Showing posts with label UFCW union. Show all posts
Showing posts with label UFCW union. Show all posts

Friday, July 1, 2011

Tesco Shareholders Meet: Board Says Yes to Pay Plan, No to Investigation of Fresh & Easy Neighborhood Market; Pig Farmers Say it's Impossible to Bring Home the Bacon


News/Analysis/Commentary
Tesco's 2011 Annual General Meeting (AGM)

Tesco's annual shareholders' meeting today in Nottingham, England UK, home of the Sheriff of Nottingham of literature fame, went off with precision - and with the exception of a couple interesting diversions was nearly as placid as the countryside surrounding the Midlands' city where it was held.

First up, Tesco's shareholders approved the global retailer's new Remuneration Plan, or pay package for senior executives who also serve on its board, by a whopping 97.2%. In contrast, at last year's annual meeting, 47% of shareholders voted against the Remuneration Plan for 2010.

What a difference a year - and a new pay scheme - makes.

In this story on Wednesday - June 29, 2011: Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market - we said Tesco shareholders - which really means the big institutional investors because that's where most of the votes are - would pass the global retailer's Remuneration Report, approving the new senior executive/board director compensation plan by a healthy majority, although even we were surprised by the whopping 97.2% in favor vote.

In June, Tesco unveiled the new pay plan for its senior executives who also sit on the board, as a way to try to put an end to what many shareholders and others have argued over the years is the controversial way in which the United Kingdom-headquartered global retailer compensates and rewards the executive directors.

The new pay (or remuneration) plan, which Tesco's board says is a simpler, more collegiate and more investor-friendly version compared to the old one, basically removes executive-level stock options from the senior executives-directors' compensation (bonuses and stock on top of base salary) package and replaces them with what Tesco is calling a performance share award.

All the directors performance share awards are based on the total performance of Tesco plc, rather than its individual divisions and the like, which is one of the collegiate aspects of the plan, according to Tesco.

In the new program Tesco also has dumped its four long-term financial incentive plans for the executive directors - which is something some investors and others have called excessive - and replaced them with just one plan.

The old plan also required five different performance measures or metrics to determine success in terms of the bonuses and stock options the executive directors would receive. In contrast, under the new and simplified plan, there are two performance measures: return on capital employed and earnings-per-share.

Additionally, under the old plan Tesco used over 20 performance measures to determine annual bonuses for the senior executives who also sit on the board. That's been chopped down to just seven in the new plan. More simplification.

All the directors will participate in the same plan now (collegiate), unlike under the old scheme, including board member-Tesco group deputy CEO, chief marketing officer and Fresh & Easy Neighborhood Market CEO Tim Mason, who was singled out among the executive directors previously, in that part of his bonus and stock option package was based on the performance of Fresh & Easy USA, which he's been CEO of since 2006.

The package though wasn't based on Fresh & Easy's making a profit or even breaking-even. Instead it was based on certain benchmarks put forth by former CEO Terry Leahy, who retired in March of this year, and approved by Tesco's board.

For example, last year Mason was given a bonus worth about 80% of his annual salary of £832,000 - which is about $1.336 million at today's conversion rate - even though Fresh & Easy had loses about 10% higher than the previous year.

In 2009, Mason took home total compensation of over $6 million, despite huge losses at Fresh & Easy.

In both cases then Tesco CEO Terry Leahy and the board said he earned the pay and bonuses, plus stock options, for hitting certain strategic goals and meeting certain corporate benchmarks and milestones.

From 2006 to last year Mason's only position, in addition to sitting on the board, was CEO of Fresh & Easy. But in March of this year he was named to the added posts of Tesco group deputy CEO and chief marketing officer for Tesco. Therefore, it makes logical sense he should be included along with all the other executives-directors in the compensation scheme, in our analysis. (See our Jun 29 piece linked above and below for more details about that analysis.)

No independent investigation of Fresh & Easy

In our story on Wednesday [Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market] we reported the labor union-affiliated Ctw Investment Group asked new Tesco board member and incoming (November 2011) chairman Richard Broadbent to initiate an objective and independent review of the retailer's El Segundo, California-based Fresh & Easy chain. Broadbent was approved by shareholders as a board member today. He joins the board tomorrow.

In our story linked above, we said the board would not do this now or anytime in the future. Tesco board chair David Reid, who is retiring in November, and the rest of the board did just that, dismissing the request by CtW and another firm, Pirc, saying it would not order such an independent review of Fresh & Easy Neighborhood Market. End of story.

In a statement Tesco's board said: "CtW doesn't own shares and doesn't represent shareholders. Pirc doesn't represent shareholders either. We are very glad that shareholders have endorsed the new Remuneration Plan."

CtW Investment Group manages pension funds for various U.S. labor unions, including the United Food & Commercial Workers (UFCW) union, which have investments in Tesco. It says it's therefore an institutional investor in Tesco, just like the various other fund management firms attending today's meeting. And since CtW was at the meeting, and Tesco only allows investors and the media at the annual shareholders' meeting, it would appear on the face of it the retailer recognizes the investment group as an investor. If not, why was CtW allowed at today's meeting?

A representative of CtW said today he was disappointed by the decision the board made to say no to an independent and objective investigation of Fresh & Easy. But he also said he was far from surprised by the decision.

The union pension fund-affiliated investment group was also at last year's shareholders' meeting, along with the UFCW union. The representatives of CtW and the UFCW were part of some verbal fireworks with then CEO Terry Leahy last year over the compensation issue (particularly as it pertained to Tim Mason), which is something Tesco and new CEO Clarke avoided at this year's shareholders' meeting. Read our story here - July 5, 2010: Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London. It's also good background in general for this piece.

The vast majority of investors at today's meeting were fine with the board's saying no to an independent investigation of Fresh & Easy, although many weren't fine or happy about the 176-store U.S. chain's continued losses, which to date are at about $900 million

CEO Clarke said little - and deputy CEO and Fresh & Easy Neighborhood Market CEO Mason said nothing - about Fresh & Easy at today's meeting, other Clarke's saying Tesco still plans to break even with the grocery chain, which lost about $307 million on sales of about $818 million in the fiscal year end February 26, 2011, by the end of the its 2012/13 fiscal year, which is 20 months from now.

Clark also said he's pleased with Fresh & Easy's "progress," based in part on the four trips he's made to its El Segundo, California-based headquarters offices and Riverside County distribution center campus since February of this year,  saying he believes the chain's on track to break even by February 2013, which is something he's said before a few times since taking over in March as CEO of Tesco.

Mason didn't make a presentation about Fresh & Easy at today's shareholders' meeting, which didn't surprise us but demonstrates how much Tesco wants to downplay its U.S. operation, which has 176 stores in California (127 units), Arizona (28) and Nevada (21), which is hundreds of fewer stores then it originally said it would have open by now.

The first Fresh  Easy stores opened in November 2007. Tesco originally planned to have 500 stores open by now and up to a 1,000 units open by the end of 2013. The plans now call for 300 stores to be open by February 2013.

We said from day one, late 2007 when the blog was started, that those store count number were over the top.

We were right.

And when Philip Clarke took over as CEO of Tesco in March, he said it would take 400 stores to break-even. In April he revised that to 300 stores. Terry Leahy's dream was for Fresh & Easy to be a cash cow for Tesco. Clarke, who inherited the loses at Fresh & Easy from Leahy and Mason, would be pleased as punch to break even.

This year's fireworks: Protesting pig farmers

Tesco's shareholders may have been fairly happy about things overall at today's annual meeting, voting by 97.2% in favor of the Remuneration Plan, as an example. But a group of about 70-80 British pig farmers and supporters protesting outside the conference center in Nottingham where the event was held were "slopping mad."

Struggling to bring home the bacon

The pig farmers and there allies said Tesco is paying them unfair prices for the pork they sell to the retailer, which is the UK's number one grocer, with an about 30% market share, and they want the retailer to pay a more fair price for the locally-raised pigs. Tesco's top two competitors, Walmart-owned Asda and Sainsbury's hold a combined national share of about 34%, to put just how big Tesco is in the UK in perspective.

One of the pig farmers said rising costs for feed are rapidly putting him in a situation in which if Tesco doesn't soon raise the price it pays him for his pork he will be losing money on every pig if he continues selling to the retailer.

A Tesco spokesman said the retailer believes it pays a fair price for the pigs and that Tesco makes a strong effort to support and advertise the locally-produced pork.

But the pig farmers weren't buying this, which is why they were protesting outside the shareholders' meeting, holding signs with various slogans, such as this one: "Tesco - how about the crumbs from your rich man's table?"

The protesting pig farmers received a significant amount of attention from investors and the media today though, perhaps proving that in addition to pork-producing the also know that in public relations as in pig farming the "squeaky" wheel most often not only gets the grease but also its 15 minutes or so in the spotlight.

But Tesco would be wise to sit down with these local pig farmers and try to hash something agreeable out, as the issue has been festering for a very long time in the UK.

Related Stories

June 29, 2011: Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market

May 11, 2011: Richard Broadbent to Join Tesco's Board July 2; Become New Chairman November 3

April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million
March 1, 2011: Fresh & Easy Neighborhood Market CEO Tim Mason Pockets Nearly $1 Million From Sale of Tesco Shares

February 28, 2011: Changing of the Guard: Clarke Takes Over the Reins as Tesco CEO Wednesday

February 28, 2011: Big Day For Tesco CEO Terry Leahy: Retirement and A Birthday But No Break-Even For Fresh & Easy USA On His Watch


[Also: Click on the following links - , , , , , , , ,  - to read stories about past Tesco annual general (shareholder) meetings and related topics.]
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Wednesday, June 29, 2011

Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market


News/Analysis
Tesco's 2011 Annual General Meeting (AGM)

The CtW Investment Group (part of the Change to Win coalition), which invests and manages money for a number of union pension funds in the U.S. including the United Food & Commercial Workers (UFCW) union, is calling for incoming Tesco plc board chairman Richard Broadbent to order and lead an "objective and independent" review of the United Kingdom-based global retailer’s U.S. Fresh & Easy Neighborhood Market chain.

The union-affiliated investment group's request came in the form of a letter it sent today to Broadbent, in advance of Tesco's Annual General Meeting (AGM), which is being held in Nottingham, UK on Friday.

Broadbent, who is currently deputy chairman at Britain's Barclays Bank, is set to join Tesco's board as a non-executive director July 2. He will become chairman on November 3, 2011, when current board chair David Reid retires. [See - May 11, 2011: Richard Broadbent to Join Tesco's Board July 2; Become New Chairman November 3.]

Since Broadbent isn't set to become chairman for four months, it appears CtW Investment Group is timing its letter to the not yet member of Tesco's board and its future chairman to Friday's annual meeting, where he is up for a vote by shareholders to approve his nomination to the global retailer's board of directors, which consists of an about 50%-50% split between Tesco senior executives, including CEO Philip Clarke and deputy CEO and Fresh & Easy Neighborhood Market CEO, Tim Mason, and outside or non-executive directors. As a board member and then as chairman, Broadbent will be a non-executive director, meaning he doesn't work for Tesco.

The group says in the letter an independent review of Fresh & Easy is needed in order to determine what additional steps Tesco needs to take to make good on the commitment made by CEO Philip Clarke after taking over in March of this year that the fledgling U.S. grocery chain, which lost about $307 million on sales of about $818 million in its most recent fiscal year (ended February 26, 2011), will break even by the end of its 2012/13 fiscal year, which is 20 months from now.

There are currently 176 Fresh & Easy Neighborhood Market stores open and operating in California (127 units), Arizona (28) and Nevada (21).

Tesco has opened 22 new Fresh & Easy stores so far this year - 12 in Northern California, its newest market region, and 10 in Southern California, where it has 101 of its 176 stores. There are currently 12 Fresh & Easy grocery markets in Northern California and 14 units each respectively in the Bakersfield and Fresno metropolitan regions in California's Central Valley.

Clark said recently (confirming our earlier report of 40-50 new stores this year) Tesco plans to open 50 new Fresh & Easy stores in 2011. As part of its break-even plan for Fresh & Easy, Tesco says it will have 300 stores open and operating by February 2013, at which point it says it will break even with the U.S. operation.

CtW Investment Group also has a problem with Tesco's proposed new senior executive/board director remuneration or pay plan, which will be voted on by shareholders at the annual meeting on Friday, specifically the part that no longer ties Fresh & Easy Neighborhood Market CEO Tim Mason's pay to performance at the grocery chain.

This argument is really a moot point though, for two reasons.

First, CtW Investment Group last year objected to Mason's pay and bonus structure under Tesco's then pay-for-performance scheme, which is still in effect.

For example, Mason made over $6 million in 2009, despite huge losses [See: Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy] at Fresh & Easy. Tesco said his pay, bonus and stock compensation was in reward for "meeting certain corporate benchmarks and milestones" with Fresh & Easy.

In other words, performance is in the eye of the corporate beholder. And is often the case, it doesn't have to be based on profit and loss, particularly when it comes to start-up-type ventures like Fresh & Easy (four years in November 2011), although in our analysis and opinion Mason's pay last year was too high ($2.5 million might have been reasonable) considering the continued high losses at Fresh & Easy. But we didn't expect him to give any of it back.

More significant though in terms of rendering the argument CtW Investments is making moot in our analysis is the fact as of March 2011 Mason became Tesco's group deputy CEO and chief marketing officer, as well as CEO of Fresh & Easy.

Therefore, unlike from 2006-2010 when his sole responsibility at Tesco was for Fresh & Easy, he is now not only the CEO of the U.S. chain but also deputy CEO to Philip Clarke, as well as the global retailer's chief marketing officer. As such, in our analysis, the argument his pay should be tied to Fresh & Easy's performance, which it really never was in practice if one defines performance as making a profit or at least coming close to break-even, has been rendered moot by his elevation to deputy CEO of Tesco.

Mason has been a member of Tesco's board since February 16, 1995.

Before moving to the U.S. in January 2006 to start up Fresh & Easy as CEO he was Tesco's chief marketing officer, based in the UK, a position he again holds as of March, as part of his job title trifecta at Tesco.

Mason remains based at Fresh & Easy's headquarters in El Segundo, California but has been spending a considerable amount of time since March at Tesco's headquarters in the UK, as well as traveling to its other global outposts. For example, he's spent the last few days in Eastern Europe with his boss, CEO Philip Clarke, and other Tesco senior executives, who are putting on a road show for financial analysts.

CtW investment Group and the UFCW union were front and center, joined by numerous others, at last year's Tesco AGM over the issue of compensation for the global retailer's senior executives who also serve on its board. The pay issue was the major hot button at the 2010 investors' meeting, where a whopping 47% of company shareholders voted against Tesco's Remuneration Report.

[We chronicled the going's on at last year's AGM in this story - July 5, 2010: Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London - which we suggest you read. Also See - June 23, 2010: Tesco Fresh & Easy Neighborhood Market CEO Tim Mason Gets Big Stock Award Featuring a Singular Twist.]

Earlier this month Tesco moved to avoid any such similar behavior from shareholders when they meet in the United Kingdom on Friday, when it released a revamped pay plan for its senior executive/board directors. The new "all for one and one for all" scheme attempts to reward all the senior executives/directors based on Tesco's overall performance, at least in theory.

Ironically, this is what CtW Investment Group and the UFCW union, who's pension funds it manages and invests objects too because it lumps Mason in with all the other Tesco senior executives on the board rather than basing his pay on Fresh & Easy's performance. But as we detailed above, since Mason is deputy CEO and chef marketing officer of Tesco along with being CEO of Fresh & Easy Neighborhood Market, including him in the mix seems kosher to us.

Plus: Who says Mason will remain CEO of Fresh & Easy for long, now that he has major Tesco group responsibilities?

For example, Former CEO of Tesco's operations in Taiwan, Jeff Adams, who was transferred to Fresh & Easy Neighborhood Market in 2008 and is its head of retail operations, a lesser position than he held previously in Taiwan, has been waiting patiently in the wings in El Segundo for nearly three years. He would be one of Tesco deputy CEO Mason's logical internal replacements as CEO of Fresh & Easy - based on the way Tesco does internal succession - should Mason return to the UK.

[For some background on Jeff Adams at Fresh & Easy USA read - March 12, 2008: Breaking News: Tesco plc. Makes Major Personnel Change to Fresh & Easy Neighborhood Market USA Senior Management Team; and September 22, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market.]

The irony involving CtW Investment Group's position on the new executive/director pay sheme is because it appears from all indications we have the majority of Tesco's other investors - CtW holds some stock in Tesco through the pension funds it manages for the UFCW and other labor unions so qualifies as an investor in the company - particularly the big and all-important institutional investors who control the voting, are in favor of the new pay plan, which is expected to pass by a much higher percentage of votes than the Remuneration Plan did last year.

A representative of CtW is set to be at Friday's Tesco AGM, according to the firm. The UFCW union also told us it will have someone there, as it did last year.

We don't expect the same level of fireworks this year as there was in 2010 at the meeting [Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London.] But there should be a robust, albeit brief, discussion of the new pay plan.

We also don't expect any action to be taken by Tesco's board now or in the future regarding the request in the investment group's letter to Richard Broadbent for an "objective and independent" review of Fresh & Easy Neighborhood Market - at least not one the results of which Tesco would make public.

Tesco has a solid agenda for its annual meeting Friday, which only runs for two hours, from 11 am-1 pm. You can view the agenda here.

Fresh & Easy Buzz will have a correspondent at Friday's . We'll be offering news reports and analysis of the annual shareholders' meeting in the blog. Stay tuned.

Related Stories

May 11, 2011: Richard Broadbent to Join Tesco's Board July 2; Become New Chairman November 3

April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million

March 1, 2011: Fresh & Easy Neighborhood Market CEO Tim Mason Pockets Nearly $1 Million From Sale of Tesco Shares

February 28, 2011: Changing of the Guard: Clarke Takes Over the Reins as Tesco CEO Wednesday

February 28, 2011: Big Day For Tesco CEO Terry Leahy: Retirement and A Birthday But No Break-Even For Fresh & Easy USA On His Watch


[Also: Click on the following links - , , , , , , , ,  - to read stories about past Tesco annual general (shareholder) meetings and related topics.]
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Wednesday, June 8, 2011

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
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Monday, May 23, 2011

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
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Thursday, May 12, 2011

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: , , , , , , .]
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Friday, May 6, 2011

'Son of Tesco Fresh & Easy Law': California State Assembly Appropriations Committee Hearing For AB 183 Cancelled

Thursday's scheduled hearing in the California State Assembly Appropriations Committee for AB 183, the legislative bill that if passed and signed into law by Governor Jerry Brown would prohibit sales of alcoholic beverages at grocery and other retail store self-service checkout stands in the Golden State, was cancelled at the request of the author, Assemblywoman Fiona Ma, who represents parts of San Francisco and San Mateo County.

Read our story published yesterday for details on the legislation - May 4, 2011: 'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year.

A spokesperson for the committee said Thursday a new hearing date for AB 183 had not yet been set.

We contacted Assemblywoman Ma, asking her when she planned to ask the Appropriations Committee's chairperson to set a new date for the hearing. However, we didn't hear back from her prior to publishing this story.

The Assemblywoman is also the Speaker Pro Tempore of the California State Assembly, which is the number two leadership position in the legislative body, after Assembly Speaker John Perez.

The sale of alcohol at self-service checkout stands is currently legal in California. If the legislation becomes law, it would ban the practice in stores statewide.
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Wednesday, May 4, 2011

'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year

Self-service/assisted checkout at a Fresh & Easy Neighborhood Market store
News/Analysis

It's back.

Legislation in the California State Assembly that if passed and signed by Governor Jerry Brown would prohibit the sale of alcoholic beverages at self-service checkout stands in California grocery and other retail format stores is rapidly making its way through the various key legislative committees, on it's likely way to being voted on soon by the full legislative body.

The bill, AB 183, was introduced on January 25, 2011 by Assemblywomen Fiona Ma, who represents Assembly District 12, which spans most of the western portion of San Francisco and the northern edge of nearby San Mateo County.

AB 183 is virtually identical to AB 1060, which was passed by a majority of members of the California State Assembly and California State Senate in 2010, but was vetoed by then Governor Arnold Schwarzenegger, right before the midnight deadline, on September 30, 2010.

AB 1060 was authored by Assemblyman Hector De La Torre (D-South Gate, Southern California), who also authored what was the first piece of legislation in California to ban alcohol sales at self-service checkout stands, AB 523, in 2008.

The 2008 bill, AB 523, unlike AB 1060 last year, didn't pass.

In a July 14, 2008 story about AB 523 - July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages - we nicknamed the legislation the "Tesco  Fresh & Easy Law" because Tesco's Fresh & Easy Neighborhood Market, which has 126 of its current 175 grocery markets in California, is the only grocery chain of note that offers only self-service checkout, and not the full-service/self-service option, in its stores.

Assemblyman De La Torre's AB 1060 in 2010 was virtually identical to his AB 523 in 2008.

And, Assemblywoman Ma's current bill, AB 183, is virtually identical to De La Torre's AB 1060, which last year passed both houses of the California State Legislature, but was vetoed by then Governor Schwarzenegger.

In a series of reports and stories on AB 1060 last year, we said the legislation would be back this year, either authored by Assemblyman De La Torre's or another Democratic member of the Assembly. (The stories are linked above and at the end of this piece.)

It is.

And we're calling AB 183 the "Son of Tesco Fresh & Easy Law."

Del La Torre, who supports AB 183, took a pass on authoring another bill this year.

But Assemblywoman Ma, who also happens to be Speaker Pro Tempore of the California State Assembly, the number two leadership position after Assembly Speaker John Perez, introduced virtually identical AB 183 in January.

Ma, who is a CPA by profession, is using her added status and clout as Speaker Pro Tempore to speed the bill to prohibit the sale of alcoholic beverages at self-service checkout stands through the key committees in the California State Assembly.

On Wednesday, April 13, AB 183 achieved its first key committee milestone, passing in the Assembly Committee on Governmental Organization by a big majority - 11 committee members in favor of the bill and only three against it.

Today (May 4), just a few weeks later, AB 183 is being heard by the powerful and important Assembly Committee on Appropriations. A vote by the committee could come as early as later today or tomorrow.

The appropriations committee passed AB 1060 last year. The odds Assemblywoman Ma's AB 183 will pass in the committee after today's hearing are extremely high.

Democrats control a significant majority in the California State Assembly, which also means they have majority control of all the committees.

Assemblywoman Ma has put together a strong grass roots coalition in support of her legislation to ban alcohol sales at self-service checkout stands in grocery and other format stores.

Among the key supporters of AB 183 include: Mothers Against Drunk Driving (MADD); alcohol industry watchdog organization the Marin Institute; the San Francisco Fire Department; San Francisco Police Officers, the San Francisco District Attorney's Office, Metro United Methodist Ministries and others.

Supporters of the legislation have also recruited high school students, who are speaking out in a variety of venues  in favor of passage of AB 183.

The United Food & Commercial Workers (UFCW) union also supports AB 183. The retail grocery clerks' union was a major supporter of AB 1060 in 2010. But so far the UFCW hasn't been anywhere near as involved with Ma's legislation as it was with Assemblyman De La Torre's self-service checkout booze ban bill last year. But it's still early.

California State Assembly Speaker John Perez, who picked Assemblywoman Fiona Ma to be his deputy, is a former organizer and executive with the UFCW union. Therefore, the political ties are close among all the players mentioned above.

Like was the case last year, the California Grocer's Association (CGA) opposes any legislation, including AB 183, that would ban grocers from selling alcoholic beverages at self-service checkout stands, even though virtually all of its grocer-members, which include Safeway Stores and other big chains, as well as smaller chains and independents, offer both full-service checkout and self-service in their respective stores.

In fact, only a small percentage of grocers in California offer self-service checkout as an option, along with full-service, although that's changing as more add self-service lanes to their stores. Fresh & Easy Neighborhood Market is the only CGA member-grocer we're aware of that offers self-service checkout only in its stores.

The CGA and others argue there are sufficient safeguards in place to prevent minors from buying alcohol at the self-service checkouts, which is the primary argument Ma, De La Torre and other supporters of the legislation site as the chief reason for a ban.

Self-service checkout stands in California have a locking device that's designed to prevent people under 21-years of age from buying alcoholic beverages using the checkouts.

The retail industry and others argue the system works fine.

Conversely, supporters of AB 183 argue the opposite, siting studies done at UCLA and by others in which minors were able to buy alcohol at grocery store self-service checkouts.

In the 2009 study at UCLA, for example, researchers said 20% of minor adults, out of the total number (100%) of underage subjects used in the study, were able to override a self-service checkout by scanning other items and/or swiping credit cards. (You can read details about the system and the opposing arguments about its efficacy in past stories we've done here.)

Assemblywoman Ma says, in explaining her reasoning for authoring AB 183: "Underage drinking costs California taxpayers an estimated $8.1 billion annually. AB 183 seeks to prevent alcohol from getting in the wrong hands and protects the public and our youth. It’s better to be safe than sorry."

She also argues allowing alcohol to be sold at self-service checkout stands is no different than allowing cigarettes to be sold in vending machines or in stores without the assistance of store employees.

In 1995, California passed legislation that restricted the use of  vending machines. In 2001, the state banned the self-service sales of cigarettes in retail stores without the assistance of the retailer or an employee of the retailer. This is why grocery and other retail stores in California either keep cigarettes behind the counter or merchandise them in display cabinets with locking, clear plastic doors.

Tesco's Fresh & Easy Neighborhood Market calls its self-service checkout program "assisted checkout" because store workers are instructed by the grocer's senior management to assist customers with checkout anytime they ask. And store clerks do so gladly, based on our observations of nearly four years.

Such a system won't get by though if AB 183 passes and becomes law because the legislation requires a store clerk to be present at any checkout stand where alcoholic beverages are being sold. As such, Fresh & Easy would likely have to, at a minimum, have at least one dedicated full-service checkout stand in each of its stores in California. [See - August 15, 2010 piece : Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores.]

Ironically, since 2008 we've said it's our analysis that Tesco, which lost $300 million-plus on Fresh & Easy in its most recent fiscal year ended February 2011, is making a major mistake by not offering shoppers an option of both full-service and self-service checkout in its stores, not just in California but also in Nevada and Arizona, which is something all of its competitors offer. [For example, see this March 2009 piece: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]

Therefore, as we suggested in the August 15, 2010 story linked above, at least in our analysis, the state of California would be doing Tesco's Fresh & Easy a favor if its passes AB 183 and bans the sales of alcoholic beverages at self-service checkout stands, since the grocer would then have to have at least one full-service checkout stand in each of its California stores. We suspect, based on experience, the full-service checkout stand would be a popular one.

Like it has since the first piece of legislation designed to ban alcohol sales was introduced by Assemblyman De La Torre in 2008, Tesco's Fresh & Easy Neighborhood Market is taking an extremely low profile regarding AB 183.

For example, so far this year neither Fresh & Easy Neighborhood Market CEO Tim Mason or any of the members of his senior executive team have to date spoken out publicly in a statement or press release in opposition to AB 183 - just as was the case in 2010 and 2008-2009. Instead, Tesco's Fresh & Easy is letting the grocers' association and its own public relations/lobbying firm in Sacramento deal with the legislation and issue behind the scenes.

We do know that Tim Mason, who in addition to being CEO of El Segundo, California-based Fresh & Easy is the deputy group CEO of United Kingdom-based Tesco, met with California Assembly Speaker John Perez, who collects plastic ducks and displays them in his Assembly office, on February 18 of this year. But we don't know if AB 183 was one of the things they discussed during Mason's brief visit to the Speaker's office at the State Capital in Sacramento.

Tesco's Fresh & Easy should start preparing for the possible passage of the self-service checkout alcohol sales ban bill this year for a couple reasons.

First, the Democrats have a majority in both the California State Assembly and California State Senate this legislative year equal to the majority they had last year, when AB 1060 passed in both bodies. It seems unlikely - although never say never either way when it comes to California politics - that, given this consideration, along with a couple others, AB 183 will fail to pass both legislative bodies this year, just as Ab 1060 did in 2010.

But even more significant - the big potential game changer this year, compared to 2010 - is there's a new Governor in the house - Democrat Jerry Brown.

Even though Governor Schwarzenegger was and is a liberal-to-moderate Republican, when it came to legislation regulating or banning existing business practices, like being able to sell alcohol at self-service checkouts, which is currently legal, he was pretty absolute, tending more often then not to veto bills that put new regulations on businesses or banned existing practices outright.

Governor Brown, however, who's doing his second tour as chief executive of the Golden State, is more prone to favor legislation like AB 183.

Brown's also a Democrat, who as Governor needs all the support he can get from the Democratic leaders of the California State Assembly and California State Senate, in order to pass a budget this year that also reduces a potion of California's massive budget deficit.

He's also fairly close to Speaker Pro Tempore Fiona Ma. Brown, like Ma, is from the Bay Area. The Governor was Mayor Oakland for two terms and lives in the city. Before that he lived in San Francisco for many years, as well as having a home in Southern California. He's also the former chairman of the California Democratic Party.

Although Brown hasn't publicly offered his views on AB 183, that we're aware of - we did ask an aide in his office who said 's the case, we would be rather surprised if he vetoed AB 183 if it is passed by both Democrat-controlled state legislative bodies

We will be following AB 183 closely as the bill to ban the sales of alcoholic beverages at self-service checkout stands makes its way through the legislative process in Sacramento, which some compare to watching sausage being made.

Related Stories

September 30, 2010: Self-Service-Only Checkout Safe at California Fresh & Easy Neighborhood Market Stores Thanks to Governor's Veto Pen

September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Schwarzenegger Can Find His Veto Pen Before Midnight Tonight

September 28, 2010: Fresh & Easy Neighborhood Market Hoping Governor Schwarzenegger Prefers His Veto Pen When it Comes to AB 1060

September 25, 2010: Future of Fresh & Easy Neighborhood Market's Self-Service-Only Checkout in California Up to Governor Schwarzenegger

August 24, 2010: California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

August 15, 2010 : Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End
'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.

March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track

May 20, 2008: Take One Dose of 'Internal Research', Add An 'Independent' Survey From An Unnamed Source, and You Get A Consumer Preference For Self-Service Checkout.
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