Analyst: Strike Pricetag $50M

April 22, 2019

By Thomas Breen | New Haven Independent

A just-ended strike cost Stop & Shop up to $50 million as well as possible customers — which may cost its union as well.

So warns a retail analyst who monitored the dramatic 11-day walkout.

Burt Flickinger III, the managing director of the New York City-based consumer industry consulting firm Strategic Resource Group (SRG), offered that assessment as 31,000 Stop & Shop employees throughout New England ended their 11-day strike and returned to work Monday after reaching a new tentative agreement with the Dutch-owned regional grocery store chain.

Workers won better terms on healthcare, pay, and defined-benefit pension plans in the deal, as well as preserving time-and-half Sunday pay, according to initial reports. (Full details have not been released; a strike vote is scheduled later this week.) And management can finally reopen stores shuttered for nearly two weeks.

Union leaders, workers, and politicians alike hailed the deal as a clear victory.

Flickinger is less sure. He noted that the strike could cost the chain an aggregate of upwards of $50 million, not just in lost operating costs but also in new marketing initiatives needed to win back customers who brought their Holy Week and Passover food business to non-union shops like Wegmans, Walmart, Target, and Whole Foods.

Workers may hurt in the long run too, he said, because Stop & Shop now needs to divert millions of dollars towards strike fallout that could have otherwise been spent on building new stores and hiring new employees.

“It was really a Pyrrhic victory for both sides at the bargaining table,” Flickinger told the Independent on Monday morning. “It wasn’t a total win for either side.”

Organized labor as a whole may see a more undiluted victory, he added, if non-unionized workers at some of the other grocery store chains feel inspired to join unions thanks to the contract successes achieved by this strike.

Joy On Whalley

At the Whalley Avenue store on Monday, workers and customers alike were unambiguously optimistic about the end to the strike and the resumption of work.

They celebrated the tentative agreement as an apparent win for workers in need of quality pay and benefits, and for New Haven customers who can now shop again at a centrally-located grocery store.

“Let me tell you something: I feel ecstatic!” said Leyda McKay, who has worked for nine years in the produce department. “It was never about a raise,” she said about the strike. “It was about maintaining our benefits.” She said she doesn’t know much about the newly negotiated contract, but that she has heard that it is fair.

“We’re good for the next three years,” she said.

Her husband, Mike McKay, was similarly enthused about her wife getting to go back to work, with stable pay and benefits on the horizon. Even during the strike, he said, “these bills, they keep coming.” Now his family can start paying those bills with both he and his wife’s salaries, he said.

“I’m feeling great,” meat counter employee Hazel Stewart (pictured) said with a big smile. She said she had filed for unemployment during the strike, and had had to travel to Walmart to buy her groceries during the strike. “The whole ordeal had me frustrated and overwhelmed,” she said. When she and her daughter got the news of the strike’s end on Sunday night, she said they literally jumped up and down with relief.

Kyle Nixon (pictured), who has worked for two years in the store’s courtesy department, said he got the news on Monday morning that he could return to work that day. “That was very, very hard,” he said about the strike, “wondering how I was gonna pay my bills.”

Ross Mero, a janitor at the West Haven Veteran Affairs hospital who had come by the store Monday morning to do his weekly shopping, asked Nixon if the union had won.

“We fought for it,” Nixon said with pride. “And we won.”

“I was hoping you would win,” Mero said. Even though he had to travel out of the way to ShopRite to get his groceries during the strike, he said, he was still pulling for the union. He said he thought the company was just throwing money away by not agreeing to the union’s terms when he learned that the strike had been costing the grocery store $2 million a day.

“The company to me was just screwing up,” he said.

Tallying The Costs

Flickinger, whose consulting firm specializes in the labor economics of U.S. retail chains and consumer goods, estimated during the strike that the labor lockout was costing Stop & Shop around $2 million a day.

Now that the strike appears to be over, he said, he believes the 11-day shutdown of stores throughout Connecticut, Massachusetts, and Rhode Island may have cost the regional chain between $20 and $25 million in operating losses. That was driven primarily by lost inventory of fruits, vegetables, meat, seafood, and other fresh and temperature-controlled inventory.

“Stop & Shop by our estimates lost 75 to 90 percent of their customers during Holy Week,” he said, “the most important week in the first 15 weeks of 2019 for sales and profits.”

The losses don’t end with virtually no sales over the past 11 days, he said.

“In aggregate, so many shoppers shifted to non-union competition, whether it was Big Y or Walmart or Wegmans or Costco or BJs. We’re estimating that 3 to 5 percent of Stop & Shop shoppers may have been lost for an extended period of time.”

That means that the regional chain will have to boost its marketing to win back those customers who spent their Easter and Passover dollars at other stores.

Those increased promotional efforts could cost upwards of $20 or $30 million extra between now and the rest of the year, he estimated. That adds up to a $50 million aggregate hit to the chain, which for the past 40 years has had one of the best relationships with organized labor of any extant grocery store in the region.

Ultimately, that may hurt the very workers who are returning to work with high spirits thanks to the promise of secure pension and healthcare plans.

“Now instead of having the money to invest in more Super Stop & Shops in the next few years for more union jobs and more jobs, the company will have less money to invest.”

But there may nevertheless be a silver lining for organized labor in general, he said. Non-unionized workers at Target, Walmart, and Whole Foods/Amazon may look to this strike as proof that belonging to a union means better pay and benefits.

“Maybe this will be a catalyst for the team members in those stores to unionize,” he said.

Union, Company See A Win

Buoyed by the prospect of signing a contract later this week with more labor-friendly terms around healthcare, pensions, time-and-a-half pay on Sundays, and salary increases, Jorge Cabrera (pictured on the line), a business representative for the United Food and Commercial Workers (UCFW) Local 919, called the strike a historic success for all working class people.

“This was not only a big victory for our workers,” Cabrera told the Independent Monday, “but for organized labor throughout the region and the country.”

While declining to share the specific terms of the new proposed contract, Cabrera said the union locals will be hosting staff meetings throughout New England later this week to discuss the post-strike contract. The union is strongly recommending that its members vote to approve this new contract, he said.

“We pushed back successfully on some of the more draconian cuts to healthcare and time-and-a-half pay,” he added.

After the union’s announcement on Sunday night of its tentative agreement with Stop & Shop, U.S. Sen. Richard Blumenthal called the news “a victory for all American workers who stand for strong pay, affordable health care, and other basic rights.”

Gov. Ned Lamont and Lt. Gov. Susan Bysiewicz also offered praise for the striking workers in a joint statement issued Monday afternoon.

“We are proud of the women and men of the United Food and Commercial Workers who fought for what they deserve,” they wrote. “These are good jobs that provide fair wages, good benefits, and a secure retirement that are critical to the success of Connecticut’s families. It was great to see so much backing from the community in support of the workers who are simply trying to support their families and earn an honest living. Now, the 31,000 hardworking store clerks, associates, and meat cutters can get back to doing what they love – serving their customers and communities. We know that the bargaining process is not easy, but this is a win for the workers, for management, and for Stop & Shop’s customers.”

Stop & Shop, which has been owned by the Dutch parent company Ahold since 1995, published a host of details about the contract negotiations on the store’s official website. “We have made a fair, responsible offer to the UFCW New England locals and want you to see exactly what we have proposed,” the site’s statement reads. “We encourage you to read our full offers on the Contracts page.”

Tags: Stop & shop strikeBurt FlickingerJorge Cabrera