Giant's labor image is pushed Competition raises stake in contract talks

January 26, 1997|By Liz Bowie | Liz Bowie,SUN STAFF

In 1990, Giant's truck drivers went on strike for wage increases. A few hours after the walkout began, founder Israel Cohen arrived at a store, saw the pickets, and immediately ordered the negotiators to give the drivers what they wanted -- to the penny.

Giant Food Inc.'s image had always been that of a solid union company, negotiating more than 40 union contracts covering about 24,000 of its 28,000 employees. Its labor costs were among the highest in one of the most expensive regions in the country. And many workers -- from the supermarket's tough-talking truck drivers to its polite store clerks -- saw the region's largest grocery chain as a "family company" run by an entrepreneur who believed that well-paid employees would build a quality operation.

But the 35-day strike by 320 Teamster truck drivers that ended last week showed how much this union-friendly company is willing to endure to ensure it can be flexible and competitive. It also foreshadowed what could be a rough road ahead for Giant and its unions.

In just weeks, Giant will begin negotiating again, this time with 150 dairy workers, members of Teamsters Local 246, whose contract expires February 22.

Contracts with two bakers' locals expire in May, followed by a fourth with more than 1,000 warehouse workers, the Teamsters Local 730, in the fall.

And although his union's contract talks are several years off, Buddy Mays, president of Local 27 of the United Food and Commercial Workers, is already wary.

"Do I see problems in the future?" he said. "Absolutely, because it is a changing industry."

In fact, analysts say, it is the radical changes in the industry that have changed the company's tone -- not Izzy Cohen's death in November 1995 and the subsequent sale of a 49 percent stake to a British grocery chain, J Sainsbury PLC.

"The competitive environment was very different in the 1970s and 1980s," said Edward F. Comeau, an analyst with Donaldson, Lufkin & Jenrette in New York.

Pro-union atmosphere

Wage and benefit increases negotiated at the table during those decades could be easily passed on to consumers. It was in such an atmosphere that Giant's truck drivers reached their current level of compensation -- $40,000 to $80,000 a year in wages and benefits.

Today, the marketplace is far more competitive, said Jeff Metzger, publisher of Food World, a trade magazine. "There are more nonunion operators, and they are coming in with very deep pockets," he said.

Discount stores now sell groceries. Local nonunion chains have grown, Food Lion has made inroads around Baltimore and Washington and warehouse clubs are doing millions of dollars in business.

In addition, stores that sell prepared foods, such as Boston Market, are chipping away at the grocer's market share.

"These are companies that aren't here on a four-store basis," Metzger said. "They have made an effort to build their market share."

Until recently, Giant Food has had little to worry about. Its nearest competitors in Washington and Baltimore have been glimpses in its rear-view mirror -- just the way Cohen liked it.

In Baltimore, where Giant has about 70 of its 174 stores, Giant commands 28.8 percent of the market. The second largest chain is Metro with 9.61 percent, followed by Super Fresh with 8.02 percent, according to Food World.

In Washington, Giant has 44.87 percent of the market, a larger percentage than in Baltimore, but it faces a much stronger competitor in Safeway, which has 27.06 percent of the market.

So it was not surprising that when Safeway renegotiated a contract last June with Teamsters Local 639 that reduced its labor costs, Giant got worried.

Safeway cuts pay

Safeway cut its truck drivers' pay to $27.89 an hour in wages and benefits -- 68 cents an hour less than Giant's cost. And it won the right to use subcontractors to distribute some goods to its stores -- a concession Giant coveted as it planned to expand into the Delaware Valley.

"Locally, Giant was out on an island," Metzger said.

Comeau believes that had Cohen faced the same competitive situation, he would have insisted on the company having "control over its own destiny" -- even if it meant a strike.

"It isn't that Izzy wouldn't take a strike," Comeau said. "Izzy was an ornery character. He loved his company. He loved his employees. But there wasn't a person anywhere who could tell him how to run his business."

Mays, the UFCW local official, said the unions recognize that they will have to make concessions to keep Giant competitive. In fact, his union already has, agreeing in the current contract to create a lower-wage scale for new hires.

With a Sainsbury takeover of Giant likely in the future, he predicted one of the major issues to hit the bargaining table will be job security.

"We want to protect all our jobs," he said.

In addition, it became clear that union solidarity still counted.

Union warnings

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