Supermarkets slam Wal-Mart--Lower labor costs at heart of strikes by grocery workers

CROSS LANES, W.Va. — To find the cause of the nation's three supermarket strikes, just follow Judy Ranson's shopping cart.

An inveterate bargain hunter, Ranson used to chase down the best grocery deals at three stores: her local Kroger in Cross Lanes or down the road at a Fas Check in Dunbar and at a Poca Supermarket in Poca.

Now she makes one trip a week, to the Wal-Mart Supercenter, which opened five years ago a mile and a half down the road and across Interstate 64 from Kroger.

Ranson, who is 57, spends about $90 for herself and her husband. She estimates that she saves $40 to $50 off what she'd pay at the supermarket. "Kroger's prices are too high on a lot of stuff," she said. "I figure $100 ought to be enough to feed anyone for a week."

Officials at Kroger and the nation's other dominant supermarket chains — Ahold, Albertsons Inc. and Safeway Inc. — cite competition from Wal-Mart Stores Inc. and other box stores moving into the grocery business as a reason to hold the line on labor costs.

Those costs include health-care benefits that are the sticking point in United Food and Commercial Workers strikes of 3,300 workers at 44 Kroger stores in West Virginia, Kentucky and Ohio; 70,000 workers at three Southern California chains; and 10,000 workers at three chains in Missouri.

Similar struggles are expected within the next six months as UFCW contracts expire in the Phoenix and Washington, D.C., areas.

"Box stores are a very real threat," said Archie Fralin, a Kroger spokesman in Roanoke, Va. "Their lower labor costs make it imperative for us to manage costs. That's just a reality."

Wal-Mart doesn't break out earnings by division, so it's hard to calculate how much food it sells. But analysts say in just 10 years it has become the biggest player in the grocery business, last year capturing anywhere from 5 percent to 15 percent of the industry's $680 billion pie.

Traditional supermarket sales have dropped about 3 percent in the past year, estimates The Food Institute, a New Jersey-based trade group.

"The supermarket chains are still profitable, but executives see their market share down more than 5 percent over five years, and they're frightened," said George Whalin, president of Retail Management Consultants in San Marcos, Calif.

Lower labor costs for nonunion workers make up part of the advantage of box stores like Wal-Mart.

Including pension and health benefits, Kroger estimates it pays workers on average $6 an hour more in West Virginia than Wal-Mart. Burt Flickinger, managing partner of Strategic Resource Group in New York, says the difference in other parts of the country runs as high as $10 to $14 an hour for full-time workers.

At the Cross Lanes Kroger, striking UFCW workers say Wal-Mart's opening five years ago cost their store $100,000 in weekly receipts — between a third and a half of the store's income.

In response, workers say, Kroger has slashed the store's payroll from 86 to 45 full- and part-time workers.

"All we hear from management is 'Do more,' " said Kay Underwood, 49, a 29-year Kroger employee. "We did an employee survey, and the number of us on Paxil, Prozac, blood pressure medicines, you name it, has gone sky high. We're killing ourselves for this company."

Fralin wouldn't comment on individual Kroger store sales.

But he said industry studies show that Wal-Mart often takes as much as $100,000 a week from existing supermarkets, and he hypothesized that a store losing that much would see labor costs cut similarly.

Wal-Mart insists labor costs are just one part of a low-price formula that includes better purchasing logistics and information systems.

Analysts agree that the Arkansas chain's famously efficient ordering and distribution systems give it an edge, as does its clout in pushing for low wholesale prices. They also say supermarkets have room to improve.

"Most big chains went on a buying binge of smaller chains in the 1990s, and many of those acquisitions have not been fully integrated," said Mark Hamstra, editor of Supermarket News. "They still have costs to wring out from those buys."

Jim Lowthers is president of UFCW Local 400, which represents 30,000 food-industry workers in six states including West Virginia. He says his local has lost 5 percent of its members in five years.

"All these companies make billions of dollars, and all they want to say is 'Wal-Mart, Wal-Mart, Wal-Mart,' " he said. "They've joined together to say the only way to save is by reducing worker benefits. There's no reason they can't compete, profit and still take care of their employees."

Neil Stern, a partner with Chicago retail analyst firm McMillan/Doolittle, said he sympathizes with both management and workers.

"No one can say these retail workers are making too much money," Stern said. "At the same time, these companies are operating on an uneven playing field in terms of labor costs, and that can't continue."

Whalin calls the grocery industry invasion by box stores like Wal-Mart and Target, warehouse clubs like Costco and even drugstore chains like Longs a "sea change."

"Supermarkets have to do better at wringing the costs out of everything," he said. "But no matter what they do, in the long run they can't compete. Ultimately we're going to see fewer chains operating in each region — two, not three or four."

Don't they balance the low wages by drawing in people with little or no skill? If you are unskilled in life, you stay with low wages and if you have skills and education you demand your value in the market place.

The wages are from the market place and a Wal-Mart seems to thrive on people with little skills who are grateful to have a job anywhere.

If they don't like the pay or work, they can leave and find the pay they want if they can get it.

IMO, most can't get it and Wal-Mart's pay reflects their value.

It's not the lack of choice that bothers me. After all, we can and do shop via internet. It's the local people who get driven out of business. I guess that's a bit like mourning the passing of the stagecoach, though.

Carolyn

The nearest Wal-Mart is 30+ miles from my house, which is fine with me. We don't have a Wal-Mart in this county at all, and we still have some really nice locally-owned stores to patronize. We have a couple of nice local grocery stores, an old fashioned 5- and 10-cent store (which has a Radio Shack inside, as well as a full-service hardware store) and lots of other small businesses.

I sure as heck don't buy any meat at Wal-Mart at all. The meat is cut off site and brought in prewrapped. I bought a T-bone steak from them a couple of years ago (prepackaged) and I still don't know what animal that steak came off of, but it wasn't a steer - it probably answered to the name of "Trigger".

I don't buy chicken from them, either, because the last time I bought chicken there, when I got it home and opened the package up, it was green and rotten (I couldn't see through the packaging, which was colored plastic, to tell it was bad). I only go to Wal-Mart if there there is no other place I can get a particular item. I shop my local stores first.

But what really caught our attention were the prices: $3/lb for fresh (farm bred) salmon, $5.29/lb for 5-7 pound rolls of filet mignon (we don't bother with hamburger anymore), $1.59/lb for 5 lb racks of ribs, etc.

The filet mignon sounds good, but as with most Socal Groceries it's probably that USDA Select garbage. I have to travel back to the Midwest once a year to load up on good steaks. Back in the Midwest, California Beef would be considered commercial grade dog food. The worst steak back there is better than the $10/lb USDA Choice that Ralphs and Albertsons ships in as Aged meaning Midwesterners refused to buy it because it was too old to sell.

Amazing how people will shed any sense of dignity and self-respect just to save a few shekels on some laundry detergent.

Amazing how people will label others as "undignified" because they shop at a store that sells the same products for considerably less.

You say that Wal-Mart never puts other stores out of business and that you don't know of any place that they have put stores out of business.

I do. My home town. Go to Wagoner, Oklahoma. There used to be two other grocery stores in town, an IGA grocery and a Homeland (subsidiary of Safeway). Now, the only place in town to buy food is the Wal-Mart Supercenter. Drive through the downtown section and look at all the boarded-up buildings. There used to be a full-service hardware there. Gone. There was a Western Auto and an OTASCO. Gone. The only businesses downtown now are flea markets in a few of the old buildings.

Oh, and BTW, the quality of the food is really lousy in the SuperCenter (for example, rotten eggs and spoiled meat) and yes, they did raise their prices on milk and meat and other staples when they finally killed off the two grocery stores and people had to drive about 20 miles to shop at any other grocery store.

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