The big winners from strikes at Ralphs and Albertsons will be rival grocery stores
In the world of retail, timing can be everything.
And Southern California’s two newest grocery chains stand to gain a lot more business if a supermarket strike occurs among some of the region’s biggest players.
An estimated 50,000 United Food and Commercial Workers members voted Tuesday to authorize a strike against Ralphs and Albertsons, which also owns Vons, Pavilions and Safeway stores.
Their labor contract expired March 6 and the current offer proposed by the grocery chains is inadequate, union officials said.
In the meantime, German discount grocer Aldi and Emeryville-basedGrocery Outlet Bargain Market are gaining a foothold in the region’s retail market. A strike would send more shoppers their way.
Aldi plans to open 45 locations in Southern California. The first of the stores opened in March and the company is staffing each location with 17 to 20 employees.
Another 200 employees are working at the company’s 825,000-square-foot regional headquarters and distribution center in Moreno Valley.
All told, the company’s initial foray into Southern California will create about 1,100 jobs for the region.
Grocery Outlet Bargain Market announced in September plans to open 14 stores in the greater Los Angeles area, a move that will create about 500 jobs. Locations are already open in La Habra, Sun Valley and Azusa. Additional stores will be opening soon in Rosemead, Whittier and Baldwin Park.
“These companies will definitely benefit,” said David Livingston, a managing partner with the supermarket consulting firm DJL. “They love it when this happens. Those stores are non-union, so they don’t have to worry about this stuff.”
Burt P. Flickinger III, managing director for the consumer industry consulting firm Strategic Resource Group, went a step further.
“The new Aldi stores in Southern California are each averaging about $350,000 to $400,000 a week in sales, so that’s $17.5 million to $20 million a year,” he said. “If there were to be a strike, those stores would each exceed $600,000 in sales per week and about $36 million to $40 million per store on an annual basis for as long as the strike lasted.”
Aldi’s Southern California stores are already generating double the amount of sales the company’s East Coast markets did when they first opened, he said.
“They have really perfected their model to increase sales,” Flickinger said. “And their model is to be the low-price leader.”
Flickinger explained why Aldi appeals so strongly to consumers.
“Aldi has discounts on all of the products people use for cooking,” he said. “You see celery every day for 99 cents at Aldi when it’s $2.99 at Whole Foods and $1.99 at any other supermarket chain. They also have lower prices on milk, eggs, flour, sugar and other key commodities like breakfast foods, frozen foods and snacks.”
The grocery chain is known for its private-label foods, Flickinger said, but the company is also adding more name-brand products as well.
Southern California’s last grocery strike in late 2003 and early 2004 lasted 141 days and cost the industry nearly $2 billion, according to UFCW Local 770 President Rick Icaza.
“It was outrageous,” he said. “We not only lost money, we also lost market share. Back then all of those supermarkets had about 70 percent of the market share. Today that’s down to about 35 percent. A high percentage of shoppers ended up going to Trader Joe’s, Bristol Farms, Whole Foodsand places like Stater Bros.”
In recent years, consumers have further expanded their grocery shopping to Wal-Mart, Target and 99 Cents Only Stores, as well as CVS andWalgreens.
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