L.A. Labor Problems Over, Gigante Plans Major Foray

Staff Reporter

At a time when many other retailers are pulling in their horns, Grupo Gigante is making plans to open five new supermarkets in Los Angeles next year.

The local expansion by Mexico's second-largest supermarket chain comes after an agreement last spring with the United Food & Commercial Workers union. The five new stores are expected to employ 1,000 people.

Justo Frias, president of Gigante's Orange County-based U.S. operations, has spent months scouting for L.A.-area locations. Two potential sites are still being studied. Three sites are ready for development and on track to open by the latter half of next year.

One is in Compton, another in Santa Fe Springs. A third site is at Slauson and Vermont avenues in South Central Los Angeles, a site that became a subject of controversy earlier this year when former City Council Member Rita Walters objected to Gigante not being unionized in the United States.

But last April, Gigante signed a four-year contract with UFCW Local 770 that ended months of picketing in front of the chain's three existing Southern California stores located in Pico Rivera, Covina, and Arleta.

"The wages we negotiated with them are not as high as the wages we negotiated with Ralphs and Albertson's," said Ricardo Icaza, president of Local 770. "But if they expand the way they feel they should, we ultimately will try to negotiate the same agreement we have with Ralphs and Albertson's."

For example, experienced meatcutters at Ralphs make $18.78 an hour while Gigante pays $12.15 an hour for the same positions.

Grupo Gigante, which has more than 220 locations in Mexico and revenues last year of $2.8 billion, plans to expand as quickly as it can find retail locations that can accommodate 45,000-square-foot markets, the ideal store size for Gigante.

"We believe the name Gigante itself in the Latino world has some strength in it. This is a growing market and we thought this would be a growing niche for us," Frias said. "The first couple of years you build your infrastructure, systems and accounting. Then you are ready to grow more."

Early success

Gigante opened its first U.S. store two years ago in Pico Rivera, where 90 percent of the population is Latino. That 60,000-square-foot store has outperformed other supermarkets in the area.

"Their store sales are twice the amount of other stores (here)," said Dennis Courtemarche, Pico Rivera's city manager. Courtemarche declined to reveal specific sales figures.

Gigante has had similar success at its Covina store, said Mark Marquez, Covina's community development director.

There are good reasons for that success. Latinos constitute one of the fastest-growing immigrant populations in Southern California, and that growth has been particularly rapid in Los Angeles. From 1990 to 2000, the Latino population in the city climbed 18.4 percent. Latinos now make up 46.5 percent of the city's population and 44.6 percent of the county's population.

While other major supermarket chains such as Food 4 Less have juggled their product offerings to appeal to the tastes of Latino communities, Gigante has an edge over its competitors. It has in-house bakeries that make goods from fresh ingredients, from spinach tortillas to bolillos, a Mexican-style bread). It also buys at bargain rates huge quantities of Mexican-made canned and frozen-food items that are unavailable at most other U.S. supermarkets. Its produce is also a big seller.

"We have an aggressive pricing program in our produce department, which is a basic commodity for our customers," Frias said.

Market share battle

A few years ago, Vons and Food 4 Less opened separate Latino supermarket concepts called Tianguis and Viva Markets. Those branding concepts were abandoned because they were more expensive to operate and advertise.

But Vons, Food 4 Less, Albertson's and Ralphs all stock popular Latino food items, such as several varieties of fresh chiles, papaya, Mexican spices and sauces.

Smaller chains that are making inroads into L.A.'s Latino communities include Superior Super Warehouse Foods, owned by a Korean group, Top Valu, owned by K.V. Mart Co., and Jons Markets, owned by the Berberian family.

Despite such competition, some industry analysts believe Gigante has a good chance of successfully expanding in Southern California.

"Retail is detail," said Bill Bishop, president of Bishop Consulting Inc., a supermarket consulting firm in Illinois. "They have a dedication and sophistication to serve that market."

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