Unions gain strengtrh in Calif., but retailers ready for action

SAN FRANCISCO —With Fresh & Easy Neighborhood Markets preparing to roll into Northern California, a challenge could again be union activity in opposition to the launch of its operations. Almost certainly, the United Food and Commercial Workers Union will repeat the tactics it has used against Tesco and its non-union Fresh & Easy markets, in part because it has enjoyed some success.

Beyond the particulars, all non-union retailers operating in California are likely to experience more aggressive opposition from unions and their allies. Not only have they had success in challenges to Tesco—including a court judgment that ordered the company to conduct a potentially troublesome environmental assessment of its Riverside, Calif., DC— but unions and their backers also have a peculiar set of allies in their opposition to Tesco, Wal-Mart, Target, The Home Depot and any other non-union retailer they set their sights on: California’s major supermarket chains.

Unions seem to have been emboldened by the recent wage agreement they signed with Safeway, Kroger and Super-valu earlier this year covering Southern California. The contract returned give-backs the supermarket operators got after the major strike three years earlier. The supermarket operators got some concessions they wanted as well, including a new health care structure that management regarded as more flexible and a contract period expanded to four years from three. And they may have accrued one more important benefit: an aura as the socially responsible retailers in a state that is experiencing a major influx of outside, non-union competitors.

In July, when he learned that the agreement was ratified by UFCW rank and file,Steve Burd,Safeway’s chairman and ceo, touted how well the company and its individual banners, including Vons in Southern California, was taking care of its workers.“This new agreement provides employees with the best wages, benefitsandworkingconditions in the Southern California retail market, while making certain Vons has the tools to thrive in a highly competitive environment,” he said at the time.

In the meantime, Tesco was being sued. Temeculah, Calif., environmental attorney Raymond Johnson sued Tesco twice about the environmental impact of its distribution center, sparking rumors early this year that litigation was impacting Tesco’s construction schedule. Rumor also tied Johnson to the UFCW. Analysts noted that the UFCW has challenged some Fresh & Easy liquor licenses, too, which made observers suspect a link with Health First, the group backing Johnson.

In early December, Tesco found itself dealing with a ruling by California Judge Thomas Cahraman, stating that the company has to comply with the California Environmental Quality Act as regards its 820,000-square-foot Riverside, Calif., DC.

Technically, the ruling could lead to the closure of Tesco’s DC, but Johnson conceded that, at an earlier phase of litigation, the court refused to grant a temporary injunction shutting down construction, which suggested that it probably will be disinclined to end operations there at this late date. The court could shutter it, Johnson said, if any environmental impact was sufficiently negative, but some form of mitigation is more likely. “Every case is different, so it’s hard to say what will happen,” Johnson told Retailing Today. “Normally, it’s not an issue. People don’t go ahead and build once someone has sued them on it.”

Well, Tesco didn’t exactly ignore the environmental quality question. It was advised that it didn’t need the environmental impact study to build the DC by a California governmental entity, the March Joint Powers Authority, Johnson acknowledged. Such entities are associations of local municipalities who join to oversee a particular jurisdiction, in this case the former March Air Force Base.

Judge Cahraman had a different opinion.

Many observers see the hand of the UFCW behind Health First, but parties involved deny this, carefully. Johnson said he isn’t aware of union involvement in Health First, which he works with as a group of concerned local citizens, but he wouldn’t say categorically that they were not a part of it. Johnson did say, though, that retailers and their backers often see unions behind obstacles to their expansion in California. “My experience has been when anyone winds up suing Wal-Mart, say, there is always tendency for the other side in the case to make that claim.”

In the meantime, Tesco conducted its San Francisco store ground breaking on Dec. 13, with the city’s mayor Gavin Newsom and supervisor Sophie Maxwell, lending a hand. The San Francisco unit should be open in about a year and a half. Published reports about a new DC in Northern California are premature, Wonacott stated, but he didn’t rule out a new facility as the Bay Area and other adjacent markets mature. For the time being, the San Francisco and other Northern California Fresh & Easy stores will be supplied from Riverside.

And so far, Northern California has proven a friendly respite for the company. “We’re just really starting up here. We just had the ground breaking for the store. That neighborhood has been underserved for too long. They weren’t protesting today or anything [of the] like,” said Wonacott.

The respite probably won’t last, said Richard Berman, president of strategic communications, advertising and government affairs firm Berman and Co., who regularly deals with union issues. “The M.O. of the unions for the targeted businesses is to put pressure on them through zoning, licensing environmental impact and any other regulatory process they can trigger that can slow down the opportunity to invest and expand.”

In other words, Tesco can expect a replay of the union tactics it experienced in Southern California in the northern part of the state, and maybe even some new wrinkles, given the relatively friendly environment for their evolution.