To compete in a nonunion world, Stop & Shop must first win over its unionized workers

April 21, 2019

By Stephen Singer | Hartford Courant

Before Stop & Shop can return to the field and compete for customers with rival nonunion food and grocery retailers, it must first win over its unionized workers apprehensive about rapid change in the supermarket industry.

The Quincy, Mass.-based chain, sidelined by a strike by the United Food and Commercial Workers union, faces competitors unfettered by union contracts and negotiated work rules. Nonunion players in the supermarket industry include Walmart, Target, Aldi, Trader Joe’s and Whole Foods, which offers discounts linked to Amazon Prime memberships.

Union and nonunion alike, Stop & Shop and its competitors must contend with sweeping changes in technology and consumer tastes that are reshaping the industry.

All are jumping into online retail in response to customers who want to avoid navigating parking lots and supermarket aisles. Stop & Shop and its rivals also are looking to more broadly apply automation in stores, such as self-checkout, and in warehouses, raising fears among workers of lost jobs.

And with its rivals, it faces competition from meal preparation startups catering to new customer tastes.

But unlike the competition, as Stop & Shop negotiates its way through the evolving industry, it must hammer out with the UFCW — sometimes a partner, now a bitter foe — contract provisions that govern pay, how to allocate rapidly rising health care costs and funding for worker pensions, a nearly unheard of private-sector benefit.

Stop & Shop announces on its website that it’s the “only fully unionized large supermarket company in New England.” President Mark McGowan said the company’s contract proposals maintain a “responsible balance in rewarding our associates, protecting jobs and serving our customers in a dramatically changing, mostly nonunion environment.”

Burt Flickinger, an industry analyst, said the dominance achieved by Walmart transformed what had once been a broadly unionized marketplace.

“There’s nothing left of Shaw’s, A&P, Pathmark, Waldbaum’s, Tops and Grand Union,” he said. “The Walmart bear is eating all the union competition.”

The dispute between Stop & Shop and the UFCW, which have been negotiating a labor contract since mid-January, escalated April 11 into a strike by 31,000 workers in Connecticut, Massachusetts and Rhode Island. About 240 stores are nearly empty, staffed by some replacement workers and managers and drawing few customers deterred by a wall of union resistance in the form of picket lines.

“This is a painful fight,” Mark Espinosa, president of UFCW Local 919, said in a video to strikers.

The length of the strike would be second only to a southern California supermarket walkout in 2003–04, said Flickinger, managing director of Strategic Resource Group, a consumer research organization. That strike, waged by the UFCW against several supermarket chains involving 70,000 workers, lasted five months.

Employers and employees paid a high price: Vons, owned by Safeway, closed more than 50 stores over the following 10 years as customers switched to different grocery stores and never returned, he said.

“It gave Walmart the wedge to get into southern California,” Flickinger said.

“Even if they settle tonight, Stop & Shop could lose 5 percent (of customers) and never get it back,” he said. “Nonunion competitors will be dancing on the tables.”

Competitors such as Highland Park Market, ShopRite and Big Y are already benefiting from the strike, with its impact visible in photos posted on Twitter of nearly empty parking lots at Stop & Shop supermarkets. In contrast, Highland Park in Farmington reported a 50 percent increase in business last week over the previous week, said Evan DeRousse, assistant store manager.

“We welcome all Stop & Shop customers and hope to convert a few of them to keep them coming back here,” he said.

The U.S. is the biggest market segment for Stop & Shop’s Dutch parent company, Ahold Delhaize. Its brands generated 2018 revenue of more than $44 billion.

The UFCW and its striking members point to Ahold’s profit of about $2 billion last year as evidence it can sweeten its proposals. But Flickinger said it took on “massive losses” competing with Walmart as the retail giant expanded in the South, partly helped by government-financed economic development aid.

Other constraints are at work. Industry profitability was expected to increase “only slightly” from 2013 to 2018 due to high consolidation costs and stiff price competition, according to a December report by IBISWorld, a research group.

Competition is intensifying as customers turned to warehouse clubs and supercenters, such as Costco and Walmart, because of cost savings and convenience, it said.

“Consumers also shifted toward limited assortment and fresh format stores like Aldi and Trader Joe’s that provide a simpler layout and primarily sell less costly store-brand products,” IBISWorld said.

Another competitive threat looms as Amazon plans to open 2,000 Amazon Fresh stores in the United States by 2026, many of which will operate without traditional check-out lines, the research report said.

And the rise of younger shoppers over time is expected to accelerate the transformation of online grocery shopping, some analysts say.

It helps explains why Stop & Shop spent $70 million for a makeover of 21 supermarkets in the Hartford area last year. A wider choice in produce, frictionless checkout that uses mobile pay for a quicker exit and other changes are intended to better compete with the chain’s rivals and hold on to customers who have no shortage of choices.

As Stop & Shop and the UFCW negotiate, Greg Clauss, a union shop steward and produce clerk recently on the picket line outside a Stop & Shop in East Hartford, acknowledged the power play at work in a walkout that’s lasted longer than many workers expected.

“We flexed our muscles when we went on strike,” he said. “Now they’re flexing their muscles by making us be out here.”

Stephen Singer can be reached at ssinger@courant.com.