The International Longshoremen’s Union (ILA) agreed to suspend their three-day strike at 36 U.S. East Coast and Gulf ports and go back to work immediately. Not settled is some key language the union is seeking as it continues to bargain with the U.S. Maritime Alliance (USMX) over a new six-year deal which will be extended until January 15.
What was agreed to was that the 47,000 longshoreman who walked off their jobs on October 2 will receive a 62 percent hourly increase over the life of the next contract. Compensation will increase from $39 an hour to $63 an hour.
Led by bellicose and profane ILA 78-year-old president Harold Daggett (“We’ll shut them down”), the ILA had originally demanded a 77 percent pay raise (to $69 an hour) for most of its associates.
“We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve,” Daggett said when the strike began, reminding us that the memory of Lee J. Cobb’s portrayal as union leader Johnny Friendly in “On the Waterfront,” still survives.
Just because the dockworkers are back on the job doesn’t mean getting a new six-year deal completed by January 15 will be a walk in the park.
Still unsettled is the ILA demand that all automation on the docks be contractually banned (a ridiculous notion). Also still to be negotiated is the ILA’s insistence that “container royalties” – a union welfare plan that compensates longshoremen whether they work or not – be increased. Higher starting rates for new hires are also on the bargaining table.
Even though the two sides hadn’t officially met since June, some back-channel negotiating (including a push from the Biden administration) helped narrow the gap enough so that the ILA felt comfortable to allow their dockworkers to return to their jobs.
The three-day strike did have an economic impact, however. It’s estimated that the walkout, the first by the ILA since 1977, cost as much as $4.5 billion a day.
As for food products, a check on about a dozen supermarkets during the strike period indicated that there were some declines in service levels in produce departments (mainly tropical fruits, specifically bananas), but almost all retailers were more than adequately supplied to serve their customers.
Certainly, retailers and suppliers learned a painful lesson from the catastrophic effects of COVID and how it wreaked havoc with supply chains. This time they were better prepared, planning for the worst and also implementing contingencies when the strike began.
That’s not to say retailers won’t once again be the target of criticism when the cost of the job action and subsequent new expensive contract leads to price hikes.
I urge Lina Khan, Kamala Harris and Elizabeth Warren (and others) who are always quick to scapegoat retailers to put in the necessary work to understand the complexity of the grocery business and how a dockworkers strike, an avian flu epidemic, increased labor and insurance costs and retail shrink (just to name a few) can impact pricing.
‘Round The Trade
And speaking of Lina Khan, the New York Times published an interesting “Q&A” with FTC chairwomen on the day that her initial three-year term expired. While others disagree that she’s frequently overreaching beyond the scope of her job, the 35-year-old Yale law school graduate views her role as “restoring the role of robust, active antitrust enforcement in a legal and economic system that for too long has let those regulatory muscles atrophy to the detriment of consumers and healthier market competition.” She added: “My role is not one of a policymaker saying thumbs up, thumbs down on a merger.
We enforce the law. I get it. There are probably deal-makers out there who wish we didn’t have the antitrust laws.” And in seemingly an indirect reference to the ongoing Kroger-Albertsons merger battle with the large federal agency, Khan noted, “I also think it’s interesting that over the last couple of decades, there have been a set of case studies on mergers that were permitted to go through on the basis that there would be efficiencies passed on to consumers, or to other market participants. A lot of times, those efficiencies don’t actually materialize, and when they do, if you don’t have sufficient competition in the market, the companies are not going to have an incentive to pass those efficiencies on to everybody else. If you’re not enforcing antitrust, you’re allowing decades of consolidation that can create inflationary spikes more readily, because your system as a whole is less resilient to that disruption.”
BTW, just because her term has expired, don’t expect Khan to be voluntarily stepping down soon. Of course, the upcoming presidential election could quickly change her status.
If you’ve been reading this column for the past few months, you’ve probably noted my criticism of the performance of the country’s largest drug chains, particularly Walgreens and Rite Aid. The largest of those merchants – CVS – has escaped some of my reproval because its parent company, CVS Health, continues to perform decently. However, after the Woonsocket, RI-based firm announced late last that it will lay off 2,900 at all of its units, it became clear that all three drug chains continue to be clueless on how to staunch the bleeding.
And while CVS’ problems impact all of its divisions, the fact remains that when it comes to retailing, Rite Aid, Walgreens and CVS are awful at their craft. And there’s potentially worse news for CVS, as the FTC (we told you Lina Kahn and her acolytes are very busy) officially sued the “big three” pharmacy benefits managers which includes CVS Caremark. The lawsuit is a follow up from the federal agency’s critical report of PBM practices issued in early July.
The FTC alleges that the three PBMs created a perverse drug rebate system that prioritizes high rebates from drug manufacturers, leading to artificially inflated insulin list prices. The complaint charges that even when lower list price insulins became available that could have been more affordable for vulnerable patients, the PBMs systemically excluded them in favor of high list price, highly rebated insulin products. These strategies have allowed the PBMs and GPOs (group purchasing organizations) to line their pockets while certain patients are forced to pay higher out-of-pocket costs for insulin medication, the FTC’s complaint alleges.
“Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed,” said Rahul Rao, deputy director of the FTC’s Bureau of Competition. “Caremark, ESI, and Optum -as medication gatekeepers – have extracted millions of dollars off the backs of patients who need life-saving medications. The FTC’s administrative action seeks to put an end to the Big Three PBMs’ exploitative conduct and marks an important step in fixing a broken system – a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers.”
A few days after that legal filing, the U.S. Justice Department (which oversees the FTC) sued Visa. The suit alleges the large credit card company illegally maintained a monopoly over debit network markets by using its dominance to thwart the growth of its existing competitors and prevent others from developing new and innovative alternatives. According to the complaint, more than 60 percent of debit transactions in the United States run on Visa’s debit network, allowing it to charge more than $7 billion in fees each year for processing those transactions.
The complaint further alleges that Visa illegally maintains its monopoly power by insulating itself from competition, noting, “Visa wields its dominance, enormous scale, and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks. These agreements penalize Visa’s customers who route transactions to a different debit network or alternative payment system.” In so doing, the complaint alleges, Visa locks up debit volume, insulates itself from competition, and smothers smaller, lower-priced competitors.
Visa also induces would-be competitors to become partners instead of entering the market as competitors by offering generous monetary incentives and threatening punitive additional fees. As the complaint alleges, Visa coopted the competition because it feared losing share, revenues, or being displaced by another debit network altogether. “We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” said Attorney General Merrick B. Garland. “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa’s unlawful conduct affects not just the price of one thing – but the price of nearly everything.”
Obviously, Visa will use its mighty financial and political clout to fight this aggressively. However, to grocery retailers, this litigation at the highest level is the right thing to do. And much like The suit against PBMs, it’s time to go after companies that have cleverly and systemically used their might to rip off merchants and customers for decades.
A rare mediocre quarter (by some standards) for Costco. Actually, the numbers were very good, just not quite at the level of the Issaquah, WA-based club operator’s stellar growth over the past few years as well as not being in line with the predictions of financial analysts. Total sales were up 1 percent in Q4 (ended September 1) to $78.2 billion. Comp store revenue remained among the best in the industry, gaining 5.4 percent. With Costco’s increased membership fee kicking in on September 1 and its continued revenue consistency, look for a quick return to dynamic results beginning in Q1 of fiscal 2025.
While Costco has been a great performer for decades, UNFI has not. The beleaguered wholesaler/retailer posted improved sales and earnings in its fourth quarter ended August 3. After awful post-COVID financial results, the Providence, RI-based company posted a net sales increase of 10 percent to $8.2 billion, helped by an extra week in its fiscal year and lowered its comparative Q4 loss from $68 million to $37 million. I’ll give UNFI credit for becoming more internally efficient (as proven by its financial results). However, a $37 million net loss for 13 weeks is still poor, and more intangibly, the company’s perception of many of its Mid-Atlantic customers remains below average. When those independents tell me that UNFI has improved their private label program, its competitive pricing structure and its customer service levels with those independents, then I’ll change my perception, too.
A few more thoughts on the awful situation surrounding Boar’s Head. With even more deaths and illnesses stemming from the listeria breakout at the company’s Jarratt, VA plan in August, Boar’s Head needs to go. Maybe not the brand (although resurrecting that once highly desired name will take a miracle), but company ownership needs to be flushed. While the deli processor has now permanently closed its Jarratt plant, management’s weak response to dealing with a catastrophic event like this makes it obvious that the clandestine leadership team at the Sarasota, FL-based company need to be replaced and held criminally liable. And the USDA, which publicly acknowledged all the violations at that south-central Virginia, should also be held liable, because submitting distressing inspection reports and taking more direct action clearly aren’t connected in this case. Off with their heads!
Local Notes
Whole Foods officially opened its first “Daily Shop,” the natural and organics retail’s newest attempt at mastering the small store format. The site of the initial 9,100 square foot location is on 3rd Avenue (near 69th Street) in Manhattan’s tony Upper East side. Other Manhattan “Daily Shops” are slated for Stuyvesant Town (East Village) and Hell’s Kitchen (8th Avenue & W. 50th Street). Sources tell us that two other, yet undisclosed Manhattan locations are slated for the company’s newest format. Meanwhile, parent firm Amazon quietly closed three of its five “Amazon Go” cashless c-stores in Manhattan.
Shuttering late last month were “Go” units on 42nd Street, Rockefeller Center and on Liberty Street. That leaves Amazon with two remaining stores on the island – Vesey Street and E. 53rd Street. Even though Amazon claims it is still committed to the “Go” format, I’m hard-pressed to believe that the concept has long-term legs in any major city.
Also opening this month in NYC will be a new Lidl store on Exterior Street in the Bronx. And the German discounter, whose U.S. headquarters are based in Arlington, VA, will open another Big Apple limited assortment store on Grand Street in lower Manhattan, That 23,000 square foot unit is slated to open next summer.
Kudos to Bill Mayo, formerly Wakefern’s chief administrative officer, has been named Save A Lot’s chief operating offer reporting to SAL CEO Fred Boehler. Mayo, who worked for Wakefern for 29 years, joined the St. Louis area discounter earlier this year as chief development officer. His promotion is part of a restructuring that included the retirement of Trey Johnson (ex-Albertsons) as chief marketing, merchandising and sales officer. Mayo’s new duties include oversight of merchandising, marketing, sales, retail operations and new business development.
With Mayo supervising so many of the company’s duties, I wonder what Boehler’s job will be. Satisfying the frustrations of some of its larger members would be a good start. Additionally, SAL announced that it will open a Brooklyn micro fulfillment center. Although it currently only operates one store in the five boroughs of NYC (on 9th Street in Brooklyn), the discounter is partnering with automated solutions company Fabric and last-mile delivery firm Uber Eats, to provide direct-to-consumer service from a new facility both parties recently opened in Brooklyn.
Weis Markets has agreed to acquire Sunnyway Foods’ two stores in Chambersburg, PA and Greencastle, PA. The Central PA independent, which was owned and operated by the Martin family for more than 69 years, will briefly close and then reopen under the Weis banner. “Sunnyway Foods, the Martin family and its associates are known for their service and dedication to their communities,” said Jonathan Weis, chairman and CEO of Weis. “As a company with a strong local focus, our goal is to build upon this strong foundation. We look forward to interviewing the associates of these stores for employment with our company.”
Kudos to Cyndi Ireland, daughter of my late, great partner Dick Bestany. Cyndi was recently promoted to VP-sales at Just Ice Tea where she will expand her role from overseeing conventional and mass channels to now also being responsible for national DSD and grocery channels. Just Ice Tea is part of the Eat the Change organization founded by Seth Goldman who also began Honest Tea before selling it to Coca-Cola in 2011.
From the obit desk this month, it’s with sadness that I report the passing of Bill Riley, 81, former owner of large food brokerage firm Joseph W. Riley, which for many years was based in Haverford, PA. The brokerage was started by his dad Joe Riley in 1952 and later run by Bill and his brother Pete (it was sold to Crossmark in 1999). Although Bill did not have the “larger than life” personality of his younger brother, he was a valuable piece of an organization that thrived for nearly 50 years. On a personal note, I found Bill to be very cerebral and very funny in an acerbic way. He was a good man who will be missed.
Also leaving us during the past month was Kris Kristofersson, one of the greatest songwriters of the past 60 years and a notable actor and singer as well. A former Army officer and Rhodes scholar (a highly unlikely combination), he declined an offer to teach at West Point, opting instead to try to become a songwriter in Nashville. His first job was sweeping floors at Columbia Records. However, Kristofersson kept working at his craft before writing a best-selling song – “For the Good Times” – for country crooner Ray Price in 1970. He quickly followed up with iconic songs that were covered by Johnny Cash (“Sunday Morning Coming Down”) and Janis Joplin (“Me and Bobby McGee”). During this time, Kristofferson also landed a recording contract and became a popular concert act. He also acted in more than 115 TV shows and films including his best-known role as Barbra Streisand’s co-star in a remake of “A Star is Born” (1976). My favorite Kristofersson part was as Billy the Kid in Sam Peckinpah’s “Pat Garrett & Billy the Kid” (1972, one of his first movie roles). In that flick, other rock stars including singer Rita Coolidge (his wife at the time) and Bob Dylan, were prominently featured. A cool, classy dude with a boatload of talent, Kris Kristofferson was 88 when he died.
Pete Rose, a man who would never be considered a humanitarian, has died at the age of 83. From the view of many, Pete Rose was only good at one thing: playing baseball. But let’s give him his due, he was one of the greatest ballplayers of all time. The Cincinnati native owns many Major League records including most all-time hits (4,256), most games played (3,852 over 24 seasons) and most singles (3,215). He was National League Rookie of the Year in 1963, NL MVP in 1975 and World Series MVP in 1975. And (deep in the trivia archives) Rose was the only major leaguer to play in more than 500 games at five different positions (1B, 2B, 3B, LF and RF). He won three batting titles and retired with a career batting average of .303. But there was this gambling thing when he managed his original team, the Cincinnati Reds. Betting on baseball is cardinal sin numero uno in the MLB manifesto and his actions crushed his reputation and got him banned from baseball for life and unable to gain entry into the Hall of Fame. My opinion on whether Rose should gain access to the HOF has changed over the years. While baseball considers gambling by a player, manager or executive to be the most heinous of transgressions, Rose did not “cheat” in the same manner as Mark McGuire, Sammy Sosa, Roger Clemens and Barry Bonds (all not in the HOF either) as he didn’t illegally alter his body to gain an advantage. And I’m not giving Rose a pass for his inveterate gambling – he deserved his banishment and the subsequent criticism that he endured for the rest of his life. But now that’s he’s dead, his pure on the field achievements should be recognized. Put him in Cooperstown but let the inscription on his plaque state details of his on-the-field greatness as well as his immoral behavior.
On the other side of the baseball credibility realm is Luis Tiant, one of the most talented and entertaining baseball players in my lifetime. “El Tiante” passed away earlier this month at the age of 83. Leaving his family in Cuba, where his father was also a great pitcher, Tiant first pitched in the Mexican League in 1959. He made his major league debut with the Cleveland Indians in 1964, shutting out the Yankees (a World Series team that year) on four hits with 11 punchouts. He will always be remembered for his performance in what I believe is the greatest World Series of all-time – the 1975 fall classic between the Red Sox and Reds. Tiant pitched a shutout in Game 1 and a complete game 5-4 victory in Game 4, when he threw an astonishing 163 pitches and held on to a one-run lead for five innings. He started again in the memorable Game 6, pitching seven innings in what turned out to be a 12-inning 7-6 Red Sox win that ended with a dramatic Carlton Fisk home run. In his 19-year career, Tiant won 20 or more games four times and threw 187 complete games. And his on-field antics, merited this description by the New York Times: “…he was one of the game’s memorable showmen, distinctive in almost every way – from his Fu Manchu mustache, barrel-shaped torso and ever-present mammoth cigar (ever-present, that is, except on the field, including in the locker room shower) to his dizzying repertoire of breaking balls and delivery angles, as well as perhaps the most elastic, twisty-turny windup in history.” Tiant is currently not in the baseball Hall of Fame but should deserve strong consideration with the Veteran’s committee. After all, he won more career games than Cooperstown inductees Don Sutton, Don Drysdale, Lefty Gomez or Dizzy Dean and he hurled more shutouts (49) than Roger Clemens, Whitey Ford, Catfish Hunter, Sandy Koufax or Bob Feller. And only one active pitcher – Mark Verlander, with 241 career wins (and a lock to be inducted) – has more career victories than “El Tiante.”
Death in the Hamptons? Or as Willie Nelson (one of Kristofferson’s bandmates in The Highwaymen) once sang, “Turn out the lights, The party’s over….” The party is indeed over for Kmart. The once-iconic American retailer will close it last U.S. big box store in Bridgehampton, NY on October 20. Cause of death was ineptness and apathy leading to horrific retailing. Contributing to the company’s passing were former Kmart executives Charles Conaway and Mark Schwartz and current Kmart (TransformCo) chairman “Slow Eddie” Lampert. Death was slow, painful and predictable.