A sweetheart deal:
Ontario Wal-Mart supercentres are at least five years away, so why did a trio of unions representing Loblaws workers agree to cut pay and benefits now?
The Financial Post recently reported a sweetheart deal between Loblaws and its union, United Food and Commercial Workers: "Loblaws to fend off Wal-Mart invasion with cheap labour."
Loblaws and the union cut this deal by bargaining in secret and refusing rank-and-file union members a vote. Surprisingly, this change comes part way into a multi-year binding labour contract. However, Loblaws didn't need to open the contract; it merely got three local union presidents to sign an agreement for slashed rates of pay and benefits.
To do this, the UFCW quietly placed the issue on the agenda of some union meetings held during peak holiday season. The union presidents asked the few who attended, including those paid to be there, to authorize the presidents to sign the deal. Few of the local members have seen copies of it to this day. Some presidents didn't even bother with a union meeting. They simply had committee members approve the presidents' activities.
"What's the point in belonging to a union, if, when the company demands that employees are not to be given a voice, the union executive would agree to it?" Ben Blasdell, a bakery manager at a Loblaws store in Collingwood, told the press last week. He went on to ask, "Where is the line between the union and the company?"
That's a tough question that more than a few labour watchers would have trouble answering.
When we talk about mid-contract wage slashing, we're not talking about an Air Canada scenario. We're talking Loblaws Companies -- a hugely profitable organization with a historically steady and robust sales growth. Loblaws saw its sales grow 6.8% in 2001 with a further 7.4% in 2002. That translates into a whopping $23-billion for 2002. Loblaws reports its 2002 operating income increased 14.7% to $1.3- billion.
The presidents of the three agreeable UFCW franchises, Kevin Corporon, Local 1000a, Wayne Hanley, Local 175 and Brian Williamson, Local 1977, aren't doing all that bad themselves. They are among the highest paid union presidents in Ontario. Each earns well in excess of $100,000 a year plus lucrative perks. Meanwhile, they represent some of the lowest paid unionized workers in the province and are pushing to see them paid even less.
At the beginning of the current Loblaws contract Mr. Williamson was headline news. His members were outraged when the UFCW bargained a 1% raise for them while taking for himself a 64% annual salary boost, to $118,300 from $72,000. They were nearly speechless to learn that a new clause in his personal contract also gave him, in addition to hefty union pensions, 150% of his annual salary as a retirement bonus and a new car when he retires.
This time around, Mr. Williamson says: "We think of this as making the very best of a bad situation." Likening it to buying insurance, Mr. Williamson adds, "It's about making sure that anyone that happens to be affected is protected as best as they can."
What bad situation?
Wal-Mart has been in the grocery business in Canada since it bought Woolco Stores in 1994. The bigger Ontario threat, Costco Wholesale Corp., has aggressively chewed up grocery share from all the big players for well over a decade. It owns a huge chunk of the U.S. grocery market as well. However, because it isn't the media villain that Wal-Mart is, Costco isn't as effective a bogeyman as Wal-Mart.
When Wal-Mart announced plans to bring its Sams Club warehouse store concept to Canada, Mike Weir, managing director of Toronto- based Guardian Capital Inc., considered it a significant development. However, Mr. Weir stated, the Sams Club stores would represent competition more for Costco than Loblaws.
In the April, 2001, paper, Evil Empires of The Canadian Grocery Industry, National Bank financial analyst Perry Caicco said, "We believe that the highly-successful U.S. Wal-Mart Supercentre operation will not be seen in the Canadian market for at least six or seven years, and probably not ever."
Think about it. Even if Loblaws' worst fears come true and in five years from now Wal-Mart starts to build supercentres, what's the purpose of the wage cuts now? We all know that to effect change, you have to get people to "smell the smoke." But what's happening here is someone is trying to get people to imagine the smoke. Something smells, but it isn't smoke.
Mr. Caicco cites several reasons that debunk the Loblaw/UFCW assertions. He says Wal-Mart is less focused on food and more on building growth in its very profitable general merchandise areas. Unlike in the United States, Canada has no successful supercentre formats.
"The U.S. supercentres used pure pricing power to steal grocery share from higher-priced small-town conventional store operators with rundown physical plant. Canada has much lower food prices than the U.S. to begin with, a strong complement of low-priced discount or "box" stores and plenty of fresh, modern assets, even in the most rural of markets. Very simply, there are few sources of share growth vulnerable enough for supercentres to feed on."
Within days of the Caicco report's release, Loblaws president John Lederer and chairman Galen Weston started the UFCW softening- up process by saying that employees would be expected to do their part to help the heavily unionized company compete against competitors such as non-unionized Wal-Mart and Costco Wholesale Corp. Within hours, UFCW Canada director Michael Fraser shot back, saying "I get a little concerned where they are coming from. Because I believe employees have been more than flexible over the past number of years."
Saying that the UFCW has been "flexible" over the years is an understatement of monumental proportions. Twenty years ago, full- time retail/food jobs were abundant and starting wages were well above average for the labour market. Today, full-time retail jobs are nearly nonexistent, and near minimum wages are pretty normal.
The UFCW has handed over just about every concession the major retail grocers has asked for. Sometimes a bit of drama is thrown in for the union members' sake, but usually the concessions have been granted with little more than a whimper. In effect, we are looking at a real-time demise of a union.
Its failure is no more evident than in its inability to propagate. The UFCW is famous for publicly wailing that it can't organize Wal-Mart employees because Wal-Mart is just too anti- union. In reality, they have difficulty organizing any new members. The only increases in UFCW numbers have come from splitting full- time jobs into part-time jobs, and in merging with smaller unions.
In a bizarre twist of logic, UFCW now seems set to help create Wal-Mart wages and working conditions for its existing members. What will it have left to offer Wal-Mart employees except the opportunity to pay $40 a month in union dues?