Threat of Benefit Cuts Could Lead to Supermarket Strike

Staff Reporter

Grocery store workers and management at four major supermarket chains in Southern California are bracing for a battle royale over employers' plans to cut health and pension benefits in upcoming contract talks.

The four chains Ralphs, Albertsons Inc., Vons and Stater Bros. Markets say they can't afford to keep paying all their workers' health and pension costs in light of increasing competition with non-union grocers such as Wal-Mart Stores Inc. The grocers have already warned that they plan to seek concessions from 80,000 union members from San Diego to Santa Barbara.

In turn, officials at the United Food & Commercial Workers Union have dug in their heels.

"If the companies ask for reductions in health benefits and pension, our members will strike," said Rick Icaza, president of L.A.-based Local 770, one of seven UFCW chapters involved. "We're not going to negotiate a concessionary agreement."

The current four-year contract expires on Oct. 5. In the last several agreements, "by this time we've already negotiated and ratified the agreement," Icaza said.

Talks for the new contract are expected to begin next month. Meantime, the two sides have been ratcheting up the rhetoric, with the unions adding a 50-cents-an-hour raise to their demands and the grocers threatening to bring in replacement workers.

"Our challenge is to try to get a deal done without a work stoppage," said John Schroeder, vice president of human resources and labor relations for Ralphs, a unit of Cincinnati-based Kroger Co.

If there is a strike, Ralphs "will have a plan in place to continue to operate our business without that workforce," he said, adding that he believes other chains have or will implement similar contingency plans.

Officials at Colton-based Stater Bros. Holdings Co. and Arcadia-based Vons, owned by Safeway Inc., did not return calls. An Albertsons spokeswoman declined comment.

Strong benefits

The UFCW has long prided itself on having a nearly cost-free benefits package to offset a pay scale union officials claim is the least popular aspect of their current agreement.

Under the current contract, union members receive 100 percent coverage for health insurance, costing an average of $7,883 per employee per year. The perks include free doctor office and emergency room visits, and $3 co-pays for generic prescription drugs and $6 for name brands.

Employees who retire after 40 years are entitled to $32,400 per year in pension plus a lump sum payment of $30,000 to $40,000. (Each additional year garners $840 more in annual pension.)

To obtain these benefits, grocery store employees have agreed to moderate wage packages. Under the current contract, food baggers earn a maximum of $7.40 per hour. Meat cutters earn $19.18 maximum.

"Our pay is adequate," said Icaza. "But our main emphasis has always been fringe benefits."

After a several year lull, the cost of these benefits is rising again and the grocery chains want the unions to begin contributing. Without concessions, Ralphs says its health insurance costs alone for its 19,200 UFCW employees would reach $185 million annually from the current $117 million over the next three years.

Pension funds, which grew fat over the bull market of the 1990s, are now coming under strain as well.

In addition to rising costs, grocers face a growing challenge from non-union food sellers who are expanding their presence throughout the region and state.

Monrovia-based Trader Joe's Co., for instance, has about 40 stores in L.A. County. Bentonville, Ark.-based Wal-Mart Stores Inc. plans to open 40 so-called "super centers" with large grocery sections in California within three to five years. The influx is expected to create more than 20,000 non-union jobs.

"The competitive environment in which we operate is changing," said Stacia Levenfeld, a spokeswoman for Albertson's. "Our labor contracts have to reflect the nature of that competitive environment."

Grocery store negotiators would not reveal specifics of the proposed contributions they will demand.

By comparison, full-time Wal-Mart employees pay bi-weekly premium contributions of $13 for single coverage and $57 for families, according to Terry Srsen, Wal-Mart's vice president of labor relations.

He denied that Wal-Mart is relevant to its competitors' labor talks.

"I think we are being whipsawed by both sides for their own negotiating purposes," said Srsen said. "We haven't driven any of these major grocers out of business in other areas of the country. I don't know why California would be any different."

Union muscle

The Southern California chapters of the UFCW have not walked off the job since they staged a five-day strike against the grocery store chains in 1978. But the union has been actively showing its muscle over wage and benefit disputes in other areas of the country this year.

Its members ratified a new three-year contract in January with American Sugar Refining Co. after Domino Sugar employees staged a month-long strike at a Baltimore plant. A month later, 470 workers at a Tyson Foods Inc. meat processing plant in Jefferson, Wis. staged a walkout.

Yet another dispute arose this spring between 300 bakery, deli and non-foods workers at 15 Indiana, Michigan and Ohio stores owned by Kroger.

"I don't know if they are more militant than others but they have done well by their members over the years," said Daniel Mitchell, a professor of management and public policy at UCLA.

For decades, the seven local chapters have collectively bargained with the consortium of representatives from the major chains. Smaller chains that employed UFCW members abided by the single contract.

This time, only the three largest chains Vons, Ralphs and Albertsons will negotiate the UFCW. Stater Bros. signed a "me-too" agreement that means it will accept whatever terms are worked out.

The union also represents 1,035 Gelson's employees within its seven locals. Gelson's will not be part of the management negotiating team.

Brenda McDaniel, vice president of human resources for Arden Group Inc., which owns the 17-store chain, did not return phone calls.

Trader Joe's, which sees itself as a "specialty foods" enterprise in a separate industry from grocery chains, had little to say about the dispute. "Trader Joe's has no comment on the supermarket industry," said Pat St. John, a company spokeswoman.

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