Execs, Employees and the UFCW Union: A Look Under (Tesco) Fresh & Easy Neighborhood Market's 'Hood'

News/Analysis/Commentary

Tesco, the owner of 175-store El Segundo, California-based Fresh & Easy Neighborhood Market, is launching what CEO Philip Clarke calls a new "Vision and Strategy" for the global retailing chain, which has operations in 14 countries and is the third-largest retailer in the world, based on annual sales. (See the story below on the blog or click here to read it.)

But in California (where Tesco's Fresh & Easy Neighborhood Market is headquartered), Nevada and Arizona where the chain's175 stores are, the United Food & Commercial Workers (UFCW) union and a group of Fresh & Easy store-level employees are continuing a strategy started last year.

Dueling strategies

The strategy, which is designed to help the workers and UFCW unionize the Tesco-owned grocery chain, is called "Fix Fresh & Easy, which is a multi-media - advertising, public relations and social media - focused campaign designed to draw attention to Tesco's financial struggle with its U.S fresh food and grocery chain and to offer to "assist" the retailer in the struggle if it will sit down with workers and union representatives and talk about unionizing Fresh & Easy Neighborhood Market.

Tesco reported a $300 million loss for Fresh & Easy Neighborhood Market in April, for its 2010/11 fiscal year, which ended February 26, 2011, on sales of about $818 million.

Tesco's store-level employees in the United Kingdom, where it's the largest food, grocery and general merchandise retailer with an about 30% national food and grocery sales market share, are unionized.

The "Fix Fresh & Easy" campaign's latest just-out media effort is a brief (2.40 minute) video featuring a number of Fresh & Easy Neighborhood Market employees talking about why the work for the Tesco-owned chain and why they want to be affiliated with the UFCW union. [You can view the video, "Fresh & Easy Employees Speak Out," here.]

All but one of the Fresh & Easy employees featured in the video work in the grocer's stores and at its fresh foods' kitchen, which is located at its distribution center complex in Riverside County, (Southern) California, according to the producer of the video and a representative of the employee group. The other employee in the video works at Fresh & Easy Neighborhood Market's corporate headquarters office in El Segundo, (Southern), California.

The pro-unionization employee group, in partnership with the UFCW union, has been kicking-up its activities anotch or two vis-a-vis Fresh & Easy over the last couple months with its efforts.

Most recently, the Fresh & Easy worker group spoke out about Tesco's $300-million loss with Fresh & Easy for the 2010/11 fiscal year, as we reported and detailed on April 20: Pro-Union Workers' Group and UFCW Union Speak Out On Fresh & Easy Neighborhood Market's $300 Million-Plus Loss.

A couple weeks earlier, in early April 2011, the UFCW union and the Fresh & Easy employee group, along with other supporters, held pro-union rallies at 25 Fresh & Easy Neighborhood Market store across California, as we reported and wrote about here - UFCW Union, Activists and Employees Hold Pro-Union Rallies at 25 Fresh & Easy Neighborhood Market Stores in California.

The employee group has asked for meetings with the appropriate senior executives at Fresh & Easy Neighborhood Market in order to discuss with them why they want a union at the Tesco-owned chain.

Thus far no such meetings between the employees and any senior executives have been granted by Fresh & Easy Neighborhood Market CEO Tim Mason.

The CEO's of Tesco and its Fresh & Easy Neighborhood Market have said since the UFCW union started organizing at the first batch of Fresh & Easy stores in late 2007 that it's up to the workers if they want a union, saying that if they do then they can call an election as detailed under National Labor Relations Board (NLRB) rules and U.S. labor laws.

The pro-unionizaton employee group, who's leaders work at the Fresh & Easy grocery market on Eagle Rock Boulevard in Los Angeles' Glassell Park neighborhood, haven't called for an election at the store - and they tell us they don't plan to do so anytime in the near future. The reason: They say they feel Fresh & Easy's management will spend large sums of money and do whatever it takes legally to prevent a majority vote at the store for unionization.

"We have many concerns about our health and safety at work, how the company has treated us when we've tried to unionize and the company's struggles to succeed in America," the three leaders of the pro-unionization employee group - Michael Acuna, Carlos Juares and Lisa Austin - told us in an e-mail reply.

"All we are asking for is a fair chance for the workers at Fresh & Easy to create a better place to work and to make this company successful. This company [Fresh & Easy Neighborhood Market] is losing money hand over fist and will continue to until they work with us workers, the community and their customers to succeed in a uniquely America market. We feel that this company could be a great place to work and so we want them to stick around and succeed for future generations," Acuna, Juares and Austin said.

Tesco's Fresh & Easy has said in a number of public statements that if such an election were called, it would follow NLRB guidelines.

But it's also highly unlikely, based on our research and reporting, that at present a majority of the employees at the Glassell Park Fresh & Easy store would vote in favor of unionization if an election were held today. A couple of the pro-union employee group leaders said as much at the April rallies noted above.

Some Fresh & Easy store employees, in concert with the UFCW union, have filed cases against the grocery chain with the NLRB. We've covered those cases closely. You can read that coverage and analysis here.

Stakeholders: Execs & employees

Fresh & Easy's senior management team and the Fresh & Easy employees - both those who are pro-union and those who ether don't care one way or another or don't want a union, which based on our research currently comprises the majority of Fresh & Easy workers - have different objectives to achieve in their respective jobs. But the company and the employees are directly linked economically.

If you open the hood of the car (in this case Fresh & Easy is the car) and look real close inside, as American billionaire and former (early 1990's) candidate for President Ross Perot used to like to say, the two stakeholder groups have a directly related common interest - economics - in the form of jobs, for both the Fresh & Easy executives and the rank-and-file employees.

For example, if Tesco closes up shop with its Fresh & Easy chain because it can't turn a profit, the employees lose because they are out of jobs. And very few of them will be able to find jobs with unionized grocery chains like Kroger and Safeway in the current sour economy, and probably not even when it improves because these chains aren't doing much new hiring.

Pulling the Fresh & Easy plug for Tesco would obviously be a huge loss for the United Kingdom-based retailer - not just of money (around $1.2 billion if it pulled the plug today, based on our estimates) but also of prestige, as well as pride.

Not succeeding in America after the way Tesco talked about how it would "revolutionize" grocery shopping inth U.S with Fresh & Easy and the like would and should be a monumental embarrassment for Terry Leahy, Tim Mason (and now Philip Clarke) and the other Tesco executives in charge of the venture if the grocery chain fails.

Stakeholders: The union

The UFCW is a bit more interesting case in terms of its place among the three stakeholders - Tesco, the employees and the union - in a strategic win-lose scenario analysis.

The union's big win will be if Fresh & Easy Neighborhood Market becomes a union grocer. That means more members and increased revenue in the form of union dues for the UFCW.

Those Fresh & Easy Neighborhood Market employees who want union representation would share in this win with the UFCW.

A unionized Fresh & Easy also means one of the faster-growing chains in California, Nevada and Arizona in terms of new store growth would jump from the non-union camp - which includes key chains  in the three states  like Kroger's Ralphs, Fry's and Smiths; Safeway Stores, Albertsons, Stater Bros., Save Mart, Raley's and others - and part company from the non-union chain camp - which includes key players in the three states like Walmart, Target, Whole Foods Market, Trader Joe's, Sprouts Farmer Market, Sunflower Farmers Market and a number of others.

But unlike Tesco and the employees of Fresh & Easy, the UFCW also gets a win if Tesco pulls the plug on its Fresh & Easy Neighborhood Market chain, and ceases doing business in California, Nevada and Arizona.

Why: Because although Tesco is losing semi-truck trailers' worth of money with Fresh & Easy, it, like all the other non-union food and grocery retailers, is taking business from the union chains like Kroger and Safeway, as well as putting price-pressure on the chains because Fresh & Easy Neighborhood Market, Walmart, Trader Joe's and and most of the other non-union chains have forced the union grocers to lower prices in order to compete.

Therefore, from a stakeholder strategic analysis perspective, it's better for the UFCW to have Tesco's Fresh & Easy gone than it is to have it remain and continue to be non-union, even though the union's bigger goal is to have it as a unionized grocery chain, like those noted above.

The elimination of one or more non-union competitors is a plus for the union chains, obviously. Less competition and price-pressure, although Kroger, Safeway and the other unionized grocers would rather it be Walmart, Trader Joe's, Whole Foods or Target most likely - all bigger threats than Tesco's Fresh & Easy is at this stage of the game.

A close look under the "hood"

But as of today, we don't see Tesco's Fresh  Easy becoming a union grocery chain anytime in the foreseeable future.

We do see, in our analysis, an about 50% chance Tesco CEO Philip Clarke will pull the plug on Fresh & Easy before the end of Tesco's 2012/13 fiscal year, which comes to a close February 2013.

Clarke and Tesco have said that's when it will break-even with Fresh & Easy Neighborhood Market. And if Tesco doesn't break-even or come very close (in the $50-$75 million loss range) to breaking-even with Fresh & Easy by then, we suggest there's a 90% chance it will fold up shop in America come early 2013 or shorly before then.

One constant with successful grocery chains tends to be the key stakeholders, particularly management and employees, not only are on the same team but share pretty much the same overall strategies. When that is the case - think non-union Trader Joe's and Whole Foods Market, for example - external stakeholders like labor unions and others tend to have little or no influence in the game.

The jury is still out on what influence the UFCW union will have at Tesco's Fresh & Easy. But if you compare the management/labor and union organizing climate that exists at Fresh & Easy with what's going on (or not going on) at Whole Foods and Trader Joe's, where the union has made virtually no in roads to date despite decades of trying and where their are no organized pro-unionization employee groups to speak of, it's fair to ask if one of Tesco's major problems with Fresh & Easy might be found in the way senior management has structured the chain's human resource and organizational culture and management.

The CEO's of Trader Joe's and Whole Foods Market spend little time concerning themselves with unionization issues. Both chains, like Tesco's Fresh & Easy, want to and strive to remain non-union. But for over three years Tim Mason, the CEO of Fresh & Easy, has spent a good deal of his time dealing with the question and issue of remaining non-union or becoming a union chain.

Beyond whatever side a person takes on the union/non-union grocery chain issue at Tesco's Fresh & Easy, it's worth taking a deeper analytical look at what, besides the fact the UFCW wants to unionize the chain and a group of employees wants union representation, might possibly be more fundamental reasons - taking a close look under Fresh & Easy's "hood" - for why Tesco finds itself the main target among all the non-union chains in the Western U.S. The close look should be taken at both Fresh & Easy's senior management - is it doing all it can from a management/labor relations and policy perspective? - and the UFCW union - would it prefer a failed Fresh & Easy to a non-union one?

Reader Resource

[Read our extensive coverage and analysis since 2008 about Tesco's Fresh & Easy Neighborhood Market, the UFCW union and related management-labor topics and issues at the following links: UFCW union UFCW, Fix Fresh and Easy, food retailing and organized labor, Fresh and Easy Neighborhood Market, labor relations, National Labor Relations Act, Tesco plc.]