The increasingly crowded supermarket industry in Southern California might make negotiating a new labor contract for some 48,000 affected workers harder than it has been in recent years, analysts told Bloomberg BNA.

“It’s been such a topsy-turvy, highly competitive market in San Diego, so for the unions it’s a different negotiating environment,” said Miro Copic, a marketing lecturer and branding authority at San Diego State University who monitors retail trade developments.

Two developments are limiting the bargaining power wielded by the United Food and Commercial Workers and traditional grocery stores operating in Southern California. The UFCW, among other unions, is losing members employed in the private sector. This decrease in union density, including in Southern California, hinders organized labor’s push to protect workers’ rights.

At the same time, traditional grocery stores, in this instance Ralphs Grocery Co., Albertsons Inc. and Vons, increasingly must compete for customers with supercenters, warehouse club stores, limited assortment stores, online sellers, farmers’ markets and ethnic food stores, according to the Food Marketing Institute’s latest report on the food retailing industry.

If negotiators for the UFCW and for those three supermarkets can’t reach agreement on a proposed labor contract, and a threatened strike in August proceeds, both sides could have trouble making a full recovery, analysts said.

“The unions don’t have the balance of power they had in 2003,” Copic said, when UFCW-represented workers at Ralphs, Albertsons and Vons went on strike for 141 days. The unions also don’t have the same amount of power they had when the unionized grocery store chains in Southern California dominated the retail food store market, Copic said.

‘Devastating’ Strike in 2003

The strike and a related lockout lasted from October 2003 to February 2004 after the parties failed to reach an agreement on a new contract, covering some 59,000 workers.

“The strike was devastating for all parties,” Burt Flickinger III, managing director of Strategic Resource Group, in New York City, told Bloomberg BNA. “It knocked out the strike fund for UFCW, and Safeway and Vons reported record losses.”

Ralphs is a subsidiary of the Kroger Co., the largest traditional grocery store chain in the U.S.

Vons was a subsidiary of Safeway, which in 2014 was purchased by Cerberus Capital Management LP, the parent company of Albertsons.

Contract Expired in March

The most recent bargaining agreement took effect March 3, 2014, and expired March 6, 2016. That contract covered about 60,000 workers.

UFCW leaders and the three supermarkets have been bargaining since March to reach agreement on a new deal, which would cover about 48,000 hourly workers—11,000 at Albertsons, 19,500 at Vons and 17,500 at Ralphs.

Union members voted overwhelmingly in June to authorize a strike should negotiations with the grocers continue to stall.

Strike Possible in August

The parties plan to continue bargaining throughout July and might go on strike in early August if a tentative agreement isn’t reached by then, Greg Conger, president of UFCW Local 324, in Buena Park, Calif., told Bloomberg BNA.

California grocery workers involved in this matter are represented by other UFCW locals as well: Local 8-Golden State, based in Roseville; Local 135 in San Diego; Local 770 in Los Angeles; Local 1167 in Bloomington; Local 1428 in Claremont; and Local 1442 in El Segundo.

“We are focused on fair scheduling practices, living wages, and maintaining our pension and health-care benefits,” Ricardo Icaza, president of the Los Angeles-based UFCW Local 770, told Bloomberg BNA.

Push for Higher Wages

The starting wage for courtesy clerks covered by the contract is $10.10 per hour, he said. But it’s difficult for workers, many of whom are employed part-time, to survive on a wage that low.

Union negotiators are “very focused on increasing take-home pay,” Icaza said. He added that it currently takes more than seven years for a new hire to reach the top rate of pay, based on the wage scales in the bargaining agreement that expired in March.

“Rents and other necessities in Southern California are increasing but pay for grocery workers has stagnated,” he said.

Currently, part-time clerks’ helpers covered by the contract are guaranteed 16 hours of work per week, and part-time clerks are guaranteed 24 hours of work per week, Icaza said.

The average grocery employee covered by the contract earns $14 per hour.

“At 24 hours per week, that’s only $336 per week,” Icaza said. “At 30 hours per week, that would increase to $420 per week—an increase of $84 per week without increasing wages at all.”

More Advance Notice About Schedules

In addition to providing employees with more work hours, Icaza said the union wants the employers to give them more advance notice about their weekly work schedules.

Currently, these companies post the weekly work schedule on Friday for the week that starts the following Monday, he said.

Workers only have two or three days’ notice of their work schedules, Icaza said, adding that this “makes it very difficult for our members to schedule child care, medical appointments” and “get a second job to help make ends meet.”

Employers Urge ‘Fair Deal for All.’

Representatives for Albertsons, Vons and Ralphs said they’re focused on reaching an agreement that benefits both sides.

“We remain committed to negotiating a contract that is fair to all parties, including our employees, and will continue to work to achieve that,” Carlos Illingworth, a spokesman for Albertsons and Vons, said July 7 in an e-mail message to Bloomberg BNA.

“We look forward to reaching an agreement at the only place we can—the bargaining table,” Kendra Doyel, a spokeswoman for Ralphs, said July 7. “Ralphs remains committed to working out the details for a contract that rewards our associates and enables us to keep our stores competitive.”

Health Benefits Potentially Problematic

But the UFCW negotiators might face their most formidable challenge when they push for changes in the health-benefit package.

“The financial burden of providing health insurance for employees is the top factor impacting food retailers in 2015, further complicated by the implementation of the Affordable Care Act,” the Food Marketing Institute report noted.

David Livingston, a supermarket analyst in Waukesha, Wis., told Bloomberg BNA that health-care costs are “nearly impossible” to predict, and one of the least-controllable expenses for companies. As a result, he said the contract negotiations would likely involve a great deal of haggling over health care, and how much both sides pay.

“Employees don’t realize the value of their health care could be worth more than their actual dollar wage,” Livingston said. “A family health plan can be around $25,000 a year.”

The Food Marketing Institute report noted that average annual premiums for employer-sponsored health insurance ranged from $9,950 for employee-only coverage to $16,834 for family coverage, according to the Henry J. Kaiser Foundation’s 2014 Employer Health Benefits Survey.

“Despite year-over-year cost increases, 40 percent of food retailers fully absorbed the healthcare benefit plan cost increases incurred in 2014,” the FMI report said.

Independent food retailers were “very likely to fully absorb these costs,” it added.

Other food retailers deflected at least some of the costs, the report said, by increasing employee health-care premiums, lowering employer-covered health benefits offered and monitoring workers’ hours to make sure they remained below the 30-hour eligibility threshold required by the Affordable Care Act.

A crucial challenge for employers in upcoming negotiations with the UFCW, Livingston said, will involve getting union members “to understand that their employers are not charities that should share all the profits with the employees.”

Priority goes to stockholders, he said.

Source: Bloomberg BNA