Posted on 01/13/2004 10:19:40 PM PST by calcowgirl
Walk down any aisle in a major supermarket and look at the products on the shelves.
If you wonder how they got there, it wasn't random luck, a clerk's decision or even the invisible hand of the free market system.
Food product manufacturers pay major supermarket chains slotting fees to guarantee space on store shelves. They pay even more to make sure their products are visible and easily accessible to shoppers.
The Federal Trade Comission estimates that these fees amount to as much as $9 billion annually for the industry, of which the three companies involved in the Southern California supermarket strike probably get more than half.
Nobody knows the exact amount. The companies who pay aren't talking, and the chains won't comment on the practice.
"If you're a smaller producer, it's hard to get into stores because of slotting fees,' said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp. "This is one of those industry customs that almost no one is aware of.'
Alone among the major players, Wal-Mart doesn't slot, allotting shelf space based on which products offer the lowest wholesale prices.
Since food producers pass the cost of slotting along in higher prices, that's a competitive disadvantage for Albertsons, Ralphs and Vons once they have to compete with the Arkansas- based giant.
"Wal-Mart will come into Southern California with no slotting, and their prices will be lower than the chains,'Kyser said. "They will not have the same array of products, but if you want low prices and are content to live with the big brands, then you'll shop at Wal-Mart.'
If that's a hidden issue in the 96- day-old supermarket strike, it makes it easier to understand why businesses that are showing a profit at present are so eager to cut costs.
At least to date, the chains seem to be taking an "our way or the highway' approach to negotiating with the United Food and Commercial Workers union.
"I'm not going to say their offer is exactly the same as it was in October,' said Ellen Anreder, spokeswoman for six of the seven striking locals of the UFCW. "It isn't exactly thesame, but it is nowhere near where it needs to be.'
On the crucial issue of health- care costs, the chains currently pay $3.85 per worker per hour for health care. In addition to asking for employees to contribute $5 to $15 per pay period for their insurance and making larger co-payments for treatment, the chains want to cap their own contribution at $4.60 for current employees and $1.35 for future ones.
The unions argue that such a system would force employees to absorb all future cost increases past $4.60, and that the lower rate for new employees would mean that by the third year of the current contract, even old employees would be paying as much as $100 a week for their insurance.
Jonathan Ziegler, a grocery analyst with JM Dutton & Associates in Santa Barbara, said the dispute might be settled more quickly if the chains gave in a little.
"It might help if they didn't implement a two-tier pay system,' he said. "In lieu of that, they could establish a (Wal-Mart-type) policy where employees aren't granted health care benefits for the first six 6 to nine months. That would cuts costs because the turnover in that business is so high.'
And the strike continues.
Someone's going to win? Maybe Wal-Mart...
Walmart would be fine. They deliver a good product at a competitive price. The shelves at my local Walmart are kept stocked with what I need. The meat department at Fred Meyer is certainly a bit better. Our local WinCo is employee-owned, non-union and competitive with Walmart. The Albertson's is a union shop with higher prices and far fewer annoying customers in the aisles. They will be closing soon and the building will be taken over by Target.
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