Strike Against 'Big Three' Grocery Chains in Southern California Could Be Just Around the Corner

UFCW Local 770 president Rick Icaza (center) speaks at today's rally in Los Angeles. At right in the yellow shirt is Connie Leyva, president of  local 1428. To Icaza's left is Maria Elena Durazo, head of the Los Angeles County Federation of Labor. The "L.A. Isn't Wisconsin" signs refer to the state's controversial new law banning public employee collective bargaining.

Southern California Market Region
News/Analysis

The ongoing contract negotiations between the United Food & Commercial Workers (UFCW) union in Southern California and the region's "Big Three" grocery chains - Kroger Co.-owned Ralphs', Safeway's Vons and Albertsons, which is owned by Supervalu, Inc. - took a turn closer in the direction of a strike by union grocery clerks today when the presidents of the seven union locals in the region and leaders of the Los Angeles County Federation of Labor held a rally and press conference late this morning at the federation's headquarters in downtown Los Angeles.

Attending the event in support of the UFCW locals and its members were numerous representatives from labor unions representing police officers, firefighters, teachers, truck drivers, warehouse workers and even actors and entertainers, along with union members who work in stores owned and operated by the three supermarket chains.

The many representatives of the allied unions, which are a part of the Los Angeles County Federation of Labor umbrella organization, said at today's press conference they would support the UFCW locals should they decide to go out on strike against the "Big Three" unionized supermarket chains, which also happen to be the three market-share-leading grocers in Southern California - Ralphs' being number one, followed by Safeway's Vons and Supervalu's Albertsons.

Strike could come soon

Talk of a strike was the topic on the minds and lips of the presidents of the UFCW union locals and their supporters today at the rally and press conference - and the rhetoric was heated.

For example, in describing the key sticking point between union negotiators and representatives of the three grocery chains, which is a proposal by the grocers to shift a significant percentage of employee health benefits now being paid by the retailers to store employees, Greg Conger, president of UFCW Local 324, called the health care benefits cost-shifting proposal by the "Big Three" chains: "A ruse that ignores the fact that these companies continue to post multi-billion profits annually. That isn’t an insignificant footnote," Conger said. "The impact of these proposals is a matter of life and death for some of our members."

All the Southern California UFCW presidents at the rally and press conference today said a strike against the three grocery chains could be coming soon, which was an obvious strategic attempt, as was the rally and press conference itself, to energize the ongoing contract negotiations, which have been going on since April and are at what is essentially an impasse over the health care benefit cost-shifting proposal by the grocers.

We aren't suggesting a strike might not be coming soon. Rather we're suggesting today's event is the opening salvo; a message of sorts to the grocery chains in advance of calling an actual strike, which the union and its members would like to avoid, as would the grocers.

Rick Icaza, president of UFCW Local 770 was blunt and to the point speaking today about the current state of the contract negotiations and his feelings about the likelihood of a strike happening, saying: "We're so far apart, if something doesn't happen soon, we will have a strike."

As we've previously reported, on April 21 union members authorized the UFCW locals to call a strike if and when it decides to. Since then contract negotiations have continued. In May a federal mediator was brought in at the request of the UFCW to assist with the talks. The strike clock gained a significant amount of time today.

The three grocery chains reacted to today's rally and press conference by issuing a joint press release in which they said: "We are still actively negotiating, and any talk of a strike is unnecessary. The only place where we can reach an agreement is at the bargaining table, and we believe our focus should be there, reaching a fair and reasonable contract."

As we've noted in our ongoing reporting and analysis of the contact negotiations, the grocers are serious about shifting a significant percentage of employee health costs to the workers. These chain's want employees to pay more out-of-pocket than they currently are (the cost-shifting) for monthly premiums, deductibles, co-payments and a couple other aspects involving the health care plans.

The UFCW said in late May the proposal submitted to it by the "Big Three" chains was unacceptable. Since then neither side has made a significant enough compromise. Therefore the talks have been and are at a stalemate in terms of moving forward.

A couple of our sources at the chains are telling us that if a strike is called there's a feeling of confidence among certain senior management people that because of the high unemployment rate in much of Southern California (the state has a 12.4% jobless rate) that they could hire replacement workers rapidly, which would come after the union calls a strike.

There's been discussion among the union locals about whether to strike all three chains at one time or one or two initially. Albertsons is the most often mentioned target we hear from our union sources if just one chain is chosen initially. But we are increasingly being told by our grocer sources that if one or two of the three chains is targeted  initially, the others will call an employee lockout in support of whatever chain or chains get hit with a strike first, in a united-we-stand solidarity pact.

Changed landscape: 2003-to-2011

The last time there was a major grocery strike in Southern California - the affected area includes all of Southern California to the Mexico border, the south coast to Mammoth, and the southern Central Valley - was in 2003. That strike lasted about five months before the grocers and union locals reached a contract agreement that was ratified by the union members.

In the nearly nine years since the 2003 grocery strike, the food and grocery retailing competitive landscape in Southern California  has changed considerably.

While Ralphs, Vons and Albertsons remain the "Big Three" market share leaders in the region, their overall and respective shares have been eroded considerably, primarily by a number of non-union food retailers in the region, including: Costco, Walmart, Target, Trader Joe's, WinCo Foods, Smart & Final, Whole Foods Market, Sprouts Farmers Market, Tesco's Fresh & Easy Neighborhood Market and a number of others, including more than one ethnic-focused grocery chain, plus dollar/99-cent and drug store chains, all after a share of the food and grocery dollar in mega-populated Southern California.

Combined, these retailers have opened thousands of new stores in Southern California over the last nine years, exerting significant competitive and price pressure on the "Big Three."

In fact, the vast majority of all the new food and grocery-focused square-footage in the region over the last eight years has been from these and other non-union grocers, as the "Big Three" have opened only a small number of new stores each year from 2003 to the present, compared to the non-union players.

Strange bedfellows

It's just this phenomenon that presents a "Catch 22" when it comes to a strike by the UFCW union against the "Big Three" unionized chains - a strike against Ralphs', Vons and Albertsons would provide a major benefit to Walmart, Trader Joe's, Whole Foods Market, Tesco's Fresh & Easy and the other non-union chain's mentioned above, the store-level workers of which the UFCW is trying to organize in various degrees and hopes will eventually become unionized.

For example, nothing would make Tesco CEO Philip Clarke and his deputy, Fresh & Easy Neighborhood Market CEO Tim Mason, happier than to see the UFCW, which has been conducting an aggressive three-plus year campaign to unionize Fresh & Easy's store workers, call a strike against the "Big Three" chains so it could, it hopes, grab some much-needed added sales and business for its 108 stores in Southern California and the Bakersfield region in the southern Central Valley.

And ironically, the longer a strike against the three chains the better for Fresh & Easy, because in addition to allowing the fledgling 175-store chain to grab whatever added sales it could, a protracted strike would also allow new shoppers to become familiar with Fresh & Easy because in strike situations shoppers tend to seek out grocery stores they haven't shopped in before.

There are also about 2 million union members (if you include family members) in Southern California. A big part of organized labor's strategy in 2003, and it would be again this year, in a strike is to convince as any of those union family members as possible not to set foot in a grocery store owned by Kroger, Safeway or Supervalu, along with getting UFCW members and their families elsewhere in California and across the U.S. to boycott stores owned by the grocers.

The "Big Three" chains in Southern California, plus Stater Bros., lost over $2 billion in sales during the about five months the 2003 strike lasted. That's why the longer a strike lasts the better it would be for Tesco's Fresh & Easy and all the other non-union chain's mentioned earlier. Stater Bros., which is unionized and is the fourth-largest chain in the region, is negotiating on its own with the UFCW locals this time around. Historically it has participated in contract negotiations with the other three chains.

If you listen closely, you can even hear the sounds of ringing cash registers in the Southern California offices of those non-union food and grocery retailers, including at Fresh & Easy's headquarters in El Segundo, as the possibility of a strike against the "Big Three" chains gets closer to becoming a reality.

Related Stories

May 23, 2011: Odds Southern California Grocery Store Workers Will Strike Highest Since Contract Talks Began

May 12, 2011: Execs, Employees and the UFCW Union: A Look Under (Tesco) Fresh & Easy Neighborhood Market's 'Hood'

April 25, 2011: Talks Between Southern California's 'Big Three' Grocery Chains and UFCW Union Resume Tomorrow

April 21, 2011: Southern California Grocery Store Workers Vote to Authorize Strike Against 'Big Three' Chains

April 20, 2011: Pro-Union Workers' Group and UFCW Union Speak Out On Fresh & Easy Neighborhood Market's $300 Million-Plus Loss

April 5, 201: UFCW Union, Activists and Employees Hold Pro-Union Rallies at 25 Fresh & Easy Neighborhood Market Stores in California

Odds Southern California Grocery Store Workers Will Strike Highest Since Contract Talks Began

Southern California Market Region
News/Analysis

The odds unionized grocery store workers in Southern California, (and the Central Coast and southern Central Valley) strike one or more of the region's "big three" unionized supermarket chains - Kroger's Ralphs, Safeway's Vons, and Albertsons, which is owned by Supervalu, Inc. - are much more likely today than they were just a week ago, based on our reporting and in our analysis.

Why? Last week representatives for the three grocery chains noted above presented negotiators from the United Foods & Commercial Workers' (UFCW) locals in Southern California with a proposal that details the health care plan changes - read significant cuts - the grocers want as part of the new three year contract that's being negotiated involving the chains and the about 60,000 unionized grocery store workers in the region.

Last month the union presented the chains with their health care plan proposal. The proposal from the grocers was their counter-offer, which is what the union says it's been waiting for since April.

And the presidents of the UFCW locals in Southern California pronounced the proposal, which would shift a considerable amount of health care costs to the store workers, dead on arrival.

For example, Ricardo Icaza, the president of UFCW local 770 which represent about 36,000 of the 60,000 unionized retail clerks in a region that stretches from Santa Maria on the Central Coast to Bakersfield in the southern Central Valley and includes Los Angeles County out to the Lancaster/Palmdale area in the desert, said in a note to union members on Thursday, May 19: "Ralphs, Vons, and Albertsons presented your union with a proposal that would effectively destroy your health coverage." No ambiguity in that statement.

On Friday, Michael Straeter, president of UFCW local 1442 which represents unionized retail clerks from Malibu to Long Beach in Southern California, had a similar message for the members of his local, saying: " [The] health care proposal from the company [Ralphs, Vons and Albertsons] shifts 80% of new costs to you," meaning the union members. "Stay strong as negotiations continue," he added in the message to the rank-and-file.

Straeter, who says the proposed health care plan changes will shift $450 million over three years from the supermarket chains to workers, also told his members to prepare to start picketing as early as this coming weekend.

The negotiations between UFCW representatives and the three supermarket chains will continue this week. The negotiators for both parties will once again be joined by a federal mediator, who's assisting with the talks at the request of the UFCW union.

But the union locals are thinking beyond what is an obvious impasse, in our analysis - the grocers say their proposal regarding the heath care plan changes is "reasonable" but the UFCW locals say it's a non-starter, which equals an impasse for all intents and purposes, even though the negotiations will continue. The federal mediator will obviously be busy mediating this week.

Union stewards and picket captains have been told by the union leaders to attend a meeting on Thursday, May 26, in which the possibility of forming picket lines at one or all three chains will be discussed. A UFCW representative told us Friday that the picket signs are already being made.

The UFCW members authorized the union on April 21 to call a strike if and when it decides to do so. (See the related stories linked at the end of this piece.)

What we're being told by more than one source a present - and this information is always subject to change - is that if a strike is called anytime soon, the current plan is to stage a walkout on Supervalu's Albertson's chain, which is the number three grocer among the "big three" in terms of annual sales and market share in Southern California. Kroger's Ralphs' is number one. Safeway Stores-owned Vons is number two.

We're also being told from other sources, on the chain side of the equation in this instance, that Ralphs' is likely to lock its employees out of the stores (meaning no work and no pay) should the UFCW and its members strike Albertsons. If Ralphs does this, Safeway's Vons is likely to follow suit, although most of our sources are far less sure about Safeway's thinking on the matter than they are about Ralphs'.

Kroger Co.'s Ralphs' division is still in court with the UFCW union over various actions involving the 2003 Southern California grocery workers strike and lockout by the chain, in fact.

The stakes are very high for the UFCW locals for a number of reasons if they do call a strike .

First, if they strike one or more of the three chains, they will be handing a whole bunch of new business to the many non-union grocers in Southern California, including Walmart, Target, Costco, Trader Joe's, Whole Foods Market, Sprouts Farmers Market/Henry's, Bristol Farms, Tesco's Fresh & Easy Neighborhood Market and others, that they're trying to unionize. Most of the non-union chains are already gearing up for a strike and thinking about the extra business it could bring their stores.

Ralphs, Vons and Albertsons are already under heavy pressure from the non-union players in Southern California that since the last contract was signed in 2007 have continued to grow - not to mention there being new entries to the market since 2007, like Fresh & Easy Neighborhood Market, which now has 101 stores in Southern California and seven in the Bakersfield region (out of its 175 total in California, Nevada and Arizona) - and take sales and market share from the "big three."

All of the fastest growing chains in the region are non-union. The "big three" unionized chains have added few stores in Southern California in comparison to all of the non-union grocers mentioned above.

At the other side of the negotiating table, Kroger's Ralphs, Safeway's Vons and Supervalu' Albertsons appear at present to be very firm on the cost reductions they say they need in the health care plans. They're saying very little publicly but are offering the message that health care costs are at the top of the list of their fastest-rising expenses.

 Look for the end of the week starting today to be a crucial point in time in the labor negotiations. If no material progress is made between the two parties this week - and there isn't going to be unless the chain's take back much of what they're asking for in the health benefits proposal, which the odds of happening are less than 5% in our analysis - then a complete impasse will be reached, meaning the union will feel the need to seriously consider a strike against one of more of the three chain's at week's end.

We suspect picketing and leafleting will come first, before a strike is called, if it is. We also don't expect a strike to be called this week or next week. But the following week,if there's no material improvement in the negotiations, the hoof beats for a strike on at least one chain are going to be very loud, in our analysis.

And perhaps the "big three" unionized chains would welcome a strike if avoiding one means giving in significantly on the takeaways they're asking for in their proposal. (They will take less than what they desire and are asking for now in the long run though. But it could be a very long run.)

Our take is that the grocers are very serious about achieving some significant savings in their costs for the union employees' health care plan. It's also our take that the union is very serious about accepting more than a small percentage of increased costs to workers for their health care plans. Stalemate

But the potential labor pool in Southern California is vast at present, since unemployment in most of the region remains in double digits. We suspect people would be lined up by the hundreds at Ralphs supermarkets in Southern California if, for example, the UFCW strikes Albertsons, and Kroger's Ralphs locks out it employees.

For example, grocers opening new stores in Southern California over the last three years generally get four or five times as many people applying for jobs at the store then they have positions available.

Additionally, organized labor and unions also are at an all time low in terms of the percentage of Americans that  favor them. A strike by the UFCW of one or more of the "big three" unionized supermarket chains could have the undesired consequence for the UFCW of the majority of consumers coming out in support of the grocers rather than the store employees, particularly because in times of high unemployment both the unemployed, the under-employed and insecure employed have far less sympathy for and are less likely to support labor strikes.

In contrast, if the union thinks the offer by the grocers is outrageous, taking more time to build that case among the grocery shopping public in Southern California could lead to greater support for the store workers than if a strike is called within the next few weeks, for example. It's all about gaging and influencing public opinion.

Another factor worth noting is that the ever-increasing price of food at the grocery store and cost of gasoline at the pump is giving the average consumer a considerable amount of grief and causing added worries on top of those created by a still high unemployment situation, ongoing housing crisis and anemic economy. Those aren't the factors that generally provide a warm reception to strikes, particularly when they are at grocery stores, a place all consumers in Southern California and elsewhere frequent regularly.

Related Stories

April 25, 2011: Talks Between Southern California's 'Big Three' Grocery Chains and UFCW Union Resume Tomorrow

April 21, 2011: Southern California Grocery Store Workers Vote to Authorize Strike Against 'Big Three' Chains

Talks Between Southern California's 'Big Three' Grocery Chains and UFCW Union Resume Tomorrow

Southern California Market Region:
Labor Negotiations Update

Negotiations between representatives of the seven United Food & Commercial Workers (UFCW) union locals in Southern California and representatives of the region's "big three" grocery chains - Kroger Co.-owned Ralphs, Safeway's Vons, and Albertsons, which is owned by Supervalu, Inc. - are set to resume tomorrow, and run until Thursday, according to Michael Straeter, president of Local 1442.

Following the three days of negotiations this week, plans are for the talks to continue on the same Tuesday- through-Thursday schedule from May 2 -to- 9, Straeter said today.

Kroger Co., Safeway Stores, Inc. and Supervalu, Inc. are the top three supermarket chains (in order of how they're listed) in the U.S., based on annual sales.

Ralphs (number one), Vons and Albertsons are also the top-three food and grocery retailers in Southern California, followed by Stater Bros., which is fourth in market share.

Stater Bros. is normally part of the contract negotiations along with the "big three." However, CEO Jack Brown, who's been a leader in union-grocery labor relations in the Southern California market for decades, this year decided to have Stater Bros. negotiate with the UFCW locals on its own, rather than being a part of the four chain group. The negotiations with Stater Bros. are currently taking place.

The last union contract in Southern California was signed in 2007. That contract expired in March of this year. Since then, the union grocery clerks and the unionized chains in Southern California have been working on a day-to-day basis, under the terms of the old contract.

Last week, UFCW-member grocery clerks in Southern California voted to authorize a strike against the three supermarket chains.

No strike has yet been called.

Both parties have said they want to reach a deal and avoid a strike and walkout by workers. The talks starting tomorrow and continuing until May 9 are designed to achieve that objective.

But when it comes to labor contract negotiations, particularly in challenging times like at present, both God and the Devil are in the details for the negotiating parties.

As such, the Southern California union locals and the three grocery chains are prepared to travel a rough and long road before they get to the end and agree on a contract that can then be voted on (for ratification) by the UFCW-member grocery clerks.

See the two stories at the following links - April 21, 2011: Southern California Grocery Store Workers Vote to Authorize Strike Against 'Big Three' Chains; and Union Grocery Store Workers' Vote Could Authorize Strike Against Southern California's 'Big Three' Grocery Chains - for background information and details on the status of the negotiations.

Southern California Grocery Store Workers Vote to Authorize Strike Against 'Big Three' Chains

Southern California Market Region Report
News/Analysis/Commentary

In this story [April 21, 2011: Union Grocery Store Workers' Vote Could Authorize Strike Against Southern California's 'Big Three' Grocery Chains] published in the very early hours of the morning, we said members of seven UFCW retail grocery union locals in Southern California would vote overwhelmingly in favor of authorizing a strike against the region's "big three" grocery chains - Kroger-owned Ralphs, Safeway's Vons and Albertsons, which is owned by Supervalue, Inc. - when the results of yesterday's vote were made public later today.

The results are in - and as we said would be the case, the UFCW-member grocery clerks voted by an overwhelming majority to authorize the union to call a strike if it feels its negotiations with the three supermarket chains are going nowhere, or if they become seriously bogged down.

According to representatives of the seven locals, about 90% of the UFCW members who voted yesterday, voted in favor of authorizing a strike.

There are 62,000 members of the combined seven locals. However, not all 62,000 members voted, and the UFCW officials are thus far keeping the number of members who voted yesterday under their union-label hats.

We also correctly said in our story early this morning that even though a strike would be authorized by the members, the union would not call for an employee strike/walkout of Ralphs, Vons and Albertsons, but instead would use the strike authorization as a bargaining chip in its negotiations with the three chains. Those negotiations are scheduled to resume next week and to continue over the next three -to- four weeks, according to union representatives and the three grocery chains.

No strike/walkout has been called by the UFCW.

The union officials hope the strike authorization provides them with some added leverage in the negotiations with the three supermarket chains, who want to reduce employee health care benefits (and expenses) and gain some other savings, as we laid out in our piece this morning.

The UFCW local officials we talked to today said no strike is planned for the immediate future. They also said the vote authorizing a strike is more than mere rhetoric; that it's a tool they will use if and when they feel it's needed.

In our early morning story we reported the three grocery chains said the union's holding a strike authorization vote was premature, since the old contract expired on March 6, 2011, and negotiations have only been going on in earnest for a few weeks.

Ralphs, Vons and Albertsons reiterated that position today in a joint statement, in which they said the authorization to strike is not only premature but, in their collective opinion, is essentially a diversion.

"Getting sidetracked by these tactics will only delay our ability to reach an agreement on a fair contract for our associates, the three grocery chains said in the joint statement. "The real work toward getting a fair contract will happen at the negotiating table and we hope that's where the union leadership will focus its attention."

As of today, here's where the grocery chains, the UFCW union-member grocery clerks and the union locals stand.

The union locals can now call a strike if they desire at any point in the negotiating process.

However, most members don't want that, as it means losing their regular paychecks from the supermarket chains for however long a strike might last. in 2007, the year the contract that expired on March 6 was ratified, negotiations between the union and the grocers took about seven weeks.

If the union does strike, the chains could fight back by locking out employees, which happened in Southern California in 2003. In a lockout the grocers hire non-union workers in an attempt to keep the stores open and sales flowing. In 2003 the retailers estimated they collectively lost about $1.5 billion because of the strike by UFCW members.

The presidents of the seven UFCW local also say the don't want to call strike, at present.

Ralphs, Vons and Albertsons are less than pleased about the strike authorization. They see it as premature and as a move by the union to play hardball early on in the negotiations.

The union local presidents, on the other hand, say the grocery chains have been stalling negotiations, so they needed to put an authorization to strike in the hip pockets of their negotiation suits.

Negotiations resume next week. Plans call for three -to- four weeks of intense negotiating, according to union officials and representatives of the three grocery chains.

If there there is a strike, the losers will be the grocery chains  - lost sales and other problems - and the UFCW-member grocery store employees - lost wages, chance of losing a job, and more.

The winners: The numerous non-union food and grocery retailers in Southern California, which include the two largest retailers in the U.S. - Walmart and Target - along with Trader Joe's, Whole Foods Market, Sprouts Farmers Market, Tesco's Fresh & Easy Neighborhood Market and a number of others.

The UFCW locals in Southern California would like to unionize all of the chains listed above.

But, ironically, if the locals do call for a strike against Ralphs, Vons and Albertsons, which account for about half of all food and grocery sales in Southern California, they will be handing a nice piece of new business (added sales) to the very same non-union food retailers they would like to unionize, giving grocers like Fresh & Easy Neighborhood Market, which the UFCW is campaigning hard to unionize, a perfect argument as to why it should remain non-union.

That argument: Remaining non-union, among other advantages, allows it (and the others) to benefit from a strike against the 'big three chains, by gaining sales from an action (the strike) taken by the very union that (in Fresh & Easy Neighborhood Market's case specifically and particularly) wants and asks consumers not to shop at its stores because they're non-union.

This "Catch 22" scenario is something both parties - the UFCW union locals and the "big three" union chains - should think seriously about when negotiations resume next week.

We will be covering the negotiations closely. Stay tuned.