Unionized grocers face competition from nonunion newcomers to Washington market

Astrid Riecken/For The Washington Post - Local activists protest wages at the Capital Plaza Wal-Mart last month. Washington-area grocery stores say Wal-Mart’s arrival in the District will ramp up competition.

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When Safeway bought Piggly Wiggly and Sanitary Grocery in 1928, it inherited more than 400 stores in the Washington area. Many were small corner shops and fresh food markets.

The deal led to a golden era for the big grocery chain. Over time, Safeway began to phase out the neighborhood outlets to open ever-more sophisticated emporiums, filled with aisles of fresh produce, meat, bread and household goods. As the stores evolved, so did their workforces. Safeway’s workers became unionized in the 1950s, and jobs at Safeway often meant stability with decent salaries and generous health benefits.

(Ben Nelms/Bloomberg) - Safeway, which posted $2.43 million in sales last year, is the second-largest grocery chain in the area. The largest, Giant, has 123 Washington-area stores and $3.98 million in sales.

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Fast forward to today, and another golden era in groceries is underway. This time, Safeway is racing to open even larger stores with wider selections to compete with a host of new entrants, whether they be warehouse-style retailers such as Wal-Mart or specialty grocers such as Trader’s Joe.

But the playing field has changed. Many of the upstarts are staffing their stores with nonunion workers, and Safeway and other long-time unionized grocers are finding it difficult to match the savings in labor costs.

“That’s what the supermarket has evolved into,” said Greg Ten Eyck, a spokesman for Safeway. “You look back just 20, 30 years ago, and you’ll find that most of the grocery retailers in town were unionized. Not anymore.”

Indeed, the mix is changing quickly as communities compete for grocery stores, stirring up long-simmering labor tensions.

Those strains explain much of the emotion behind the recent debate in Washington over whether to require large retailers to pay a “living wage” of at least $12.50 per hour.

The D.C. Council measure failed when it was vetoed by Mayor Vincent C. Gray, but the issues are likely to surface again as Wal-Mart prepares to open stores in in the District and retailers begin to grapple with the implications of the Affordable Care Act.

The next flash point could come as soon as Oct. 31, the deadline for Safeway and Giant to finalize a new contract with their union, the United Food & Commercial Workers International Union.

More grocers in D.C.

The District, once shunned by many grocers, is seeing a revival.

Since 2000, 21 grocery stores have opened within the city alone, according to the Washington D.C. Economic Partnership. Dozens more, including Balducci’s and BJ’s Wholesale Club, have expanded into the metropolitan area, while drugstores such as CVS and Walgreens have begun selling fresh food.

“The encroachment of nonunion competitors has had a real impact on us,” said Ten Eyck, who is not involved in contract negotiations. “With more and more players entering our industry, we’ve seen market share fall. And what that means for us is that we have had to close stores.”

Safeway has closed, or consolidated, 10 area stores since 2009. Giant, another chain with union workers, is down nine locations to a total of 120.

“It’s a radically changing landscape,” said Jeffrey Metzger, publisher of Food World, a trade publication based in Columbia. “There’s no question that the unions have been impacted by the influx of nonunion stores.”

Unionized employees receive roughly 20 percent more in wages and benefits than their nonunionized counterparts, according to Mark P. Federici, president of UFCW 400. Many unionized Giant and Safeway workers, including part-time employees, receive health insurance without having to pay out-of-pocket fees.

“In many cases, the differences are quite dramatic,” Ten Eyck said. “We have employees in our stores that earn upwards of $20 an hour, make time-and-a-half on Sundays, and with that, receive gold-standard health care and have a very generous pension. Need I say more? Our labor costs can be quite high.”

Fewer unionized stores

Thirty years ago, nine out of the 10 largest supermarket chains in the area were unionized. Today, that number has whittled down to four: Giant, Safeway, Shoppers Food Warehouse and Costco.

Many older union shops such as Grand Union have closed. Rockville-based Magruder’s was the most recent to take a hit, when it shuttered four stores in January after 46 years.

“Unfortunately, this is a reflection of the still-struggling economy, skyrocketing real estate costs and competition against predatory retailing giants trying to drive the few remaining independent, family-run businesses out of the market,” Federici said at the time.

The trajectory of local grocery unions has largely mirrored trends in the country’s broader labor movement, which has seen private-sector membership dwindle to 6.6 percent of the workforce from 11.2 percent 20 years ago. UFCW Local 400 now represents about 17,000 local Safeway and Giant workers.

Turning the tide has been difficult. The next best opportunity could come if and when Kroger finalizes its $2.5 billion deal to purchase Harris Teeter (the deal is currently awaiting regulatory approval). Kroger employees are represented by the UFCW, while Harris Teeter employees are not part of a union, creating an opportunity for the union to recruit new members. However, Harris Teeter executives were reported to have circulated letters to employees in August telling them that a union would not be in their best interest. The company declined to comment for this story.

Choice vs. better wages

As the fight over living wage legislation demonstrated, labor’s interest in new members and assuring higher wages can sometimes take a back seat to a community’s desire for more (and cheaper) choices in shopping.

When the Washington D.C. Economic Partnership was founded in 1999, the group quickly settled on its main priority: Bringing more grocery stores to the city.

“The city had [a lot] of food deserts,” said Keith J. Sellars, president and chief executive of the nonprofit, which markets the District to businesses. “One of the major things residents were looking for a was a place to buy groceries.”

Since then, Aldi, Food Lion and Yes! Organic Market — all nonunion shops — have arrived in the District. Another 12 are on their way, including at least five Wal-Mart stores.

But it’s not always a quick process. Sellars says the organization had been in talks with Costco for 10 years before the chain opened its first District store in December.

(While some Costco employees in Maryland and Virginia are part of the International Brotherhood of Teamsters, District employees are not.)

“These aren’t one-time conversations,” Sellers said. “Sometimes we’ll meet with each retailer five times a year — and that’s something we will continue to do because there is still more room for both additional warehouse grocery stores and niche grocers.”

But it’s not just about an increasingly crowded marketplace. There have been other changes, too. Rising gas prices and busier schedules have meant that consumers want more one-stop-shops. The average American made 1.7 weekly trips to the grocery store in 2011, down from 2.2 in 2005, according to Food Marketing Institute, a research firm in Arlington.

To stay competitive, area stores have made a number of changes in recent years. At Safeway, that has meant opening larger stores with upwards of 60,000 square feet. Food Lion has made recent efforts to de-clutter stores and widen aisles so shoppers can be in and out as quickly as possible. Giant, meanwhile, has begun integrating pharmacies, housewares and party supplies into its stores. An upcoming location boasts a 78,000-square-foot space that spans an entire block at the City Market at O in D.C.’s Shaw neighborhood.

“Locally, we’ve seen a lot of changes over the past 10 or 20 years,” said Jamie Miller, a spokesman for Landover-based Giant, which is owned by the Dutch firm Ahold. “It has really been a trend toward more convenience and value.”

Local grocers say Wal-Mart’s impending arrival in the District — the company’s first two stores are scheduled to open this year — is likely to further change the landscape.

Some stores say they are considering doing away with fresh meat counters and only serving packaged meat, like Wal-Mart does. But most say it’s too soon to tell exactly how they will react to the behemoth retailer.

“I think it’s safe to say that a Wal-Mart that sells groceries near a Safeway that sells groceries will affect business,” Safeway’s Ten Eyck said. “How that might happen, though, is still being played out.”

Health care reform impact

It is not just a question of union versus nonunion, but of the kinds of jobs and benefits various retailers offer.

Even before the Affordable Care Act went into effect Tuesday, retailers such as Trader Joe’s and Wegmans — long considered to be among the more worker-friendly nonunion grocers — announced they would no longer manage health care benefits for part-time employees who work less than 30 hours per week, steering workers instead to the new government marketplaces. Trader Joe’s currently offers health insurance to employees who work at least 18 hours per week, while the threshold at Wegmans is 20 hours.

Other grocery chains have taken quieter measures, slowly reducing the number of hours given to employees so they fall below the new law’s 28-hour cut-off for mandatory health insurance.

“Everybody’s trying to get under that 28-hour limit,” Metzger said. “Nobody knows what the financial outcomes will be with Obamacare. It’s a boondoggle for virtually all large-scale retailers — and when you’ve got organized labor, that makes it even more complicated.”

The grocery industry has become increasingly reliant on part-time workers in recent years. Unionized employees at Safeway and Giant — virtually all workers at area stores, except for assistant managers and store managers — almost always work less than 40 hours per week, Federici said.

“Retail grocery is predominantly a part-time workforce these days,” he said. “It’s very rare in our industry that anybody’s hired full-time anymore.”

The trends trouble proponents of higher wages.

“So many people are trying to make a living wage, but they are finding they can only get part-time work at a minimum wage — and that’s not enough to live on,” said a spokesman for OurD.C., a nonprofit working to bring well-paying jobs to the area. “Companies are making millions of dollars in profits, but aren’t sharing profits with workers as they once did.”

 
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