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Southern California, which is one of the most competitive food retailing markets in the United States, recently witnessed a withdrawal of a 141 workers’ strike after the United Food and Commercial Workers union arbitrated in settling a long-standing dispute between the workers and three retail giants in the region, namely Ralphs stores, Vons and Albertsons.
Ralphs stores are operated by Kroger Co (KR - Analyst Report), Vons is owned by Safeway Inc (SWY - Analyst Report) and Albertsons' parent company is Supervalu Inc (SVU - Analyst Report).
The discontentment was regarding funding of the employees' health plan, which was the main sticking point during the months of negotiations. As reported by the United Food and Commercial Workers union members agreed to the deal as their leaders had urged.
Earlier, both the parties wereinvolved in a bitter 141-day strike in Southern California that lasted for two year starting 2003. It was the longest strike in the history of the U.S. grocery industry, resulting in an estimated $1.5 billion loss in sales to competitors and permanently shifting the loyalties of some shoppers.
The three largest players had been losing market share to non-union food sellers like Wal-Mart Stores Inc (WMT - Analyst Report), Costco Wholesale Corp (COST - Analyst Report) and Target Corp (TGT - Analyst Report)
In case no agreement was reached, Ralphs would initially close all 250 stores in the region and Albertsons would have shut up to 100 locations, while Vons had said its stores would remain open.
The prospect of closures and tense picket lines prompted fears of a repeat of the four-month strike eight years ago that cost the industry $2 billion and created a mess for shoppers.
Union leaders and the markets announced earlier in July that they had agreed on the employers' contributions to pension benefits, but rejected the payments to the union health care trust fund. However, neither a deal or a strike fell through even after the Sunday evening deadline, store employees returned to work. Union officials announced in late Monday morning that the tentative deal had been reached.
While Supervalu and Kroger hold a Zacks #3 Rank, implying a short term Hold rating, Safeway currently holds a Zacks #4 Rank, implying a short-term Sell recommendation.