Driven by memories of the 2003-2004 supermarket strike a disaster for the stores and the unions, and a major inconvenience for shoppers both sides have shifted strategies and are already vying for the public relations high ground.

The supermarket chains and their unions carry painful scars from the strike. The Ralphs chain, convicted of illegally rehiring locked-out workers, has paid $70 million and remains under federal probation. The union had to cave in and accept a two-tier health plan after the 20-week shutdown.

“Nobody won, not in a strike like that,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. “Workers left the industry and had to find new careers. The stores lost customers and had to shut down some of their under-performing stores. And it was rough on the smaller suppliers.”

Financially, the strike hurt all three chains. Together, Vons, a unit of Safeway Inc.; Ralphs, owned by the Kroger Co.; and Albertsons, which has since been sold to Supervalu Inc., a Minneapolis-based supermarket chain, saw losses nearly total $2 billion. Safeway by itself took a $696 million hit during fourth quarter of 2003.

During the same period, Costco Wholesale was reporting a 14 percent gain in overall sales. Shoppers disinclined to cross picket lines turned to independent outlets like Stater Bros., Trader Joe’s Co. Inc. and Valu Plus (owned by Carson-based K.V. Mart Co.). Retail giants moved Wal-Mart and Target stores in, as well.

Stakes higher

The stakes again may be high this time around for both the stores and the 65,000 grocery workers represented by the unions. Many shoppers who turned to alternative grocery retailers have not come back, and the unions’ hold on the industry’s workers could potentially be lost in the wake of another high-profile defeat.

“It’s shocking that neither side seems to be realizing what a vulnerable position they are in,” said industry analyst Phil Lempert of Santa Monica. “The food industry is going through some major changes. Price is far less a concern for most shoppers than safety of the food they are buying, the cleanliness of the stores themselves, the level of customer service. These are all areas where the independents have made major gains on the chains since the strike.”

In a break with tradition, seven local unions, all under the umbrella United Food & Commercial Workers (UFCW), have refused to negotiate as one with the chains. In response, the three chains have taken a similar stance and decided not to negotiate as one.

That means this year’s negotiations involve seven unions multiplied by three companies, or 21 distinct contracts. Talks have begun for only two contacts, but the one with Local 770, covering 17,000 workers, looms as the largest. According to UFCW Local 770 spokeswoman Barbara Maynard, the unions hope to have new deals in place when the current agreements expire at the end of March.

“The level of distrust between the union and the supermarkets is enormous,” said Local 770 President Rick Icaza. “Supermarket executives lied to the public during the 2003-04 labor dispute, prolonged the strike and lockout through illegal activities, and inflicted immeasurable harm on workers, their families and consumers.”

While the unions are taking a divide-and-conquer approach, the region’s three major food retailers have focused on crystallizing their message and speaking in a single voice. They’ve jointly hired the Rogers Group public relations firm to coordinate and detail their strategy and are reaching out to the media, making top executives from all three chains available for face-to-face interviews.

“Last time around, it was hard to get information from the grocery companies, so they thought it would make sense to have one go-to person,” said Adena Tessler at Rogers Group in Century City, the joint spokesperson for the chains.

Settlement of the 2003-04 strike left the industry with a work force divided into two groups those who worked before the strike and those hired afterward. Maynard said that for the first group, wages loom as the big issue in current negotiations. These employees haven’t had a wage increase, even an inflation adjustment, since 2002.

The so-called second-tier workers hired since 2004 care more about health care. Payment for health insurance became the battle during the strike, and the companies apparently won by requiring workers to pay a portion of the premiums. But a recent study from the University of California at Berkeley found that 93 percent of supermarket workers hired by the three chains since the strike do not receive any health insurance from the companies.

Ideally, the unions would like to scrap the two-tier work force. That possibility gained traction in early January when Stater Bros., a small independent chain, signed an agreement with UFCW Local 324 to eliminate the dual system. Stater Bros. claimed the two-tier system increased employee turnover and hurt new employee recruitment.

Changed market

For their part, the companies point to stiff competition from non-union stores.

“The grocery companies are interested in working with unions for an agreement that balances the needs of workers, the companies and the customers and allows these chains to remain competitive in a very challenging market,” said Tessler.

That’s because consumers have so many options for buying food. During the 2004 strike, people tried smaller independent operators and grew accustomed to shopping there.

“The independents gained not only by getting new customers into their stores,” said Lempert, “but with the added revenue, they made gains in terms of enhancing the look of their stores, the range and quality of their produce and the efficiency of their customer service.” In response, the chains have upgraded a number of their sites, too, and increased the number of larger, showcase stores.

“The saber rattling I’m hearing just doesn’t make sense,” Lempert said. “Our figures show that the average U.S. grocery shopper goes grocery shopping 2.2 times a week, and that they visit an average of seven different sites in a typical month. The stores, and the unions, need to evolve and deal with more discerning customers who want better service from more qualified help, and not do things that alienate them.”

Supermarket spokeswoman Tessler said that since 2004, the companies have negotiated hundreds of contracts with the UFCW in other jurisdictions, “so they see no reason why they can’t do it here.”

Her opposite number on the union side didn’t sound so confident.

“You always go into negotiations hoping to avoid a strike,” said Maynard. “Last time we hoped to avoid a strike, but the companies provoked one. We don’t know what will happen this time but we know from union members that they are willing to fight.”