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

News/Analysis/Commentary

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

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

Dueling strategies

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Stakeholders: Execs & employees

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

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

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

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

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

Stakeholders: The union

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

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

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

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

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

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

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

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

A close look under the "hood"

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

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

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

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

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

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

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

Reader Resource

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

Safeway, Kroger Co. and UFCW Union Agree to Extension in Colorado Store Worker Contract Dispute; We Suggest A 'No Loser' Policy in Negotiations

Food & Grocery Retailing and Organized Labor: News, Analysis, Commentary

Safeway Stores, Inc.'s Colorado division and the United Food & Commercial Workers (UFCW) union avoided a potential employee strike at Safeway supermarkets in the western state when the grocery chain decided to extend its just-expired union contract until May 30, giving the retailer and UFCW local 7, which represents the store workers, more time to negotiate a new contract.

Safeway operates over 100 supermarkets in the Colorado Rocky Mountain region.

Safeway Stores, Inc. issued a statement today announcing the contract extension.

Colorado Safeway store workers voted yesterday in favor of a strike but have agreed to continue to work under the old contract, which expired at 11:59 p.m. Saturday, May 9, until a new contract can be agreed upon or the May 30 contract extension deadline is reached, according to Kristine Staaf, a spokesperson for Safeway Stores.

Safeway's Colorado Rocky Mountain division isn't the first supermarket chain in the state to extend its contract with the UFCW over the weekend.

Yesterday another supermarket chain with stores in Colorado, Kroger Co.-owned King Soopers, decided to extend the union contract for its store-level employees to May 30 after being offered the opportunity to do so earlier in the week by UFCW local 7.

Safeway-Colorado and Kroger's King Soopers-Colorado had previously agreed to a mutual pact in which if employees of one chain or the other went out on strike, the other chain would then lock out its store-level workers in return. This has become a common strategy among unionized supermarket chains in the U.S. when the UFCW threatens a strike if a new contract isn't agreed upon within a certain timeline.

Such an agreement won't be needed between now and May 30 however, since employees for both chains have indicated they plan on working through contract negotiations, at least until May 30.

The contract negotiations and threat of an employee strike come at an obvious difficult time --the recession, massive unemployment, and the financial crisis -- for both the two grocery chains and their employees.

The union and its employees want a slight wage increase under the proposed new contract.

The two grocery chains want wages kept where they currently are under the new contract.

The union wants certain changes to the employee pension system, chief among them is changing the age in which store-level workers are eligible to start receiving their pensions, from the current age of 55, to age 50.

Safeway and Kroger's King Soopers want to keep the minimum retirement age right where it was in the just-expired contract -- at age 55.

Safeway Stores' and Kroger/King Soopers' Colorado divisions are the two leading supermarket chains in the the state. Albertsons, also unionized, is number three.

Fresh & Easy Buzz Analysis and Commentary

Unionized supermarket chains like these three pay store-level employees with one-year of full-time experience from about 30% to as much as 50% more per hour than what non-union grocery and mass merchandiser chains like Wal-Mart, Target, Costco, Trader Joe's, Tesco's Fresh & Easy, Colorado-based Sunflower Farmers Market, Whole Foods Market and others do.

The hourly wage for a full-time journey-level retail clerk at a unionized supermarket chain in the Western U.S. is about $20 an hour. They also receive a higher hourly wage when they work on Sunday and on holidays.

The unionized supermarket chains also offer workers a defined benefit pension plan.

The non-union chains generally offer 401-k-type of plans in which the employer matches a certain percentage of a store worker's contribution.

A UFCW-affiliated union chain employee with 30 years' of full-time service can retire after such service and collect as much as $40,000 annually in pension benefits every year he or she is alive post retirement.

Additionally, the UFCW-union supermarket chain health plan is among the best of any business sector, at any level, in the United States. Compared to most health plans the unionized supermarket clerks have more choice, lower employee contributions and minimal co-payments.

There's a growing frustration among the CEO's and others at unionized supermarket chains like Safeway, Kroger, Supervalu, Inc. and others because the fastest-growing retailers of food and groceries, the ones nipping hard at their heels, are non-union.

In Colorado this challenge from non-union retailers especially includes Wal-Mart with its Supercenters, Costco with its big box stores that sell fresh foods and groceries, and Target with its discount format stores and Super Target stores, which are similar to a Wal-Mart Supercenter.

To a lessor but important extent it also includes increased competition from the non-union and fast-growing natural foods-grocery hybrid chains Sunflower Farmers Market and Natural Grocers, both which are based in Colorado.

These non-union chains, which generally pay lower hourly wages and offer less in employee benefits than do unionized Safeway and Kroger, have been and continue to open new stores in Colorado, putting pressure on the unionized chains.

The unionized chains argue that because these non-union retailers pay employees less and offer fewer benefits, it puts them at a competitive disadvantage when it comes to retail pricing. Despite that fact, Safeway and Kroger are both rather competitive with Wal-Mart and Costco on price -- and are actually lower overall than Target.

It's important to note that neither Safeway or Kroger has been or is talking about breaking the union. Nor are they complaining. But they have a valid argument, one the UFCW should take seriously we believe, about the competitive advantage afforded the non-union competitors.

Safeway Stores' and Kroger Co.'s stores in Arizona, Nevada and California aren't affected by the contract negotiations or threatened strike. The divisions in these respective Western States --the three states where Tesco's Fresh & Easy operates its 120 non-union grocery and fresh foods markets -- operate under separate contracts.

Safeway Stores, Inc. operates 500-plus supermarkets in California, Nevada and Arizona under the Safeway and Vons banners.

Kroger Co. operates about the same number of stores in the three states. It's banners in the three states are: Ralphs (Southern and Central California), Food 4 Less (Southern California, Nevada); FoodsCo (Northern California) Smith's Food & Drug (Nevada) and Fry's (Arizona).

Additionally, both Safeway and Kroger operate hundreds of additional supermarkets in other Western U.S. states, including in addition to Colorado, in Oregon, Washington State and elsewhere in the west.

The fact that non-union retailers have been gaining on unionized supermarket chains is best demonstrated by looking at the changes in the ranking of the top-five retailers of food and groceries over just the last four -to- five years.

Just four years ago Kroger Co. (unionized) was the number one retailer of food and groceries in the U.S., followed by non-union Wal-Mart at number two, Supervalu, Inc. (unionized) at number three and Safeway Stores, Inc. a (unionized) number four.

Today, non-union Wal-Mart is the number one food and grocery retailer nationally in the U.S. Kroger (unionized) is number two. Non-union Costco is number three Unionized Supervalu, Inc. is fourth and Safeway Stores, Inc. (unionized) is number five.

Non-union Wal-Mart and Costco have been the two fastest-growing chains among these top five in terms of annual sales volume.

Additionally, Aldi USA and Whole Foods Market, Inc., both multi-billion dollar a year grossing non-union chains, and both among the top-25 largest chains in the U.S., have grown faster on a percentage basis than any unionized supermarket chain in the U.S. over the last five years.

American workers are seeing wage stagnation greater than ever in recent history during this recession. In fact, such wage stagnation has been going on for at least the last five years.

And of course, most American workers just want to hold on to their jobs right now, since finding a new one at present reminds one of that old song: " (Dream) The Impossible Dream."

Such are the realities facing Safeway Stores, Inc., Kroger Co., the UFCW union and the employees of Safeway's Colorado stores and Kroger's King Soopers supermarkets this weekend.

All sides in the negotiations should be extra considerate of one another in these tough times, we suggest. Give and take must be the order of the day. It's not a time for winners and losers. The stakes are too high for all of the stakeholders involved.

And, with all due respect to the UFCW... Is this really a good time to be arguing for the retirement age for unionized supermarket clerks to be reduced from age 55 to 50? We get it -- the more folks that retire at age 50 the more new jobs open, at least theoretically. That could backfire though, actually, in the form of employers freezing openings.

It's just that the move is rather tin ear we think for the current times. Right now the vast majority of Americans in their late fifties and early sixties, including those at retirement age now, will have to postpone retirement because they can't afford it.

Therefore, along with a couple other reasons, we aren't sure arguing for unionized grocery clerks to get the same retirement benefits at age 50 that they now get when they retire at 55 if they choose to is a good move in terms of gaining public support. Not to mention getting continued support from unionized supermarket chains.

Related Stories from Fresh & Easy Buzz:

>April 13, 2009: Analysis: Major Retailers Costco, Whole Foods Market and Starbucks Propose Employee Free Choice Act 'Third Way' Compromise; What About Fresh & Easy?

>February 13, 2009: Labor & Food Retailing: Kroger Co. Chains Sign New Contract With the UFCW Union in Vegas; What Happened to the UFCW Tesco Fresh & Easy Campaign?

>November 10, 2008: Food Retailing & Organized Labor: Tesco's Fresh & Easy Gets Some Company as the UFCW Union Launches Campaign to Unionize Wakefern's PriceRight Banner

>November 4, 2008: U.S. Organized Labor, Including the UFCW Union, is Feeling Good Tonight About A President Obama and Stronger Democratic Majority in Congress

>October 28, 2008: The UFCW Union, Tesco's Fresh & Easy, U.S. Labor Relations, and Next Week's Presidential and Congressional Election

>October 2, 2008: Tesco Fresh & Easy Denies Huntington Beach Store Employees Request to Be Recognized As A Union Store; Next Step Likley to Be Open Ballot Election

>September 26, 2008: News & Analysis: Employees At Two More Fresh & Easy Grocery Stores Could Soon Request UFCW Union Recognition From Tesco's Fresh & Easy

>September 17, 2008: Store Workers at Huntington Beach Fresh & Easy Demand Union Recognition From Tesco Fresh & Easy Neighborhood Market

>August 27, 2008: UFCW Union Reports Tesco Fresh & Easy Neighborhood Market's Prepared Foods Supplier to Labor Board For What it Says is Unfair Firing of Six Employees

>August 5, 2008: UNI Global Union Launches Tesco-Specific Alliance; Calls For Tesco Executives to Meet With UFCW Union Officials Over Fresh & Easy Neighborhood Market

>August 4, 2008: Pico Rivera, California City Council Members Boycott Fresh & Easy Store Grand Opening; Mayor Attends But Delivers Pro-UFCW Union Message to Execs

>July 30, 2008: UFCW Union Flyers On His Door Knob Cause Heat in 'The Pragmatic Chef's' Mental Kitchen; Others Wondering About the Negative Campaign As Well

>July 3, 2008: Mid-Week Fresh & Easy Roundup: Fresh & Easy Gets Caught in A Land Use Dispute; Those Near-Famous Mixed Grill Packs; More On Manhattan Beach

>July 4, 2008: Breaking News: UFCW Union Strikes Again With Anti-Tesco Fresh & Easy Brochure Drop in Neighborhood Surrounding New Manhattan Beach Store

>July 2, 2008: UFCW Union Pickets Out in Force This Morning At Manhattan Beach Fresh & Easy Store Grand Opening

>June 30, 2008: Breaking News: UFCW Union Launches Preemptive Anti-Tesco Fresh & Easy Brochure Distribution Drop on the Eve of Manhattan Beach Store Grand Opening

>June 26, 2008: Tesco 2008 AGM: Barack Obama Sends Second Letter to Tesco CEO Requesting the Company Meet With U.S. UFCW Union Leaders About Fresh & Easy

>June 22, 2008: Vocal Cast of Critics and Advocacy Groups to Attend Tesco's Annual General Meeting On Friday, June 27

>June 4, 2008: News and Analysis: UFCW Union Takes its Tesco Union Organizing Campaign Across the Pond to the United Kingdom Beginning Today

>March 26, 2008: United Food and Commercial Workers Union Begins its Spring 2008 Organizing and Communications Campaign Directed at Tesco's Fresh & Easy

>February 11, 2008: Supermarket Union President Asks Britain's Prince Andrew to Arrange A 'Sit-Down' With Tesco Fresh & Easy Neighborhood Market Senior Executives

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