Grocers' contract unsure

The Baltimore Sun

Giant Food and Safeway supermarket chains and the union representing 23,000 store workers remained deeply divided on key issues yesterday as they approached a weekend deadline for a new labor contract, raising the threat of the first grocery strike here in more than three decades.

The contract between Safeway and Giant Food, owned by Dutch conglomerate Royal Ahold NV, and the United Food and Commercial Workers Locals 27 and 400 expires at midnight tonight, but the two sides have agreed to negotiate through tomorrow. Workers will vote on a proposed contract Tuesday - or whether to strike if no deal is hammered out. They could also decide to extend negotiations.

Giant plans to close stores from 10:30 a.m. to 2:30 p.m. during Tuesday's vote. Safeway stores will remain open.

Neither side would discuss details of the negotiations. Yesterday, Local 400's Web site noted that some progress had been made "although significant hurdles still exist. ... The focus continues to be on health and welfare benefits, wages and pension benefits."

The showdown comes at a time when rising food prices and a slowing economy are adding pressure on grocery chains' already slim margins. Supermarket companies also have pushed for cuts in labor costs in recent years as they face intense competition from nonunionized rivals on two fronts - from high-end markets that can drain upscale customers and discounters that undercut prices.

Wal-Mart Stores Inc., for instance, has started building its Supercenters, which include full groceries, in the Baltimore area. Similar stores, such as Target, also sell some grocery staples.

The area has also seen new gourmet concepts such as Wegmans, The Fresh Market, Whole Foods and Trader Joe's open more locations since the last contract was signed four years ago. And North Carolina's Harris Teeter is poised to come into the region.

Giant, the largest grocer in the area, has lost market share in recent years, as it struggled with the new competition and complaints of declining service and stocking. It had a little more than 29 percent of the Baltimore market last summer, compared with 33 percent in 2003, according to trade publication Food World. Sales have been falling since at least 2004 when Giant operations were merged with Ahold's Stop & Shop in Massachusetts. Sales have recently started to rebound.

Giant has instituted a store enhancement plan and cut prices across the board, and may be seeking more cost cuts to help improve margins.

"There's no doubt that the grocers that are most imperiled will be the ones who would be most aggressive in their bargaining with the union," said Jonathan Cutler, a sociology and labor expert at Wesleyan University. "They think they need serious concessions from the union to level the field."

Union members have said, in previous interviews, they made concessions during the last negotiations in 2004 and are reluctant to do much more this round. The last contract created a two-tier system of employees, with newer workers having longer waits for health coverage and higher co-payments. Deductibles increased for existing workers.

But as higher gas and energy costs squeeze household budgets, employees may be more reluctant to pay a higher share of health costs or take lower raises.

The union said that strike preparations are in place. Safeway and Giant have also advertised for temporary workers and have said they plan to keep stores open if there is a labor stoppage.

Labor experts said both sides stand to lose in a strike as the country heads into a possible recession. Local 27 last went on strike in 1963 and Local 400 in 1973.

The union faces the possibility that in a weakening economy, there may be more people willing to take temporary jobs. The proliferation of self-checkout lines also make it easier for grocers to operate during a walk-out. In addition, workers may be less willing to put their jobs on the line in a bad economy.

"It's a tough time from the union point of view to be negotiating a new contract when you're heading into the teeth of what some observers see could be a pretty nasty recession," said Paul Harrington, an economist at the Center for Labor Market Studies at Northeastern University in Boston. "The business cycle really affects your ability to negotiate."

Safeway and Giant also stand to bruise their reputations and lose sales and customers.

The nation's last grocery strike - a five-month walkout in Southern California in 2003 - ended in $2.5 billion in lost revenue for the grocers, which included Safeway, Albertsons Inc. and Kroger Co.

One labor expert said there were other ways besides cutting labor costs to boost revenue at grocery chains.

"In a region generally as wealthy as ours, the way stores present themselves and what they're selling in the stores makes a big difference," said Ross Eisenbrey, vice president of the Economic Policy Institute in Washington. "I think Giant and Safeway have hurt themselves by not keeping up with the competition."

andrea.walker@baltsun.com

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