The tentative contract agreement reached on Wednesday between Stater Bros and the United Food and Commercial Workers representing over 12,000 of the stores’ employees will benefit employees but result in an increase in the prices shoppers will pay at San Bernardino-based grocery chain’s supermarkets.
There has been agitation among grocery store workers in Southern California for months. Earlier this summer, there were threats of labor actions against Ralphs, Albertsons, Vons and Pavilions by the 45,000 employees with those companies throughout Southern California. On July 27, Stater Bros employees who are members of the United Food and Commercial Workers voted to authorize a strike, after negotiations between Stater Bros and the United Food and Commercial Workers Local 770 Stater Bros. Bargaining Committee, representing Stater Bros 12,000 workers, broke down, as issues relating to wages, benefits, working conditions, and job security had not been resolved.
The strike, though authorized, had not yet begun, while the union was seeking to organize consumer boycotts of certain State Bros. stores before the employee walkout. A back channel of communication between the bargaining committee and Bros. Stater Bros. Chief Executive Officer Peter Van Helden was maintained.
On August 6, the United Food and Commercial Workers Local 770 reported a tentative agreement with Stater Bros had been reached and scheduled boycotts of stores set to start on August 7 were canceled.
The 26th largest grocery-store chain in the United States, Stater Bros. Is a San Bernardino County institution. The first of the markets was founded in Yucaipa in 1936 by Cleo and Leo Stater. The corporation has experienced steady growth, and was for more than four decades headquartered with its warehouse located in Colton. It has since shifted its base to San Bernardino, on the grounds of the now-shuttered Norton Air Force Base. The chain has expanded to 171 stores, with 51 of those in San Bernardino County. Those include one in Adelanto, two in Apple Valley, one in Barstow, one in Big Bear, one in Bloomington, three in Chino, one in Chino Hills, two in Colton, four in Fontana, one in Grand Terrace, three in Hesperia, three in Highland, one in Lake Arrowhead, one in Loma Linda, one in Montclair, one in Oak Glen, four in Ontario, one in Phelan, two in Rancho Cucamonga, three in Redlands, two in Rialto, five in San Bernardino, Two in Yucca Valley, one in Twentynine Palms, two in Upland, two in Victorville, one in Yucaipa and two in Yucca Valley.
According to Van Helden, Stater Bros. finds itself caught between the competition from other food retailers in Southern California that do not employ unionized workers and the demands of its own unionized employees, such the goods at Stater Bros. are more expensive than those purchased from the supermarket chains’ competitors. This reality has pushed Stater Bros. profitability to an historic low that has become a threat to the company’s survival.
In a statement made by Van Helden five months ago, he said that the number of unionized employees throughout the grocery store industry are being replaced by non-unionized ones.
He acknowledged at that time that the company was engaging in the first layoffs in its 89-year history. “Things are getting tough,” he said. “I don’t think it’s any secret that in the last four years we’ve seen significant inflation, more than I’ve ever seen in my career. Retail prices are up about 30 percent now more than they were four years ago and that’s a big impact to our customers. We’re seeing about four, four-and-a-half percent inflation each of the last four months. With the recent announcement of new tariffs and probably more tariffs to come, it’s probably quite likely that inflation is going to take off, even above the four-and-a-half percent that we’re seeing now.”
Van Helden said that if the company can realize a three percent profit/gross margin, it can remain in business. In the effort to do that, he said, Stater Brothers is “fighting the nonunion competition. The enemy for Stater Brothers is the non-union competition. That’s who we’re really fighting against.”
Van Helden said Stater Brothers customers are going to the company’s competitors, who feature a non-unionized workforce and lower prices. “That’s how they sell their products at a lower price.”
Van Helden’s reference was too a host of retail establishments that employ workers who are not members of the retail clerk’s union, such as Aldi, Grocery Outlet, Dollar General, Walmart, Sprouts and Target.
“They take that savings [on employee wages and benefits] and they plow it into pricing,” Van Helden said. “They have lower prices. I’m not complaining about being unionized. I’m very proud that 90 percent of our workforce is unionized. I’m proud of what we pay and I’m proud of the benefits that we offer, but it does cause us to charge more for our product. That strategy for those nonunion players has really impacted this market, has really impacted those nonunion players.”
According to Van Helden, the entire landscape for companies involved in grocery sales has changed in the last generation. Previously, in California at least, the lion’s share of grocery store employees were unionized, which more or less meant there was an even playing field among competing grocery store companies. That has changed, however, such that many grocery store chains have a distinct advantage over others. Among those at a disadvantage is Stater Bros., Van Helden said.
According to Van Helden, at the turn of the millennium in 2000, 90 percent of the state’s grocery stores were unionized. At present, only 35 percent of the stores employ unionized workers.
Under normal economic conditions, Van Helden said, prices at unionized stores were only marginally higher than at non-unionized stores. But, he said, in times of accelerated inflation, unionized stores have to up their prices while non-union stores can hold the line on their prices. Thus, he said, “Inflation drives customers to the nonunion stores. While previously, only 10 percent of the stores in California were nonunion, today 65 percent of supermarkets are nonunion and they are killing the union stores.
“There is a substantial change in the market because customers have changed their shopping habits,” Van Helden continued. “When inflation happens, there’s three things we can do as a company. One, we could just simply absorb the cost increases, do nothing and go broke. We’d be bankrupt. If we had not increased our prices 30 percent over the last four years, this company would not be here today. We have to move that price forward.
“The second thing we can do,” Van Helden said, “which is what we’ve been doing, is accept the cost increases of the cost of goods, pass along those cost increases to the customers, continue to do that. It’s worked okay. We’ve given up some items. But if this continues, it’s not going to play well for us. Over time, our sales will decline. We will have fewer customers. We’ll be selling fewer items, which will mean a reduction in hours and will mean layoffs. It’s inevitable if we don’t do something different.”
Van Helden continued, “So, a third option is to say, ‘We’ll take the cost increases on the cost of goods, but rather than passing it along to the customer, let’s hold our prices, let’s not pass it along. That means instead offset that cost increase with a cost-of-operations decrease.”
Van Helden referenced labor, electricity, rent of the buildings the company occupies, and fuel as typical costs of operation.
“As we reduce those costs, then I don’t need as much margin to keep our three percent. That’s what we’re doing here. “
Van Helden said Stater Bros. Had laid a total of 63 workers off in March.
“Those 63 jobs we laid off are a cost reduction,” he said. “ Our intention is to take the cost reduction from those 63 jobs and hold the line on pricing, accept those cost-of-good increases and hold the line on pricing, if we can. And it’s not just those 63 jobs. We’ve reduced jobs at the corporate office.”
Van Helden said, “By holding the line on prices we can complete. These are tough decisions. These are decisions I have to make. My number one job in this company is to make sure this company is here for a long time, providing jobs, union jobs and a career path for those who want them.”
United Food and Commercial Workers Local 770 was less focused on the hardship Van Helden and Stater Bros. as a corporate entity was facing, while emphasizing that the Stater Bros employees it represents would now do better for themselves and their families, as they would be earning higher wages, receive higher contributions toward their pension plans from the company, receive enhanced healthcare and enjoy greater financial security.
-Mark Gutglueck