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

AP via Deseretnews ^ | October 21, 2003 | Gavin McCormick

[ChemistCat]

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."

[ChemistCat]

An interesting economic approach to the problem. I happen to know firsthand that Wal-Mart and Sam's, also, are driving employees to ruin their health trying to do the impossible--each employee having to do the work several used to do in each department. Moving elsewhere is impossible right now because the other stores are going out of business fast, or barely hanging on. You can see the desperate loss leaders, the higher prices elsewhere. When people pay $3.29/gallon for milk at Albertson's, they remember that the next time they're in Wal-mart and see it's $2.50 there.

Reminds me of a gas station pricing its gasoline super-low long enough to ruin a competitor. Everybody flocks in and buys even if they know it means that a neighbor is going to lose his business, because, hey, it's cheaper. And that's what people are going to do.

It's the American way, of course. Wal-mart will win the day. I just hope nobody is expecting Wal-mart to STAY the cheapest when it's the only store left in town.

[Jeff Chandler]

When shopping at Walmart it's important not to allow your bare skin to touch ANYTHING.

[ambrose]

Remember what Blockbastard Video did? They drove all the small chains and mom and pops out of biz, then promptly jacked up their rental prices.

[Timesink]

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.

I do the same thing, except I have to drive TWENTY miles out of town because that's the nearest Supercenter. The prices are THAT GOOD. (They have broken ground for a Supercenter only a five-minute drive from my front door, to replace the nearby regular Wal-Mart.)

By the way, I've seen other people make claims of Wal-Mart engaging in predatory pricing practices only to jack up prices once they've "put everyone else out of business", but: 1) I've never seen anyone actually be able to document the claim; 2) Prices always "go up" because of inflation over time, both at Wal-Mart and all other stores; 3) Predatory pricing is illegal; 4) Predatory pricing is largely a mythical conspiracy theory; 5) Every Wal-Mart I've ever seen built has led to dozens of other businesses opening up around them, not resulting in an entire town shutting down.

[Jeff Chandler]

Neither my wife nor I care to endure the Swap Meet atmosphere of the place. What a mob.

[Jumper]

I came back to the US in August 2003 for the first time in four years. You can imagine my surprise when I inquired as to what had happened to all the Buy American Banners at the doorways - and nobody in Customer Service or Management could ever remember a time when Walmart touted "Buy American" products.... Needless to state, at the Hope Mills, North Carolina Walmart they did not have a single American made alarm clock in the store - after an extensive search by meself and several employees. This is your typical Walmart, one that baited "American products" and quickly sold out to imports once the competition was finished.

[Timesink]

"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."

"Gone sky high" compared to when? Correlation != causation anyway.

Also, do Wal-Mart employees not have to work hard?

[Timesink]

bump for bump lists

[ambrose]

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

[EGPWS]

Remember what Blockbastard Video did? They drove all the small chains and mom and pops out of biz, then promptly jacked up their rental prices.

I wish I would have been privy to their business savvy at the time for it would have been a definite financial advantage for me to be part of their business advancing concept.

[Fledermaus]

Blockbuster did? That's funny. I have a Blockbuster near me along with four other video stores. One a chain, Hollywood Video, and two independent stores.

All the prices are about the same for the same length of the rental.

Do you people just make these lies up as you go along? If Blockbuster was so controlling, then why is it I've been able to rent videos at the same decent price for over 20 years and have NEVER had a Blockbuster account? Huh? Huh? Come on...answer that one you all knowing, all seeing, economic geniuses.

[ambrose]

ping

[EGPWS]

ping

Now how did I know that was coming? : )

[volchef]

Ewwww spaghettios, but you know, working in the Restaurant business is a real eye opener....there is a reason that Chili's, Applebees, TGIFridays have managed to stay open all these years while far superior mom and pops have gone under........and that is because Americans will eat preservative laden crap from dusk till dawn 24/7/365 as long as its hot and cheap.

Personally, I wouldn't touch half the stuff in a walmart super center...gag....but they give the sheeple what the sheeple want.....lots o food at low prices.

[ambrose]

You are..........

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[Fledermaus]

Don't confuse them with logic Timesink. They can't comprehend the facts beyond their indoctrination.

I don't know about you, but the "mom and pops" where I grew up charged ungodly prices for basic goods. Even in a dinky town of 3,500 that was 30 miles southeast of Ft. Smith, Ar we had "mom and pops" that were so expensive we'd drive to bigger cities to get non-perishable goods cheaper. Reminded me of the days my grandfather told us of taking the large flatbed wagon to Ft. Smith every other month and spending a week on dirt roads feeding the horses more than the kids just so they could buy staples to last months.

I even worked in the biggest grocery store and we did what we could to get prices down. But, being a small store in a small ciy, our wholesale prices were also marked up back then. Over a few years the owner decided to invest (trickle down economics for you idiots) in a bigger store and warehouse so he could take advantage of larger shipments and lower prices. And he was good at predicting what would go up in the mid 1970's. First, we bought coffee early and made a fortune selling it lower when it went through the roof. The same with every little 70's commodity prices crises; tuna, flour, sugar (the worst), beef and even dog food.

Then, Wal-Mart came in. Not ONE "mom and pop" store collapsed. Not ONE job was lost. It created more jobs and the competition was great for business.

In the same grocery store we broasted chicken. In 1978, KFC decided to move in (my parents sold them the land they wanted) and did the owner of the "mom and pop" store whine and complain? No. He said, "Great, I'll sell even more of my own chicken" and he did. He understood competition was better for all. And he NEVER went under, never failed to make money. As a matter of fact, the owner of this little "mom and pop" grocery store in little Booneville, Ark was the richest man in town.

To this day, Wal-Mart built themselves an even bigger store while the son the the "mom and pop" still runs the grocery store. And all are doing well. Heck, they've grown to only 5,000 and still have every grocery store open that was there when I was 18, the same movie theater, and even added a Mazzios Pizza, KFC added a Taco Bell split store, a Taco Tico moved in, Sonic is still alive and well (we loved that place in high school), the Western Auto is still going great (the owner now was in my class) even with a Wal-Mart, TCBY has a small shop, 4 dentist now instead of one, the hospital has added on, and even the old, old, old Bearcat drive in was in business selling their special double cheeseburgers and blue plate specials.

So I don't understand how I can site simple fact about a town of 3,500 in 1974 and only 5,000 in 2003 and see amazing progress while others come in here and whine and complain and flat out lie. According to EVERY SINGLE ARGUMENT they just made, that little town would be desolate and under the total control of the Walton dynasty, destined to control mankind threw rolling back prices.

I can't help but shake my head and realize we have a long way to go in the process of de-indoctrination.

[Fledermaus]

I don't smoke. But I'd rather be a flame warrior jerk than a total lying moron.

[ambrose]

And........

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