February 24, 2007

Store Talks Pivot On Competition

Experts Question Stop & Shop's Position On Health Care In Contract Negotiations

By JANICE PODSADA
Hartford Courant

Stop & Shop Supermarket Co. has a quandary as it continues to negotiate a new labor contract with its 43,000 employees in Connecticut, Rhode Island and Massachusetts.

The venerable New England company says that if it continues to pick up 100 percent of its employees' health care costs - as the union is demanding - it will lose ground against its nonunion competitors.

But if it cuts back, it could face a damaging strike that could also hurt its reputation among many customers.

But some experts say those claims - at least in Connecticut - may not be justifiable.

"Stop & Shop has pricing power, it has the power to extract a healthy profit," said Ronald Cotterill, a University of Connecticut economics professor and director of the federally funded Food Marketing Policy Center. "If the poor Stop & Shop workers want some health benefits, I don't think they're out of line."

As of Friday, negotiations between representatives of the United Food & Commercial Workers Union and the supermarket chain continued despite a strike deadline of midnight Thursday. Union officials said Friday that they will not strike as long as negotiations continue.

Although all five locals voted to strike earlier this month, the two sides have continued to talk, so far averting a strike that could put 15,000 cashiers, food department and clerical workers on the picket line in Connecticut, and another 28,000 in Massachusetts and Rhode Island.

In Connecticut, Stop & Shop has an estimated 45 percent share of retail market sales, which makes it the state's dominant grocery chain, according to a study published this month by the Food Marketing Policy Center.

Stop & Shop has nearly five times the sales of its nearest competitors, which include Big Y World Class Market, with 9.5 percent of sales, and Shaw's Supermarkets Inc., with 8 percent. Shaw's is unionized; Big Y is not.

A spokeswoman for Big Y was not available for comment Friday, and Faith Weiner, a spokeswoman for Stop & Shop, declined to comment on the company's market share in Connecticut, Massachusetts or Rhode Island.

Assertions by companies that they are being squeezed by the competition have become a common refrain in recent union negotiations, said Jonathan Cutler, a sociology professor and labor expert at Wesleyan University. It's a proven way to demand concessions from employees in all kinds of industries, from retailers to manufacturers, Cutler said.

"The demand for employees to bear the cost of their own health insurance is a rollback," Cutler said. "Historically, unions fought for and won health care benefits with no contributions from their employees."

Many companies are now coming to the negotiating table with the argument that the unions have only themselves to blame. In the supermarket business, for instance, the unions have failed to organize employees at big retailers, such as Wal-Mart or Costco.

"I think that's what Stop & Shop is saying to the union - either you're going to organize our competitors or you're going to take concessions," Cutler said.

Unions have traditionally said that keeping a company afloat is not their concern; that's a business problem, not a labor problem, Cutler said. On the other hand, "the company's point is either you unionize the competition - bring them up - or make concessions," Cutler said. "Each side has a point."

Although that argument has been raised in the Stop & Shop negotiations, both Cutler and Cotterill agreed that it's not applicable in Connecticut, given Stop & Shop's enormous market share.

"They don't have a leg to stand on here," Cutler said. "They have an enormous market share."

If the state were to gain another 30 or 40 Wal-Mart Supercenters, Stop & Shop might be facing the competition that has plagued grocery stores in other parts of the nation, Cotterill said. But the probability of a significant Wal-Mart invasion is low because Connecticut towns don't typically approve those types of mega-stores, he said.

Stop & Shop "is crying wolf at this point, and the wolf is not here yet," Cotterill said.

But Shop & Stop maintains that its nonunion competitors are making inroads. In response, the company has initiated a series of price cuts to strengthen its strategic position, said Weiner, the company spokeswoman.

Stop & Shop's nonunion rivals include Big Y, Price Chopper, Costco, BJ's Wholesale Club and Sam's Club, said Mark Espinosa, president of Local 919 of the United Food & Commercial Workers Union, which is based in Farmington. And the company's advocacy advertisements have said: "Virtually all our competitors employ non-union labor in their stores, who make contributions to the cost of their health care."

But Espinosa said that for the company to imply that health care costs would put them out of business is irresponsible.

"They continue to expand. If they go belly-up, it wouldn't be because of their employees," he said.

According to union officials, 65 percent of grocery workers in Connecticut are represented by the UFCW. Nationally, 80 percent of major supermarkets are represented by the UFCW, said Jill Cashen, a spokeswoman for the union in Washington, D.C.

Negotiations have also stalled over a union request to reduce the length of time that part-time workers must wait before receiving health care benefits.

Part-time workers, who make up 80 percent of the workforce, aren't eligible for health insurance until they've been with the company for two years, said Brian A. Petronella, president of UFCW Local 371, based in Westport. While they wait, someone has to pay for their health care coverage, Petronella said.

Sometimes that's taxpayers, Petronella said. The lack of sufficient health care coverage has led thousands of Stop & Shop workers and their families to go to taxpayer-funded clinics and hospitals for health care, including the Connecticut Husky program, Petronella said.