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Will The Union for Kroger and Safeway’s Workers Torpedo the Supermarket Giants’ Merger?
The United Food and Commercial Workers International Union (UFCW), representing thousands of associates working for Kroger and Safeway, has come out in clear opposition to the merger of the two grocery giants.
Marc Perrone, UFCW president, criticized the companies for failing to provide “any definite assurances” regarding the divestiture of stores and what that might mean for its members. The union is concerned that buyers for divested stores may be saddled with a burdensome level of debt that could put their viability at risk.
Haggen’s 2014 acquisition of 146 stores from Albertsons and Safeway remains fresh in the minds of grocery industry watchers. Haggen, an 18-store supermarket chain with stores in Oregon and Washington, acquired Albertsons and Safeway locations in Arizona, California and Las Vegas. Safeway acquired Haggen’s 29 stores in the Pacific Northwest. Today, 15 stores are operating under the Haggen banner.
The UFCW’s opposition to the merger of Kroger and Safeway is not unexpected and was likely prompted, at least in part, by an op-ed piece in the Cincinnati Enquirer from the CEOs of the two companies that addressed what they see as myths surrounding the deal.
Rodney McMullen of Kroger and Vivek Sankaran of Albertsons wrote that concerns about store closings or frontline employees losing their jobs were off-base.
“We are working closely with the regulators and are committed to finding reliable operators for the divested stores,” wrote the CEOs.
Messrs. McMullen and Sankaran also wrote, “No frontline workers will be laid off as a result of the merger. The combined company will be one of the largest unionized workforces in the country. We are committed to protecting and expanding opportunities for union jobs.”
The UFCW has been skeptical of the merger since it was announced last year. It released a statement in November that it “would oppose any merger that undermines the wages, jobs, benefits, and security of Kroger and Albertsons workers. We have repeatedly called on both Kroger and Albertsons to be fully transparent about this merger and to provide the information that every UFCW Local and member deserves. Our members have already sacrificed much over these many years, and they need to have a comprehensive understanding about what this deal means for them, their families, and the communities they serve.”
Discussion Questions
DISCUSSION QUESTIONS: Will the UFCW’s opposition play a significant role in sinking the Kroger/Safeway merger? What will a failure to get the deal approved mean for Albertsons and Kroger?
Poll
Loading …BrainTrust
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Paula Rosenblum
Co-founder, RSR Research
Someone should torpedo it. For sure. Kroger is already huge.
A possible one-word justification for mergers is “efficiency.” Do more with less. The union has every right to be concerned about jobs. The companies talk about protecting frontline jobs, but almost certainly back office jobs are at risk. Mergers that create efficiencies through layoffs are not necessarily bad things. It’s totally natural within the retail evolutionary process. But the track record in grocery is a little messy.
Let’s see if I understand. The speculation is that the government will force hundreds of stores to be divested. On top of that, Kroger and Albertsons will all close hundreds of overlapping stores.
Indeed, do not worry. “No frontline workers will be laid off as a result of the merger.”
I assure you Kroger and Albertsons’ management are not even considering what happens if the deal doesn’t get done. This one has hubris written all over it.
The CEOs have promised no stores will close “as a result of the merger.”
Emphasis on quotes.
Stores open and close often for various reasons. Leases expire, buildings get damaged, etc. There will obviously be store closures post-merger so this promise of no stores closing “as a result of the merger” is rather reaching.
I’m not sure if union opposition has ever played a role in preventing a merger — does anybody else know if this has happened? I’m assuming it does not play a role and you can bet the rent money that this will not end well for the union. I’m not opposed to it — everywhere else there are national grocery chains, so why not in the U.S.? And Walmart will keep a larger chain from acting like a monopoly.
The union has a right to express its views, but they should hold no particular weight. Corporate deal-making and decisions cannot always be governed by what the unions want. And the unions don’t own the businesses nor are they significant investors in them.
As for the union demanding assurances on divestments, this is an area outside of Kroger and Albertsons’ control as it is controlled by the FTC. However the union is right to be concerned because the FTC has a terrible track record on divestments — including Haggen, Rite Aid, Dollar Express, and so on. The FTC is not a particularly competent body and has a very theoretical approach to most things which rarely works out in practice.
I don’t think the FTC will allow it, but then Kroger will argue that Walmart has a bigger share and Amazon will open stores.
I still think it’s lousy.
I have far fewer concerns. The UK grocery market is way more consolidated than the U.S. (the top five players have a much larger share). And the UK market is fiercely competitive, cut-throat on price, has better standards in-store, is more innovative and so forth, etc. So I don’t think consolidation is automatically bad or necessarily brings all bad things. And the point on Walmart is a good one: the combined entity still won’t have as much market share as the number 1 player.
Full disclosure, in past incarnations I’ve worked closely with several unions and have spoken before UFCW audiences, although to be fair they didn’t listen to my advice. The fact that they object is not surprising, in fact not any more surprising than the fact that nobody at either chain is losing any sleep over their opposition. The only entity in position to break this deal is the FTC, and I doubt very much that they will block it. Unions are businesses that sell services in exchange for revenue in the form of dues. Obviously any action which potentially reduces the number of workers and/or their incomes is automatically seen as a threat to that revenue stream — and correctly so. But at the end of the day the UFCW isn’t in position to do much about it except complain. In fact, one could argue they will be in a much better position once the deal goes through because then they will be able to threaten a national work stoppage.
There is a fair amount of opposition between the unions and various state attorneys general in states with heavy overlap.
The union in my opinion is mostly falling back on the Haggen situation as to why this merger shouldn’t go through. While I agree that was a big deal, I think they need stronger, additional arguments.
Kroger will be fine if the merger doesn’t go through. They are already in a very strong position.
As for Albertsons, who paid out that giant special dividend and who has private equity owners controlling its shares who clearly want out and want a deal — I don’t know what will happen there if this deal doesn’t go through but something will happen.
Maybe they’ll just stamp their feet and hold their (collective) breaths until they get what they want.
It’s not 100% facetious. to say that, politically speaking, if you’re looking for stronger argument, pi**ing off ‘Private Equity’ may be it.
A Kroger spokesperson issued the following statement in response to this piece:
“Our proposed merger with Albertsons is about growing jobs and careers, and we expect the merger to create meaningful and measurable benefits for our associates. We will invest an additional $1 billion to increase wages and expand our industry-leading benefits starting on Day One following close, and we expect to provide new and exciting career growth opportunities for many associates. This commitment builds on our track record of supporting associates, including the incremental $1.9 billion we have invested in wages and comprehensive benefits since 2018. The Kroger Family of Companies is one of America’s largest unionized workforces and this merger also secures the long-term future of union jobs by establishing a more competitive alternative to large, non-union retailers.”
By my math: $1B/~800,000 employees – denominator subject to change! – comes out to ~$1200/employee; (and we’ll also have to adjust for the share that goes to management.)
I’ll leave it to others to decide if that’s meaningful.
When did labor opposition ever sink a merger?? (no cheating: if you have to ‘google’ an answer, my point is made).
That having been said, it’s not hard to see why they are objecting: controlling labor costs will most certainly be a permanent preoccupation of a combined company, and we agreed yesterday that assurance are largely meaningless; the bigger problem is the big picture: grocery is highly competitive and tho it does not, of course, face the (foreign) outsourcing issues that manufacturing does, unionized operators face competition from (often) lower cost non-unionized operators. Short term victory, long term defeat ? Cleanup in the Pyrrhic Victory aisle!
While unions focus on wages, jobs, benefits, and worker security, they often overlook the long-term effects and impacts of their actions on businesses, and the fact that once the business erodes, there will be no more wages, jobs, benefits, or worker security, at least not in the companies they were working for.
While unions concern themselves with wages, jobs, benefits, and security of workers, they often overlook one more factor: the long term health of the business itself, their employer.
On some occasions, the demands of the union simply do not allow a retailer to continue its own business model, and that often leads to business erosion, decline, or not being in business anymore.
When the business goes down, employees no longer have any wages, jobs, benefits, or securities, so “be careful what you ask for.”
Regardless of rhetoric from Kroger and Albertsons-Safeway, the UFCW does have the direct or indirect power to get in the way of the merger. There is no doubt in my mind about that.
An Albertsons spokesperson issued the following statement: “We have a rich history of creating quality jobs and working collaboratively alongside UFCW. Our proposed merger with Kroger will secure the long-term future of union jobs by establishing a more competitive alternative to large, non-union retailers. The combined company will also invest in associate wages, training, and benefits to ensure it is able to bring even more value to the customers and communities our associates so proudly serve.”