Cincinnati Enquirer, October 13, 2004, Wednesday

The Cincinnati Enquirer

October 13, 2004 Wednesday Final Edition
SECTION: BUSINESS; Pg. 1D

LENGTH: 822 words

HEADLINE: Both grocer, union in a no-win situation

BYLINE: By John Byczkowski Enquirer staff writer

BODY:
Analysis
Each must find a way to live with Wal-Mart
In an ideal world of business and labor relations, a labor agreement is a win-win situation. But what's happening between Kroger Co. and the union representing 8,500 workers in its Greater Cincinnati stores isn't ideal.
Kroger, facing a blitzkrieg of low-cost, mostly non-union competitors storming the market, says it needs to get its labor costs down so it can lower prices, get more customers, make more money and improve stores.
United Food and Commercial Workers Local 1099, which represents 8,500 meat cutters and clerks in 70 stores in the region, believes it accepted lower wage increases in the past years to maintain low-cost health benefits for its workers. The union is now resisting giving more.
The stalemate the two sides have apparently reached in labor negotiations doesn't bode well for a happy ending. "I believe in win-win negotiations," said Michael Doyle, who teaches labor relations courses for the Cincinnati chapter of the National Human Resources Association. "In some circumstances it might not work, and this might be the case, where you have two adversarial positions, and it might be tougher to get the win-win out of it."
The negotiations "are critical for the survival of the company, and they're critical for the effectiveness of unions," said Neil Stern, a retail consultant with McMillan/Doolittle LLP in Chicago. "Both sides have a lot riding on it, and that's what makes it so difficult."
Experts say both sides will lose if a stalemate leads to a strike.
Two strikes in the past year - a 141-day strike and lockout in Southern California that ended in February and shorter strike in West Virginia, southeast Ohio and eastern Kentucky - cost Kroger $228 million in lost profits. The company says it will continue struggling to win back customers in Southern California "for the foreseeable future."
The union lost as well in both Southern California and West Virginia: the agreements reached were less than what Kroger offered before the work stoppages.
Chuck Cerankosky, who follows Kroger for investment adviser Key McDonald in Cleveland, said non-union retailers pay their workers less, offer fewer benefits and have more flexible in scheduling. This saves money, and allows them to charge less.
"Kroger doesn't get a free pass that says they can charge more because they have a labor union," he said. "I've yet to find in my visits to all types of non-union food stores anybody asking at the door if the place is union."
Flexible contracts in cities such as Atlanta have allowed Kroger to remain competitive. "Kroger has shown it can operate very effectively with flexible labor contracts, but they've got to be more and more flexible because there are lots of non-union food merchants," he said.
But the UFCW is making a stand, and "it certainly is the kind of stand that a labor union needs to take if it's going to demonstrate that it's a legitimate representative of workers," said Rick Hurd, a professor of labor studies at Cornell University in Ithaca, N.Y.
"It's very simple to understand why the union wants to protect the benefits that its members get. It's not that the pay and benefits are so exorbitant they're out of line with other workers, because they're not. They're still relatively low-wage and low-benefit compared to workers in industry or in government."
What both Kroger and the UFCW are battling is Wal-Mart - a rapidly expanding, low-cost, vehemently non-union competitor. Local 1099 pointed out to its members earlier this year that Wal-Mart will build some 300 supercenters nationally, the equivalent of eight Pentagons of space selling groceries and merchandise.
For the union, Wal-Mart "creates a bargaining challenge and an organizing challenge," Hurd said. What's happening in Cincinnati illustrates the bargaining challenge, he said: Kroger stubbornly says it needs to lower the cost of wages and benefits to compete with Wal-Mart, and the union has to deal with it.
The organizing challenge is in trying to organize Wal-Mart workers. Hurd said the UFCW membership in North America is stable at about 1.4 million, but it hasn't organized a major retail chain in years. It'll be tough to organize Wal-Mart if the union is making concessions to other retailers.
Doyle agreed. "At the end of the day, any time you reduce an employee's total compensation, it's going to be a problem," he said. The union loses face, and the employer suffers damage to its image and recruiting.
And in a sector that's so fiercely competitive as groceries, "the last thing you need is a work stoppage," said Charles Little, a former Kroger human resources manager who works for a Blue Ash pharmaceutical company. "The consumers aren't going to go around any picket lines, so they'll just go to other stores."