Michael Hiltzik, in his regular Los Angeles Times “Golden State” column, offers an interesting assessment of the four-month strike/lockout that roiled the Southern California grocery industry in late 2003 and early 2004:
Nobody won. Except maybe Costco, which wasn’t involved except in its ability to attract customers who abandoned Albertsons, Safeway’s Vons, and Kroger’s Ralphs stores.
The union didn’t win because they “were shocked to learn that they weren't dealing with mom-and-pop grocery owners, but hard-bitten corporate suits, and the result was 4 1/2 months of joblessness for 59,000 workers.”
The chains, Hiltzik suggests, were so obsessive about their ability – or inability – to compete with Wal-Mart that they refused to negotiate for months. So why the chains managed to get the unions to agree “to a two-tier wage and benefits system that ensures no one will ever again be able to support his or her family in a grocery career,” he writes, they created a financial hole for themselves from which it will be difficult to emerge.
Of course, management at all three companies continues to maintain that they had to endure a certain amount of short-term pain too assure long-term viability. But Hiltzik writes, “Safeway, the strike's main target, acknowledges forgoing about $275 million in profits — including lost sales and the cost of shopper-luring bargains — in the nine months since the labor unrest began last October. Safeway Chairman Steve Burd used to contend that the union's contract demands would have cost his company about $130 million over its three-year term. In the last nine months, then, the strike looks to have cost his company more than twice the price of full capitulation. Can Burd still claim that playing hardball was the right approach?”
Hiltzik writes, though, that the biggest miscalculation by the chains may have been to pay so much attention to Wal-Mart that they ignored Costco – which carries upscale perishables, strong grocery lines, an excellent wine selection, all at sharp prices. Costco, which has seen strong sales advances in recent months, doesn’t ignite the same animus in communities as Wal-Mart, he suggests, but could in the long term be a bigger threat to the big three chains.
Nobody won. Except maybe Costco, which wasn’t involved except in its ability to attract customers who abandoned Albertsons, Safeway’s Vons, and Kroger’s Ralphs stores.
The union didn’t win because they “were shocked to learn that they weren't dealing with mom-and-pop grocery owners, but hard-bitten corporate suits, and the result was 4 1/2 months of joblessness for 59,000 workers.”
The chains, Hiltzik suggests, were so obsessive about their ability – or inability – to compete with Wal-Mart that they refused to negotiate for months. So why the chains managed to get the unions to agree “to a two-tier wage and benefits system that ensures no one will ever again be able to support his or her family in a grocery career,” he writes, they created a financial hole for themselves from which it will be difficult to emerge.
Of course, management at all three companies continues to maintain that they had to endure a certain amount of short-term pain too assure long-term viability. But Hiltzik writes, “Safeway, the strike's main target, acknowledges forgoing about $275 million in profits — including lost sales and the cost of shopper-luring bargains — in the nine months since the labor unrest began last October. Safeway Chairman Steve Burd used to contend that the union's contract demands would have cost his company about $130 million over its three-year term. In the last nine months, then, the strike looks to have cost his company more than twice the price of full capitulation. Can Burd still claim that playing hardball was the right approach?”
Hiltzik writes, though, that the biggest miscalculation by the chains may have been to pay so much attention to Wal-Mart that they ignored Costco – which carries upscale perishables, strong grocery lines, an excellent wine selection, all at sharp prices. Costco, which has seen strong sales advances in recent months, doesn’t ignite the same animus in communities as Wal-Mart, he suggests, but could in the long term be a bigger threat to the big three chains.
- KC's View:
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Interesting piece, though you do have to know that Hiltzik tends to take a harsher view of chain management than he does of the unions. But even so, some of his thoughts are intriguing…and you do have to wonder about how Safeway’s losses will take a toll on Steve Burd’s leadership. There are a number of people in upper and middle management at Safeway who swear by him…but it isn’t unanimous.
In addition to Costco’s advances during the strike/lockout, there are a number of smaller, independent retailers that saw enormous sales gains during the strike – some of which were actually able to retire their debt loads and put themselves in a far more financially competitive position.
The other thing that insiders keep telling us is that there will significant realignment in the Southern California marketplace, with mergers and acquisitions that will reshape smaller companies’ ability to compete in the long run.
Hot Rumor Alert: A rumor that we keep hearing – so many times that it is impossible to ignore – is that one of the most outstanding independent retailers in the region, Bristol Farms, is about to be acquired by Albertsons. We haven’t been able to get either company to comment on the rumor…but the suggestion is that Albertsons will try to do with Bristol Farms what Safeway was unable to do when it first acquired Pennsylvania-based Genuardi’s.
If the rumor is true (and to be honest, we hope it isn’t – we truly admire what CEO Kevin Davis and his folks have built at Bristol Farms), then we hope that Larry Johnston and Albertsons use the independent to do something that we discussed here on MNB earlier this week – use the smaller company to challenge all conventional wisdom, to serve as dissidents in an enormous corporate culture, and to just ask the questions that nobody else is willing or able to ask.
