It’s a dynamic that happens once every three or four years. And while this year’s bargaining is likely to be slightly less intense than in 2019, negotiating new labor deals affecting approximately 26,000 Baltimore-Washington area Giant Food and Safeway clerks and meatcutters is always a stressful process.
On October 28, Giant’s and Safeway’s four-year labor contracts will expire. Negotiations have just begun between the chains and UFCW Locals 400 (Washington metropolitan area) and 27 (Baltimore area, Eastern Shore and Delaware), and after speaking to members from labor and retail management, both are optimistic that a new deal will be hammered out at or near the expiration date later this month.
Unlike 2019, when resolving the decades-old, underfunded pension liability was the focus, this year’s bargaining will center on wages and security (involving retail theft) concerns.
Our union source summarized what’s been happening over the past four years: “We negotiated the last deal just before COVID changed our lives. At that time, it was imperative that we find a solution to our pension issues which were worsening every year and threatening to implode. That bargaining was very difficult, but by creating an entirely new fund we were able to find a solution that satisfied both sides.” Our source added: “Since COVID, every aspect of our lives has become more expensive. And during the pandemic, both Safeway and Giant recorded unprecedented sales and profits. This contract represents an opportunity for our members to share in those rewards and be compensated at current cost of living levels.”
Another key initiative that both sides are prepared to address is the current level of retail theft and the security issues related to shoplifting.
“I’m not certain we can find a solution to this serious problem which has only gotten worse,” said a senior level executive at one of the chains involved in the negotiating process. “We’ve made it clear that we do not want to do anything that could provoke a shoplifter into violent behavior, but I believe that our associates and our leadership can be better prepared to handle the challenges that confront all of us. It’s simply an untenable situation where solutions are hard to find.”
Our labor source agreed, but added, “I would like to see some binding language in our new contracts that address how all parties can collectively work together to, at the very least, be prepared for the worst possible scenario situation. Whether that’s frontline training, shooting drills, or other aspects of preparedness, we need better communications. However, I agree, remedies are extremely challenging. I want assurances that our retail partners fully understand that our members are extremely concerned, even frightened, about security issues in the stores.”
Another issue up for negotiation is the gap between new hires and senior staffers. Our labor source commended Safeway and Giant for closing that wage gap but feels more work needs to be done in making wages more equitable among the various contractual tiers.
In the coming weeks, as bargaining intensifies, we’ll have a better idea if the new contract will yield a three or four-year agreement.
However, the vibes seem positive from both sides, and there’s every reason to believe that new deals will be struck by Thanksgiving, perhaps even by the October 28 contract expiration date.
‘Round The Trade
Marc Lore, founder of jet.com and diapers.com, has added a new investment to the portfolio of Wonder Group, his newest venture. Lore will purchase meal kit solutions firm Blue Apron for $103 million ($13 per share) in cash, a huge win for Blue Apron shareholders who have seen the company earn a profit and whose sales have declined over the past few years. Stock was trading at about $6 per share when the deal was announced. I know Lore has worked “wonders” in the past, but resurrecting this loser could become his greatest magic trick ever.
Some numbers to report for two different kinds of wholesalers that are moving in opposite directions. On the upside remains Costco, which has posted “best in industry” financials dating back to early 2020. In a noticeably more difficult economy to navigate, the Issaquah, WA club operator saw U.S. comp store revenue increase 3.8 percent (ex-gas) and earnings rise to $2.2 billion, or $4.86 per share, compared with $1.87 billion, or $4.20 per share a year earlier, in its recently completed Q4. Other positive metrics included a 5 percent gain in traffic at its U.S. stores and a year-over-year membership fee increase of 13.7 percent to $1.5 billion in Q4. Additionally, overall membership continued to grow in the fourth quarter with 71 million cardholders, a 7.9 percent rise from the corresponding period in 2022.
One other anecdotal note about Costco: its 1-ounce gold bars (which are priced at $2,000) have been selling so rapidly that the company has placed a two-bar limit on purchases. While Costco has always been a straight-ahead promoter that shies aways from gadget merchandising, I’d suggest a promotion which may (or may not) induce even more excitement. Why not offer Costco members the Sen. Bob Menendez gold bar special? For $70,000, you can purchase a one kilogram gold bar and be eligible to enter the Menendez Family Sweepstakes where the winner would receive a 2019 Mercedes Benz. On second thought, I don’t think Costco would be interested.
At UNFI, the balance sheet reads much differently. In its fourth quarter, which ended on September 7, the Providence, RI-based wholesaler once again produced horrible numbers. The standout red number was its $68 million loss. “Our fourth quarter concluded a challenging year in which we continued to emphasize serving customers and suppliers, and we also worked diligently to improve operating effectiveness, efficiency and our technological capabilities. While we grew sales across all of our customer channels, profitability declined primarily due to a decrease in inflation driven procurement gains and elevated shrink. We expect further headwinds as we continue to cycle elevated inflationary benefits during the first half of fiscal 2024,” said Sandy Douglas, UNFI’s CEO who was recruited from Staples to become chief executive in 2022.
Douglas added: “As we look to the new fiscal year, we’re focused on addressing near-term profitability while creating a structurally more efficient technology-enabled food retail services company that can better serve our customers and capitalize on the significant growth opportunities we see ahead. To that end, we’ve already captured nearly $100 million of near-term value creation initiatives, and we now expect to drive full year operating margin benefits in fiscal 2024 of nearly $150 million from these actions. We’re continuing to invest in our supply chain and technology infrastructure to improve our cost structure and enhance the customer and supplier experience. We’re confident that combining our industry leading position with a more dynamic and nimble UNFI under the guidance of our newly refreshed board puts us on a strong path to drive meaningful and sustainable long-term shareholder value creation.”
Rah, rah, rah – the fact is that Douglas himself predicts next year’s loss to be in the range of $36 million to $110 million. What’s even more concerning is feedback from nearly a dozen UNFI independent customers who complain that its field leadership has declined and its private label programs are not competitive.
One more UNFI note: Chris Testa, president of the company, who first joined UNFI in 2009, has departed. Testa was a holdover from the Steve “The Spinmeister” regime. Douglas will now also assume his duties.
And now it’s time to finally say bye-bye to former three-time Starbucks CEO Howard (“Humble Howie”) Schultz. While Schultz stepped down as chief executive in March, he had remained on Starbucks’ board. Now he is leaving for good. “I look forward to supporting this next generation of leaders to steward Starbucks into the future as a customer, supporter and advocate in my role as chairman emeritus,” Humble Howie said in a statement. While I acknowledge that Schultz was literally the straw that stirred Starbucks to great success, that can’t totally override the disgraceful behavior he demonstrated in his recent return engagement as CEO. And one last thought: don’t let door hit your ass on the way out, Howie.
Local Notes
While 7-Eleven remains the number one convenience store retailer in the U.S., regional stalwarts Wawa and Sheetz continue to set the pace in the Mid-Atlantic. Both c-store chains have been on aggressive expansion paths during the past couple of years and those plans are continuing. For Wawa, that means adding 60 stores in Ohio over the next 8-10 years with the first stores slated to open in mid-2025. The Wawa, PA-based company, which cut the ribbon at its 1,000 th store earlier this year in Oaklyn, NJ, also has plans to open c-stores in Indiana, Kentucky, Tennessee, Geogia and Alabama, all new markets, over the next five years. At Altoona, PA-based Sheetz, which has operated c-stores in Ohio for several years, the company plans to build a new $145 million distribution and food preparation facility in Findlay, OH. Sheetz also plans to expand its base into Michigan in the next two years. More locally in Maryland, Sheetz recently opened its first store in Montgomery County (Gaithersburg) and also debuted in Cecil County (Elkton), which would be the easternmost location for the company. On a grander scale, the family-owned regional chain celebrated the opening of its 400th store last month, a 5,700 square foot unit in Chambersburg, PA
This month’s commonsense award goes Kraft/Heinz for reversing their boneheaded decision made earlier this year to rename its iconic vehicle as the “Frankmobile.” Obviously, smarter heads prevailed and after only four months, the company will once again be trotting out its “Wienermobile.” The “Wienermobile” dates back to 1936 and is an instant attraction wherever it is parked. As for the “Frankmobile,” I think the marketing whiz who thought that a name change was in order is probably looking for a new job on the production line.
llya Kuryakin and Ducky Mallard are dead. Both roles were played by memorable character actor David McCallum, who passed last month. In my early teen years, when my mind was overloaded with television (causing permanent brain damage I believe) McCallum appeared as the Russian sidekick to Robert Vaughn’s Napolean Solo on the hit show “The Man From U.N.C.L.E.” (1964-1968). The duo became an enigmatic pairing with the suave and clever Vaughn solving espionage cases alongside the taciturn Russian. This was heady stuff for a 13-year-old, and U.N.C.L.E. became one of my favorite shows. Thirty-five years later, McCallum struck gold again, appearing in 457 episodes of the popular crime show “NCIS.” His role as the bespectacled, eccentric and bow-tied medical examiner Donald “Ducky” Mallard lasted until his death. In between, McCallum appeared in 129 other TV shows and films. He was also a skilled musician, which stemmed from his parents, who were members of the Royal Philharmonic Orchestra in London. And, during his halcyon days at U.N.C.L.E., McCallum used his popularity status to record several albums. A very fine actor, David McCallum was 90 when he passed.
It is with sadness that I report the passing of Brooks Robinson, the legendary Hall of Fame third baseman for the Baltimore Orioles who died late last month at the age of 86. Robinson joined the Orioles in 1955 and in a 23-year career he played in 18 straight All-Star games, won 16 consecutive Golden Glove Awards and still holds the major league record for most putouts, assists, double plays and lifetime fielding percentage (.971). He was also the American League MVP in 1964 and the 1970 World Series most valuable player, where he gained national fame for his fielding prowess. Baltimore is a rather small community. As such, I was fortunate to meet Brooks at many trade and community events. His kindness and humility were genuine, and that is why he was so admired by so many inside and outside of baseball. Perhaps Gordon Beard, author of “Birds On The Wing: The Story Of The Baltimore Orioles” offered the best description of Brooks’ low-key but powerful presence: “Brooks never asked anyone to name a candy bar after him. In Baltimore, people name their children after him.”
