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Thursday, October 14, 2004

Other groceries ready to embrace customers


If Kroger workers strike, the competition's ready

By Randy Tucker
Enquire staff writer

[photo]
Kroger workers are shown striking in May, 1971, in this archive photo taken by Mark Treitel.
Enquirer file

As Kroger management and labor leaders in Greater Cincinnati gird for a possible replay of the costly strike and lockout in Southern California earlier this year, local competitors are poised to reap the spoils of war: new customers.

"A great example of what might happen in Cincinnati is what happened in Southern California last year,'' said Mitchell Corwin, an equity analyst who covers Kroger Co. for Chicago-based Morningstar Inc. "Customers found alternative places to shop, and they stuck with those places. The grocers have spent a lot of money trying to get those customers back since the strike ended, but they've lost many of those customers for good."

The Southern California labor dispute between the United Food & Commercial Workers Union and the three biggest grocers in the area - Kroger's Ralphs division, Safeway and Albertsons stores - cost the chains an estimated $1.5 billion in sales.

More than 70,000 workers at more than 850 stores were affected.

Both management and labor leaders in Greater Cincinnati seem eager to avoid a repeat of the costly work stoppage.

But Kroger may be willing to bear the consequences of a strike to level the playing field with non-union competitors, especially Wal-Mart, which has begun an aggressive expansion in the market. Wal-Mart and other non-union grocers can offer lower prices than Kroger because their payroll and health care costs are often a fraction of what Kroger pays its unionized workforce.

"They (Kroger) are trying to balance their long-term survival with the short-term issue of a possible strike,'' Corwin said. "But the cost issue is the more significant issue for the grocery stores. They're willing to endure a strike, because if they don't get their costs down, nothing else they do really matters."

KROGER WALKOUT
Kroger union vote OKs strike
Other groceries ready to embrace customers
Q&A: Stores will remain open
If Kroger workers do walk off the job, the grocer plans to keep its stores open. But some customers may decide not to cross the picket lines.

The competitors say they're not positioning themselves to take advantage of Kroger's problems but are simply preparing for a possible major shift in market conditions that they would be foolish to ignore.

"We're not in a dogfight,'' said John Zimmerman, a spokesman for Meijer, Greater Cincinnati's No. 2 grocer.

"We'd like to get (customers shut out in the event of a strike) in the door to see what we have to offer, but we try to do that every day. We let the products in our stores speak for themselves."

Zimmerman and Rabe said neither of their companies has stepped up advertising or promotions to draw Kroger shoppers.

Neither the No. 3 grocer in Greater Cincinnati, bigg's, nor grocery giant Wal-Mart, which has begun an aggressive expansion in the market, could be reached for comment Wednesday.

But Morningstar's Corwin said all Kroger's competitors must be salivating .

"Grocery sellers don't make a lot of money on each item they sell, so they have to sell a large volume of products to be successful," he said. "Kroger's competitors are looking at an instant increase in volume if the workers go out on strike."

E-mail rtucker@enquirer.com




KROGER WALKOUT
Kroger union vote OKs strike
Other groceries ready to embrace customers
Kroger customers still could buy groceries, drugs, use bank

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