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

Las Vegas Market Region -- and Beyond

Kroger Co., the largest U.S. supermarket chain and the number three seller of food and groceries nationally in the country in terms of market share, (after number one Wal-Mart Stores, Inc. and Coscto), says it has reached agreement with the United Food & Commercial Workers (UFCW) union on a union contract for store-level employees in the Las Vegas, Nevada Metropolitan regional market.

Kroger Co. operates two supermarket chains in the Las Vegas Metro market -- Smith's Food and Drug and Food 4 Less.

The compromise contract agreement was signed with Las Vegas-based UFCW local 711, according to the union and Kroger Co. The local represents 2,800 Smith's and 900 Food 4 Less store-level workers at a combined 47 Smith's and Food 4 Less stores in the Las Vegas Metropolitan region.

"This agreement maintains quality jobs and affordable health care for our associates and their families in this challenging economy and keeps our stores competitive," Jim Hallsey, president of Smith's Food and Drug, and Dave Hirz, president of Food 4 Less, said in a joint statement issued by Kroger Co.

The UFCW union local and Kroger had been negotiating over a new contract for a considerable amount of time. Among the issues in the negotiations were health care and job security.

Vegas, supermarkets and the UFCW

The Las Vegas Metropolitan region is one of three markets where Tesco operates its 112 Fresh & Easy Neighborhood Market combination grocery and fresh foods stores. The other two markets are Southern California and the Phoenix, Arizona Metropolitan region. There are about 35 Fresh & Easy markets in the Las Vegas Metro region.

Unlike Kroger's Smith's Food & Drug and Food 4 Less and most of the other supermarket chains in the Las Vegas, Nevada region -- as well as those in California and Arizona -- Tesco's Fresh & Easy is non-union.

Other major chains in the three markets that are unionized include Safeway Stores, Inc. (Safeway and Vons banners in Southern California, Nevada and Arizona), Ralphs (Southern California) and Fry's (Arizona) (both Kroger Co.-owned), Albertsons (Southern California, Nevada, Arizona) and a number of others, including smaller, privately-held grocery chains like 18-store Gelson's in Southern California and some others.

Most of the chain and larger, multi-store independents (and even some single-store operators) in the three markets are UFCW-union affiliated. But like Tesco's Fresh & Easy, Wal-Mart, Trader Joe's and Whole Foods Market, all major food retailers with numerous stores in the three markets, aren't unionized either.

UFCW in relative hibernation over Tesco Fresh & Easy

As regular readers of Fresh & Easy Buzz know from our extensive coverage of the issue throughout 2008, the UFCW made Tesco's Fresh & Easy its prime target in terms of non-union food and grocery retailer unionization campaigns last year.

The UFCW had its closest chance to achieve potential unionization at Fresh & Easy when employees of the Fresh & Easy market in Huntington Beach, California sent a letter to Tesco Fresh & Easy Neighborhood Market's senior management at corporate headquarters in Southern California, requesting to be recognized as a UFCW-affiliated union store.

The company responded to the store employees, telling them they were welcome to follow established procedures and hold a "secret ballot" vote on UFCW-affiliation and becoming a union store in accordance with U.S. Department of Labor guidelines. [Read our report on the store-issue in this September, 2008 piece: [Store Workers at Huntington Beach Fresh & Easy Demand Union Recognition From Tesco Fresh & Easy Neighborhood Market.] Such a response by a non-union grocery retailing company is common; it's the norm rather than the exception.

The UFCW said at the time it planned to go forward and work with the Huntington Beach store employees and to eventually hold a vote on unionization.

However, its been about six months, September, 2008 to the present, and no Huntington Beach Fresh & Easy store employee union vote has taken place yet.

Political developments and UFCW's Tesco Fresh & Easy campaign

Of course, since September, 2008 much has happened politically in the U.S. Most specifically for the UFCW, Barack Obama was elected President, with much support by organized labor, including the union which represents about 1.5 million unionized supermarket workers in the U.S., Canada and Puerto Rico.

President Obama, along with the unions and the Democratic majority in the U.S. House of Representatives and U.S. Senate, are in favor of the Employee Free Choice Act legislation and its "Card Check" provision, which instead of a "secret ballot" (the current process) vote (which isn't as easy a process as it sounds), would only require employees in all industries, including food and grocery retailing, to check "yes" on card if they want to join a union.

If the majority of say the 25 employees at a Fresh & Easy market checked yes under "Card Check," they would be certified as a union shop. The secret ballot process is much more elaborate and longer. It also allows companies to meet with and attempt to convince employees not to join the union during the process, subject to U.S. Labor Law provisions of course.

Most of corporate America, along with the U.S. Chamber of Commerce and other business trade groups, and the majority of Republicans in the House and Senate, are against the Employee Free Choice Act and its "Card Check" provision. They argue the "secret ballot" is the only fair way to hold a unionization vote, comparing the process to the "secret ballot" voters cast in electing their representatives.

The unions and other supporters, including the majority of Democrats in Congress and the President, challenge that, saying employees should have a right to an easy way, like "Card Check," to say "yes" or "no" to joining a union. They also argue voting for those who represent citizens in public office is far different than an employee electing to join a union or not.

According to a couple of our sources, the UFCW has been so much less active in its efforts to unionize Tesco's Fresh & Easy so far this year because it is waiting for Congress to put the Employee Free Choice Act with its "Card Check" provision up for debate and eventual vote in the House and Senate.

House Democratic Leader Nancy Pelosi, from California, has said she wants to introduce the Employee Free Choice Act legislation this year. Democratic Senate Leader Harry Reid, from Searchlight, Nevada, hasn't said yet if he will introduce the legislation in the Senate this year.

The Employee Free Choice Act was voted on in 2008 by both the House and the Senate. It passed by a majority in the House, where just a simple majority is needed to pass legislation, but failed to gain 60 votes in the Senate, which requires that many votes, called a Supermajority, in order to pass legislation that is opposed and filibustered by the opposition party, which the minority Senate Republicans did successfully last year. As a result, the legislation failed to get the required 60 votes in the Senate and went away. President George W. Bush has promised he would not sign the legislation if it did pass the Senate.

However, the Democrats now have a considerably larger majority in the Senate after the 2008 election than they did in 2008. There are currently 57 Democrats in the Senate, and possibly soon 58, if former comedian and radio talk show host Al Franken is confirmed as the Senator from Minnesota in that disputed election, which looks like will happen soon. Additionally, the two independents in the Senate voted for the Employee Free Choice Act the last time around. That could give them the needed 60 votes, assuming all Democrats voted in favor of the legislation. One or two moderate Republicans also could vote in favor of the legislation if it is raised this year.

President Obama has already said he would sign the Employee Free Choice Act if passed by Congress. However, it isn't at the top of his agenda right now -- the economy is.

And the President and his top aids are also concerned about the legislation being brought up anytime soon in 2009 (they prefer 2010) out of fear it will cause a backlash with unemployment at such record highs, and growing. The fear is that a debate on the Employee Free Choice Act this year would give Republicans a perfect issue to hammer the new Democratic President with, arguing as they did last year (but much louder this time) -- when the economy was much better than it is now and when unemployment was much lower than it is at present -- that passing the legislation would amount to a "job-killing" bill at a time when job loss is already skyrocketing.

The President's men also feel it would be a political gift to the conservative radio talk show hosts like Rush Limbaugh and others who have already said that if the Employee Free Choice Act comes up in Congress this year they will use it as a "job killing" hammer against the President and Democrats. One can almost visualize Rush Limbaugh encouraging House Speaker Nancy Pelosi to bring the legislation up in the House in the same way a fully-committed carnivore urges a vegetarian to just taste one bite of the beef Prime Rib so she can know what it actually tastes like to better make her case for vegetarianism.

Regardless of whether or not the UFCW is waiting for the Employee Free Choice Act and its "Card Check" provision to pass or not, it is fair to say that in terms of last year's super-aggressive and highly coordinated efforts to unionize Tesco Fresh & Easy store-level employees, thus far this year the UFCW has been in relative hibernation.

For example, while still picketing at some Fresh & Easy stores, the UFCW hasn't thus far this year demonstrated anywhere near as strongly as in 2008, when it had union reps at every new store opening, holding up signs, handing out literature and encouraging shoppers to not shop at the non-union stores.

Additionally, for most of 2008 the UFCW conducted a vocal and aggressive lobbying and public relations campaign both in the U.S. and in the United Kingdom where Tesco is headquartered, designed to draw attention to the fact Tesco's Fresh & Easy is non-union and to gain support from store employees, politicians and the media for its unionization efforts. Thus far this year that mighty UFCW 2008 PR machine has been near-silent.

Lastly, throughout 2008 UFCW representatives paid regularly scheduled visits to numerous Fresh & Easy stores. The regular visits are designed to get to know employees, build relationships with them and encourage them to join the unionization movement. We've talked with numerous Fresh & Easy store employees who say they haven't had a visit from UFCW representatives yet this year. This might not be unusual except that we talked to many of these same employees throughout 2008, and they told us then the UFCW representatives visited the stores on a regular basis, often once a month.

Unionization in an economic recession-depression

We can tell you that despite what appears to be the current hibernation of the UFCW regarding its Tesco Fresh & Easy unionization campaign, that the union's campaign to achieve that goal isn't over. But it is interesting how the union seems to have let the momentum they had going for most of last year fall off so much since the fall of 2008 to the present.

Of course, the economy is in shambles and job loss growing by the tens of thousands each day. Perhaps the union is being sensitive to this fact from a political standpoint. After all, this isn't the best time for employees of any company to be pitching to join a union to a non-union employer; not while they feel they could be next to lose their jobs because of the bad economy.

It's tough out there -- and getting tougher. Laid off formerly high-paid workers who haven't been able to find work in their respective industries for many months are hoping they can land jobs such as the $10 an hour part-time positions with medical insurance that Tesco's Fresh & Easy is offering. And there are few of those types of retail jobs out there right now as there generally has been in past recessions, not with America's retailers laying off 45,000 workers in January alone, with tens of thousands more to come this month.

You know that old saying, right: "It's a recession when your neighbor losses his job, it's a depression when you lose yours." More and more of our neighbors, as well as more and more of "us" are losing jobs. Call it a recession, call it a depression, depending on where you are in it. But another old saying is: "I know what it is when I see it." And "it" isn't looking good. As British Prime Minister Gordon Brown started calling "it" last week -- "The Depression."

It looks like the Kroger Co. employees in the Las Vegas Metropolitan region, which is one of the hardest hit in the U.S. by the recession and job losses, got their union contract renewal just in time.

Reader Resource

>[Click here for a selection of past stories from Fresh & Easy Buzz about the UFCW union-Tesco Fresh & Easy issue.]

>[Reader Note: You can follow Fresh & Easy Buzz on Twitter.com at: www.twitter.com/freshneasybuzz]

>Reader Comments: We invite reader comments on this story, and particularly want to hear your views on the issue of joining labor unions in times of serious economic recession, like at present. Is it a "good" thing to do in terms of it offering better pay and job security to workers? Is it a "job killing" proposition, as some suggest? What's your view? Just click on the "comments" link below to leave your comment.

Las Vegas, Nevada Metro Market Retail Report: Retail Faces Empty Spaces

From the Fresh & Easy Buzz Editor's Desk: Tesco's Fresh & Easy Neighborhood Market opened three new Fresh & Easy grocery and fresh foods stores on Wednesday, October 12 in Las Vegas, Nevada, bringing the grocery chain's total store count to 22 in the Las Vegas Metropolitan region market.

Those three new Las Vegas Fresh & Easy Markets are located at the following addresses in Clark County:

>Eastern & Fremont
>Las Vegas & Pecos
>Las Vegas & Lake Mead

Tesco also opened another new Fresh & Easy small-format, convenience-oriented grocery and fresh foods market today in Las Vegas, at Vegas & Buffalo.

In addition, the grocer plans to open two more Fresh & Easy stores in Clark County this month on October 29 -- one at Eastern & Wigwam and the other at Vegas & Jones.

This will bring the retailer's total Las Vegas Metropolitan market store count to 25 by the end of October, 2008.

There are currently 93 Fresh & Easy markets located in Southern California, the Las Vegas Metro region and in the Phoeniz, Arizona Metropolitan East and West Valley regions.

Hubble Smith, a business and real estate staff writer for the daily Las Vegas Review-Journal newspaper has a story in today's edition about the state of the retail, commerical real estate market in Las Vegas and the surrounding Metro region. The piece includes comments on Tesco's Fresh & Easy Neighborhood Market and other food and grocery retailers in the market. It also includes a market analysis by the firm CB Richard Ellis.

Read Hubble Smith's story below:

RETAIL FACES EMPTY SPACES
Market sees rising vacancies, negative absorption in quarter
By HUBBLE SMITH
REVIEW-JOURNAL

Las Vegas commercial real estate markets have not escaped the turmoil of the national credit and housing crises, a third-quarter retail market report from CB Richard Ellis showed.

The retail market shows the strain of the economic downturn with steadily increasing vacancies and the first quarter of negative absorption, or the amount of new space taken by tenants, in a decade.

Vacancy ran 6.32 percent in the third quarter for nearly 59 million square feet of retail space in Las Vegas, up from 5.82 percent in the previous quarter and up 1.75 percentage points from a year ago, CB Richard Ellis reported.

Asking lease rates have remained steady throughout the year, dropping a penny in the third quarter to $2.20 a square foot. Lease rates dropped 40 cents a foot in the northwest submarket and about a nickel in the Nellis and southwest submarkets.

There are some bright spots in the retail outlook for Las Vegas, including more location choices and more negotiating power for tenants, CB Richard Ellis retail broker Penny Mendlovic said.

The market provides certain businesses with the opportunity to expand and take advantage of exceptional deals on both the lease and sales sides, she said.

Hispanic grocers have grown and that has affected traditional grocers, Mendlovic said. Specialty food stores such as the Buy Low market in the redevelopment area around Owens Avenue and H Street and Sunflower Markets in the southwest valley have found their niche in Las Vegas.

"The grocery component in general nationally is doing well," she said. "The price and value concepts are doing better than others. People have to spend their money as far as it goes. Between gas and groceries, people are spending on necessities. Big Lots, Dollar Tree ... they're all doing well."

Angela Ohira knows it's probably not a good time to start a new business. Consumer spending has declined and retail analysts are forecasting a glum holiday season.

Nonetheless, she and business partner Tanya Takahashi opened Love Bug Baby, an apparel store at Eastern Crossing shopping center in Henderson. They signed a three-year lease on about 1,150 square feet for $96,600, or $2.33 a square foot.

"We saw the need in our area for what we do," said Ohira, who owned a specialty and gift business for nearly three years. "There's a baby boom going on and another one coming. I know everybody is very skeptical, but looking at the numbers, we're fully comfortable with it."

Ohira said she's "very simple and smart" with her money and didn't need outside financing for the venture.

Fundamentals within the Las Vegas retail sector continue to wane and the impacts associated with a global financial crisis provide little relief in the near term, Applied Analysis research firm principal Jeremy Aguero said in his third-quarter retail market report.

Applied Analysis showed a 6.3 percent retail vacancy rate in Las Vegas, compared with 6.1 percent in the second quarter and 3.7 percent in the same quarter a year ago. Asking rates dropped to $2.16 a square foot from $2.18 in the previous quarter.

Power centers, or larger centers anchored by big-box retailers, had the lowest vacancy rate of 3.7 percent, while neighborhood shopping centers had the highest rate at 8.5 percent.

Major completions during the quarter include Lake Mead Crossing anchored by Target in the southeast; Foothills Plaza anchored by Fresh & Easy Neighborhood Market; and Commerce Commons in North Las Vegas, also anchored by Fresh & Easy.

Retail employment posted a gain of 4,500 positions during the third quarter, a 2.6 percent increase from last year, Applied Analysis reported. It is likely that several of the recent retail closures have yet to be reported in the latest employment figures, Aguero said.

"Despite elevated vacancy rates, population growth continues, albeit at a slower pace, and a new bottom is expected in the coming quarters," Aguero said. "Time will be the critical factor before Southern Nevada witnesses a material improvement in the commercial retail supply-demand equation."

[Fresh & Easy Buzz Editor's Note: Click here to view a complete data graphic of the 'Third Quarter, 2008 Las Vegas Retail Market Analysis' conducted by the CB Richard Ellis commercial real estate firm.]

Las Vegas Region Market Report: Signs of Recession in Usually Immune Las Vegas; Why Isn't Tesco's Fresh & Easy Touting its 'Value Proposition'?

The Las Vegas Metropolitan region's economy is one of the few in the U.S. that historically does well in severe economic downturns and even recessions.

For example, only once--until now--have gambling revenues in Las Vegas' casinos fell since 1970, despite periods of serious bad economic times and recessions over the 38 years.

The last time was after the September 11, 2001 terrorist attacks, when casino gambling revenues fell 0.5% in the midst of the severe economic decline following the attacks on New York's Twin Towers and the Pentagon in Washington, D.C., according to statistics compiled by the Las Vegas Convention and Visitors Authority (LVCVA).

However, things are looking much worse at present. During the first three months of this year, casino gambling revenues are down by 4%, according to the convention and visitors authority.

Should that trend continue into the second quarter and beyond, even with a smaller percentage decline in gambling revenue, Las Vegas city officials, gaming industry executives, retailers and others are concerned the economic glow might just finally be off Las Vegas in terms of its recessionary immunity for all these many decades.

The first quarter drop in Casino revenue--always a key economic indicator in Las Vegas--isn't all the data that's pointing to the region's not being immune to the current recessionary climate in the U.S.

In the first quarter of 2008, the number of conventions held in Las Vegas has dropped 10.4%, and average daily room rates were off 3.8%, according to the latest data from the LVCVA.

Tourism, including conventions, are the lifeblood of the Las Vegas Metropolitan region, even though the area has diversified its economy considerably over the last 15 years.

However, tourism and gaming are what draws revenue into the city to support its primarily service-based economy: restaurants, entertainment and even to a certain degree food retailing, because so many area consumers work in the service industries. In fact, with new housing construction at a near standstill in the region, compared to the fact it was the Las Vegas area's biggest growth industry just two years ago--the service economy is even more key at present.

Over the last two decades, the huge Las Vegas gaming, convention and tourism sector has transformed the city and surrounding region from the land of cheap buffets and inexpensive hotel rooms, to an upscale convention, leisure and shopping destination.

Nowhere is this more evident than in the upscale and opulent casinos and resorts that have been built in Las Vegas during this era. Casino resorts like the Ballagio, the Paris, the Wynn and the MGM Grand, are just four examples of today's high-end Las Vegas.

However, according to officials at a number of these upscale casino/resorts, the poor economy is being reflected in their quarterly results. MGM Mirage, Inc., which operates two of these big, high-end properties, the MGM Grand and Bellagio, recently reported weaker than expected results in the first quarter of this year.

"Were seeing some softness in Las Vegas for the first time in quite some time," MGM Mirage, Inc. CEO David Simon recently told analysts.

The softness also is being seen in the retail sector, in both the upscale and outlet center sectors. Simon Property Group, Inc., which operates the luxury Forum Shops at Ceasar's Palace, along with two outlet centers in Las Vegas, recently reported its centers are experiencing a drop in sales which it attributes to the multiple economic factors mentioned earlier in this piece, all having to do with the recessionary U.S. economy.

The drop in tourism, conventions and gambling revenues couldn't come at a worse time for the Las Vegas Metropolitan region. Over the past 15 years, Las Vegas and its suburbs have experienced a residential housing boom, which has nearly doubled the area's residential housing stock and its population. The Metro area today is home to nearly 2 million residents.

Housing values--and thus costs--have more than doubled over this same period. However, Las Vegas is one of the regions hardest hit by the housing foreclosure and credit crisis currently going on in the U.S. In just the last two years, housing values have plummeted by 30-40% in the region, and local real estate experts say they expect further drops between now and mid- 2009.

The Las Vegas region also has seen a massive commercial development surge over the last decade. This includes new major casino and resort projects like the Wynn by Steve Wynn and many others, numerous new retail shopping and retail lifestyle center developments, and an influx of scores of new retail stores and restaurants.

All this building activity has been a boon to the region's economy, allowing some significant diversification from the service sector to the building trades and related sectors, including real estate, banking, insurance and retail.

But the bloom is now off the residential and commercial building sector. New residential building starts are at a near standstill. Further, while there are a number of commercial developments in the pipeline--including 40,000 new hotel rooms set to become available in the next two years--being completed, developers aren't planning any major commercial projects of note presently because of the bad economy.

Concerned about those first quarter number we reported above, Las Vegas' gaming and tourism industry has began a discounting campaign to lure more tourists and trade shows to the city.

Keith Schewer, director of the Center for Business and Economic Research at the University of Nevada at Las Vegas, says discounting is going to intensify in Las Vegas as it is clear the region needs to win back more tourists, even if that means cutting margins for the gaming and tourism industry operators.

Schewer adds that "cheap" might just be back in in Las Vegas, at least until the economy improves.

Fresh & Easy Las Vegas

Tesco currently has about 11 of its small-format, convenience-oriented basic grocery and fresh foods grocery stores in the Las Vegas Metropolitan region. The retailer is in the process of opening 10 more of the stores, converting 10 former Rite Aid drug stores it acquired into its Fresh & Easy food store format.

The drop in economic activity could be both good and bad for Tesco's Fresh & Easy. With less money to spend because of rising unemployment, diminished housing values, the credit crunch, near $5 a gallon gasoline, and stagnant wages, Las Vegas region shoppers could look to Tesco's Fresh & Easy with its fairly low everyday prices as more of a primary grocery shopping venue than they are currently.

On the other hand, nearly doubling its store count in the Las Vegas Metropolitan region during such difficult economic times could be a mistake for Tesco, although its clear the retailer is looking at a longer term strategy in doing so.

In Fresh & Easy Buzz's analysis, the time is perfect for Tesco to launch a value-based advertising campaign for its Fresh & Easy grocery stores in the Las Vegas Metropolitan region, playing on the theme of how shopping at the stores saves money for a variety of reasons: low everyday prices, use less gas because you don't have to drive out to a Wal-Mart Supercenter, those $5 coupons of course (good for any grocery order of $20 or more) and a number of other value propositions.

Fresh, Easy...and Cheap, might be a good advertising tag line?

However, we've seen no such effort by Tesco in the market to date.

Other than a public relations campaign, its once-every-three-week store advertising circular, leafleting neighborhoods with flyers with the $5 coupon attached, and what has been reported to be a tiny bit of paid media advertising, Tesco hasn't introduced a comprehensive advertising campaign to properly introduce the stores, generate new customer trial, and begin building the Fresh & Easy retail brand in the Las Vegas Metro market to date.

It would seem the time is right to do so. Tesco says the Fresh & Easy stores are everyday low-priced basic grocery stores with a fresh and specialty foods twist, positioned for "everybody." This is at its core then a value-based proposition rather than a specialty store one.

Therefore, there seems no better time in the Las Vegas food and grocery market--when economic bad times are finally hitting the once immune area--for a food retailer with a value proposition to market and communicate it. Doing so likely would gain much needed business for the current and upcoming Fresh & Easy grocery stores in the region even at a time when most other retail sectors of the economy are experiencing the opposite--reduced sales.