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."

[Fledermaus]

Well, then that only explains your local situation, which proves that you can't paint an entire company based on your singular experience.

I too have had horrible job experiences working for hotel chains like Hilton, Sheraton, and Radisson and Loews.

I didn't paint them all with the same brush and conclude that ALL Hiltons were the same. Sorry you had a bad experience. That's the nature of human beings in charge of things. Sure, it's the company that is reponsible and rightly should be considered an investment risk if they can't control their management structure. But that is inherit in all of them as I could point out wasting even more cyberspace.

As I said, in 1975 no one would believe you if you said Sears, JCPenny, K-Mart and Woolworths would be taken over by a new company like Wal-Mart that even took Exxon's place in the world in revenues.

Will Wal-Mart come down a notch or two in the future? Sure, I'll bet on it. I bet on Wal-Mart and won (I made a bundle buying their stock).

[volchef]

To answer your question briefly NO, because I don't have direct access to their recipes. HOWEVER I know that chain restaurant food is loaded with preservatives because my husband was offered a job in product development for a company that makes soups/stocks/bases/sauces/gravies for major chain restaurants. He turned the job down because he was so repulsed by the chemical element. Basically this firm(which is one of the nation's largest) has 5 recipe developers.....3 food scientists/chemists and 2 chefs. Getting these people on the same page is a difficult task I can assure you. Now, if you're wondering why these corporations need this the answer is simple: consistency. You simply cannot have a consistent final product at EVERY restaurant if they don't start with the exact same base and once you throw a human element into the situation consistency goes out the window. These corporations cannot afford to let a $9 an hour line cook be the creator of a recipe day in and out so if you notice they have pictures of the plates in the kitchens at these restaurants to tell the cooks where to put the pre-made sauce, the veggies, the meat etc. There's just no way for them to get around it. Hey, don't come after me because I just tell it the way it is. I have no problem with Chilis and Fridays.....people can eat whatever they want it's America for crying out loud, I just know that there is higher quality stuff out there and I prefer to eat it......my restaurant will probably fail while theirs will still be around 20 years from now.

[auboy]

Exactly! With the money I save on my staple goods at the SuperCenter, I can afford a few Porterhouse steaks from my butcher. And if it's such a bad place to work, then the ex-assistant manager at the local Winn Dixie has lost her mind. She's smiling from ear-to-ear everytime I hit the new Wal-Mart.

[Grenada]

With the money I save on my staple goods at the SuperCenter, I can afford a few Porterhouse steaks from my butcher.

And that is a good thing ;>)

[G.Mason]

"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."

Next time you're in a bank, check out the teller stations. Seven stations and two tellers? So you stand in line, "because each employee having to do the work several used to do in each department".

How many full service gas stations do you now of? Our elderly mothers must pump gas?

Wal-Mart is doing nothing different than any other business that wish to remain in business.

We've all heard the tired old song, "There's trouble right here in River City"!

[PGalt]

How many businesses have gadfly, parasitic unions opened?

[Corin Stormhands]

Wal-Mart can deliver big bottles of laundry detergent cheaper but you won't ever get fine foods there.

That depends. My wife works part-time at a Wal-Mart in a more affluent section of town. They keep up with their customer needs. And it is rare that we cannot find what we need there.

On the other hand another Wal-Mart close to us on the other side, but closer to town, is like a combat zone.

[TheEngineer]

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

And I think it's amazing how people will overpay every week to support a union grocery store, despite the fact that WalMarts are filled with union people shopping there.

You can keep your 'dignity'. Meanwhile, I'll pay market prices at WalMart and put the savings in my pocket.

[oldironsides]

Lowes home improvement stores have management working long hours for a set salery. They complain of no family life and poor treatment by the corporation. Retail is not easy for a family person. The demands are abnormal because of the attitude of the store supervisors and corporate heads.
The websites dedicated to the Lowes and Home Depot employee complaints are interesting. They may have one for Walmart gripes also?

[Clemenza]

Mark my words: as Wal-Mart moves to the northeast and California, it has found that many prefer Target, due to its better merchandise and overall environment. I think Wal-Mart is here to say, but I have seen Target doing the right things as they enter my market, while Wal-Mart maintains the rural/folksy/southern approach that doesn't work well here.

Ambrose, as regards my former employer, Ballbuster Video, they should file chapter 11 or be sold off within the next few years. Video Rental outlets in general are going to the ashbin of retail history.

[Clemenza]

Retail is not easy for a family person.

Its hell on us students too. Retail has ALWAYS su-ked in terms of pay and hours, even when my grandmother was working at Bambergers.

[ChemistCat]

You are an ass. I never worked for Wal-mart, just watched a Sam's lose most of its employees (who were friends) because they cut the departments' staffing too much.

I am noting an economic phenomenon that is hurting my town. That's all.

When Wal-mart opened their policy was "you're always next in line." The policy that results in their prices being cheapest will go where that one went, once the competition is out of the way.

[Snerfling]

Thank you for our well reasoned and articulate posts. Sometimes in the bizzaro alternative FR universe, the commentary starts looking more like The Nation.

[Admin Moderator]

probably involve your sex life

You typed all that, only to have it pulled because you decided to throw in this gratuitous insult.

[GrandMoM]

....go take your meds, POTTY MOUTH!!!!!!!!

[Snerfling]

Walmart has found that many prefer Target

Good God, another voice of reason! What is becoming of this thread? Right on; we have a Walmart and Target in Huntington Beach.

The Walmart is brand new, but still leaves a poor shopping experience due to the crowded aisles and general zoo like atmosphere. Target has wider aisles and a more relaxed shopping experience.

As Adam Smith observed, the market pricing mechanism is a marvelous thing. It allows competitors to find whichever particular niche consumers are willing to pay for respective value.

[Indrid Cold]

People always say Wal-Mart is going raise their prices once they crush the competition, but I haven't see any evidence of that. They could do it, I suppose, but they probably know it would just p*ss everybody off and leave themselves open to a Super Target store or something.

[dogbyte12]

We do have a Wal-Mart and a Target near each other. I prefer the Target. Wal-Mart is so "successful" with their cheap crap that if I wanted to save money on flour or Chinese Alarm clocks, I would be waiting in line for a good 45 minutes. See, they are saving money by not putting enough $8 an hour cashiers out. The ones who are out, are the people who could not get the $15 jobs at Albertsons or Ralphs.

It's simple economics. If you have a choice of checking for 30 hours and getting paid $450, or have to work 58 hours to get the same amount of money, with no benefits, if you are competent, where do you apply for a job?

When Wal-Mart is the only game in town, their employees do get better, I will grant that. I was in a Super Wal-Mart in Gonzales Louisiana this spring, being asked to pay $2.00 each for red bell peppers. There is only 1 Supermarket left now. The others shut down after the Super Wal-Mart moved in.

I will buy chinese food at an american restaurant, but just refuse to buy Chi-Com crap at Wal-Mart.

[Chewbacca]

I moved from the west coast to Oklahoma and find that I really hate Wall-Mart. I really preferred Fred Meyers. Better quality clothing and merchandise.

Where I live there is a Crest, Wall-Mart, Albertson's and Target all within a block or two of each other.

I rarely shop at Crest or Wall-Mart. The Albertson's is a lot cleaner, wider isles, and has fresher vegetables and meats IMHO.

Crest is where all the welfare people go and gives me the creeps. They have armed security guards in the store, and the shelves packed full with way too many choices and brands.

[ChemistCat]

Maybe Target is bright enough not to let loudspeakers rant at employees constantly during business hours. Boy that wears me out when I have to shop at Wal-mart. It wouldn't be a tenth as noisy if they'd just communicate with their employees in some quieter fashion.