsletter to employees, the company warned: “Each new [nonunion] store or an expanded food offering has the potential to take away grocery business from our stores, which means fewer hours and jobs for our employees. To ignore or further widen the cost gap with these competitors would be irresponsible.”

The union has asked to maintain benefits at current levels and has not made a wage proposal yet.

Negotiations have been held almost daily at an Anaheim hotel for three weeks and have intensified in recent days, union bargainers say. The contract will expire at midnight Sunday.

The UFCW expects to present a final offer to members that night and then hold elections over the next three days. Members will be asked to approve the contract or to strike.

“Unless there’s a change between now and the 5th of October, we’ll probably be on the streets around the 12th,” said Rick Icaza, president of UFCW Local 770 in Los Angeles, one of seven locals involved in the talks.

The contract covers a dozen counties from Mono in the north to San Diego to the south, and east to the Nevada state line.

Gelsons and Stater Bros. also are covered under the master contract but are not involved in the negotiations and would be exempt from a strike. They have agreed to abide by the terms agreed upon by the three major chains. Food-4-Less stores are covered by a separate union contract and would not be affected.

Under local union rules, a strike would need to be authorized by two-thirds of the membership -- a high bar, particularly during a time of high unemployment. Union leaders said they expected at least 80% of their members to vote in favor of a walkout unless proposals change drastically.

Employees interviewed at several stores said they were prepared to strike to save their benefits.

“Otherwise,” said Jackie Davis, a checker at a Ralphs supermarket in Pasadena, “they are going to keep pushing us and pushing us until we don’t have anything.”

Edward Rafeedy, a stocker and cashier at a Vons in Port Hueneme for five years, said he and his fiancee, who also works at the store, would be hit hard financially by a strike.

“I’d probably have to take a fast-food job or something to pay the bills,” he said. “But I’d rather make my point and keep my dignity.”

While emphasizing that he enjoys his job, Rafeedy said resentment had been building among employees over the last couple of years. Staffing cutbacks have increased workloads dramatically, he said, even as managers step up the use of “secret shoppers” who rate employees on courtesy and service.

Adding fuel to that anger was the news, posted on union Web sites, that Safeway Chairman and Chief Executive Steven A. Burd had cashed in 150,000 option shares since Sept. 8, netting $2.7 million. “It’s not like he’s taking a pay cut,” Rafeedy said.

Burd’s salary was $1 million in 2002, the same as in 2001. But his bonus was cut sharply, from $1.15 million in 2001 to $258,000 in 2002, according to the company’s most recent salary disclosure.

The sale was the first of 2 million shares Burd plans to dispose of in the next year through an automatic trading program, Safeway spokeswoman Julie Hong said. “The plan was set up well in advance of negotiations,” Hong said. “He holds a considerable amount of stock

Several union leaders said that the market chains were exaggerating the Wal-Mart threat and that their proposals seemed aimed at provoking a job action. Given the weak economy, they said, the markets may view this set of negotiations as a one-time chance to wring major concessions.

“There’s a sense the employers are using the recession and competition problems they’re facing as an opportunity to really go after the union,” said Robert Bleiweiss, a spokesman for six of the union locals in negotiations. “They don’t seem to fear a strike, unless there’s a last-minute pullback.”

Industry analysts say Wal-Mart does pose a threat, although they differ on how significant that ultimately will be. Over the next few years in California, the Bentonville, Ark.-based retailer plans to open 40 Supercenters -- which sell a full line of groceries along with the usual discount merchandise.

Wal-Mart is already the nation’s biggest seller of groceries and is expected to control 35% of the market nationwide by 2007.

The company’s expansion into groceries has sent about two dozen regional supermarket chains into bankruptcy protection, according to New York-based retail analyst Burt Flickinger. And Wal-Mart is increasingly threatening the big chains, successfully launching Supercenters in areas such as Las Vegas that have historically been friendly to unions.

“To be around longer this decade, these three chains need to have compensation considerations closer to Wal-Mart,” Flickinger said. Currently, he said, union supermarkets pay their workers $6 to $14 more per hour than Wal-Mart, including benefits and shift premiums.

The outcome of these negotiations could set the tone for contract talks coming up around the country, including Indianapolis and Denver, analysts and union leaders said. Nationally, the UFCW represents about 800,000 supermarket employees.

“There is a common agenda,” said union spokesman Greg Denier. “Across the country, major retail food employers are attempting to ratchet down wages and benefits, not only in the short term, but as a long term strategy to permanently lower the living standard of their workers.”

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When they walked

Southern California grocery clerks have gone on strike four times since 1947.

*--* Duration Year Days Outcome 1947 14 Won sick pay 1959 28 Improved pension and health benefits 1969 19 Improved wages and benefits 1978 5 Won raises to keep up with high inflation

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Source: UFCW Local 770