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April 23, 2019

Who 'won' Stop & Shop strike?

PHOTO | UFCW Stop & Shop workers, represented by the United Food and Commercial Workers (UFCW), during the recent strike.
By MICHAEL C. BINGHAM

The 11-day strike against supermarket chain Stop & Shop ended Sunday night with a proposed agreement for a new three-year contract with the United Food & Commercial Workers (UFCW). The pact must still be ratified by union membership before it becomes official.

The 31,000 striking workers in southern New England had been without a contract since February.

Reported highlights of the agreement (not yet made public):

• Continued health insurance and retirement benefits

• Continued time-and-a-half pay for current union members who work on Sundays

• Increased regular wages instead of the performance bonuses favored by management

Stop & Shop is owned by Dutch retail conglomerate Ahold Delhaize, the fourth-largest supermarket operator in the U.S. (It also owns the Food LIon and Giant chains outside the Northeast region.) It is also the only major Northeast grocery-store chain with a predominantly unionized workforce.

The walkout, which commenced April 11, is thought to have significantly impacted business at the stores. Many Connecticut Stop & Shop stores restricted business hours during the walkout, while others were closed outright. Shelves emptied as delivery trucks declined to cross union picket lines.

Stop & Shop is the region’s largest supermarket chain, with 92 stores in Connecticut. Some national retail experts estimated the strike was costing the chain anywhere from $2 million a week to $2 million a day in lost revenue — plus an indeterminate measure of market share — to competitors such as Shop Rite.

Retail analyst Burt Flickinger III of the New York consulting firm Strategic Resource Group estimated that the overall tab for the walkout could be upwards of $50 million. This includes both direct and indirect costs such as advertising and marketing efforts to win back customers who declined to cross picket lines during the work stoppage.

Supermarkets are a famously high-volume, low-margin industry. Well managed companies kill themselves to generate 3-percent margins; one percent is more typical, say industry analysts. The most profitable (and predictable) supermarket product lines are dry groceries -- with produce and deli lines subject to unpredictable (and largely uncontrollable) wholesale price fluctuations.

Over the past decade Stop & Shop has carved out a reputation for innovation in an industry whose retail customers value dependability and predictability. It was among the first supermarket chains in the Northeast to introduce online ordering with its Peapod home-delivery product.

Neither fish nor fowl

However, Stop & Shop’s positioning in the grocery market is problematic. It finds itself squeezed between high-priced, high-service grocery retailers such as Whole Foods and Trader Joe’s, and low-cost competitors such as Walmart (which has become the largest grocery retailer in the U.S. by volume), German-owned no-frills retailer Aldi and warehouse clubs such as BJ’s and Costco on the bottom.

Because of that Stop & Shop is “neither fish nor fowl,” said David Cadden, professor emeritus of entrepreneurship and strategy at Quinnipiac University’s School of Business. “They’re in the middle. And sometimes, strategically, that’s the worst place to be.”

Because of its positioning, Stop & Shop’s management was looking to reduce costs and generate more margin, Cadden said. The most obvious avenue to cost-cutting is automation, including technology such as hand-held scanners, robots and self-checkout stations.

But you still need human beings to operate the stores — to interact with customers, answer questions and fix problems. And human beings cost money.

On the other hand, human employees can also drive revenue. “One statistic I’ve seen shows that if you stop at the deli counter and interact with a [human employee], you’re likely to spend $10 more [per shopping visit] than if you’re just buying pre-packaged cold cuts,” said Cadden.

Post-strike box score

“While I don’t know the exact details of the contract, it appears from what the union said that they didn’t lose — and in not losing, they actually won,” Cadden said.

That the UFCW was able to maintain benefits and Sunday pay while negotiating higher average hourly pay from an employer under pressure to roll back costs, “The union actually came out better in this than management did,” Cadden explained.

After nearly two months of fruitless negotiations that began in February when the previous contract expired, the UFCW chose April 11 as the date for the walkout. The timing was not incidental, coming right before Holy Week (the seven-day period leading up to Easter) and Passover, which traditionally are among the busiest weeks annually (along with Thanksgiving and Christmas) in the supermarket business.

Cadden cited data that indicate that as many as 75 percent of Stop & Shop customers respected the picket line and shopped at other grocery stores after the walkout commenced. Flickinger estimated that number to be as high as 90 percent.

The question now becomes whether they will return to Stop & Shop.

Contact Michael C. Bingham at mbingham@newhavenbiz.com

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