The last grocery strike opened the door for supermarket upstarts. What happens if there's another strike?

Ralphs, Vons and Albertsons employees at a 2011 vigil in Beverly Hills.

By Shan Li, Helen Zhao

June 17, 2016 6 AM PT

The Southern California grocery strike in 2003 and 2004 shook up the region’s supermarkets, paving the way for new chains, ethnic markets and even dollar stores to thrive.

Now, as unions representing Southland grocery workers are again threatening to strike, Ralphs and Albertsons are hoping to avoid another stoppage that steers customers to their growing field of rivals.

About 47,000 of the region’s grocery clerks, stockers and other workers at Ralphs and Albertsons, which also owns Safeway, Vons and Pavilions, could vote on Monday to authorize a strike.

The stakes are enormous in Southern California, which generates some $44 billion a year in grocery sales. That massive buying power is what tempted chains such as Aldi to come and Whole Foods Market to open its first lower-cost store, called 365, in Silver Lake.

They took advantage of a grocery landscape that has been in upheaval since the 141-day work stoppage and lockout, which cost Ralphs and Albertsons $1.5 billion in sales and helped retailers such as Wal-Mart and Target expand their grocery aisles.

“That last time, it increased the opportunities for other chains geometrically,” said Burt Flickinger III, managing director of consulting firm Strategic Resource Group. “The unionized operators, and the unions, were hit so hard financially.”

Since then, the big chains have hemorrhaged market share. In 2004, Ralphs, Albertsons and Vons/Pavilions (which was acquired by Albertsons in 2014 as part of its Safeway purchase) held nearly 60% of the Southland’s grocery trade, according to the Strategic Resource Group. That share has plunged to about 33% today.

These days, Unified Grocers Inc. in the City of Commerce, a wholesale cooperative which mainly serves independent stores, controls 16.6%, according to the Shelby Report, which tracks the industry. Wal-Mart is right behind with 11%, followed by Stater Brothers at 8.9% and Trader Joe’s with 6.2%.

A strike presents an opportunity to grocers to break the shopping habits of consumers. Once someone flees to another chain, they often don’t go back, analysts said.

Many people have the mind set of “I certainly don’t want to cross the picket line and get involved,” said Ron Johnston, who publishes the Shelby Report. “It opens the door. I may drive another three, four miles to try out another chain or an independent.”

Barons Market, a small family-owned chain, saw the number of shoppers double during the last strike, said Rachel Shemirani, vice president of marketing. The San Diego company had to boost milk orders to two or three times a day, up from three or four times a week. Bread deliveries also increased to twice a day.

“It was crazy,” Shemirani recalled. “It was great for us. It really threw us in the fire really quickly.”

With the influx of shoppers, Barons Market realized there was a real market for its specialty in organic and natural foods, she said. Since then, the chain has expanded to six stores, with a seventh opening in San Diego by this winter. The grocer is also adding extra draws such as olive oil and balsamic vinegar tasting stations to all its locations.

Looking back, Shemirani said the strike “was pretty pivotal for us.”

“For years, we kept customers because they were just upset with the supermarkets, and their attitude toward workers,” she said.

Whole Foods also enjoyed a boost in the last strike and lockout.

It “was a huge opportunity for our stores in Southern California,” said Marci Frumkin, executive marketing coordinator of the chain’s southern Pacific region.

Many Southland shoppers are especially mindful of labor negotiations, Frumkin said, because the entertainment industry here includes many union jobs. (They are also not afraid to flex their own bargaining muscles: Members of the Writers Guild of America went on strike for 100 days in 2007 and 2008).

“There was a huge amount of customer loyalty to observing and respecting union negotiations,” Frumkin wrote in an email. “We became a grocery store of choice for many new customers.”

If another strike occurs, many shoppers said they’d avoid Ralphs and Albertsons.

Antonio Thompson, 41, said he likes the sales at these big chains, where careful shoppers can find “the best bargains.” But that would change if workers walk off the job, he said.

“I would spend more time in other places,” including Jons and Whole Foods, the Koreatown resident said.

At a Trader Joe’s in Hollywood, John Brickley, 70, said his shopping habits have already changed drastically during and after the 2003 strike.

Brickley said he used to get the bulk of his food at Safeway. Now, the retiree will go there only for cheaper cuts of meat. He sticks mainly to Trader Joe’s, a habit he picked up during the strike.

“I was really in solidarity with the workers and refuse to shop there anymore,” he said. “I wouldn’t cross the picket line.”

The irony, of course, is that the last strike steered many shoppers like Brickley toward chains without unions, where workers generally have fewer protections without the muscle from organized labor.

Many analysts said the grocers and unions will likely come to an agreement. Both sides were hurt so badly the last go-around that they’d be foolhardy to go there again, observers said.

Union officials say that Ralphs and Albertsons are looking to cut costs in anticipation of the minimum wage ceiling rising to $15 an hour by 2022. Currently, the starting salary pay at the two chains is $10.10 an hour.

The grocers want to lengthen the time required for entry-level workers to earn the highest pay grade, the unions said. The chains also want cuts to holiday pay, and proposed a raise of 10 cents an hour per worker over the next three years. There is also disagreement over who will cover the costs of rising healthcare expenses.

Albertsons did not respond to a request for comment. Ralphs spokeswoman Kendra Doyel said the chain doesn’t “think this is headed to a strike.”

“We want to reach an agreement at the table with the unions,” she said.

But Rick Icaza, president of UFCW Local 770, said the unions were prepared to stand their ground.

“Hopefully we can turn this thing around,” he said, “but I’m not optimistic.”

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