Grocery Contract Negotiations Break Off in Light of Unions’ Previously Scheduled Votes

Los Angeles, Calif. (October 6, 2003) – Representatives from Albertsons, Ralphs and Vons today announced that, although a final offer was not reached, negotiations with the United Food and Commercial Workers (UFCW) union broke off late Sunday night after the union said it was going to take the retailers’ most recent contract offer to members for previously scheduled votes.

Last week, the UFCW scheduled those contract ratification and strike authorization votes for October 8, 9 and 10, even though the negotiations between the union and the companies had not yet progressed to a state where a final offer could be presented.

The three grocery companies had been bargaining in good faith with the UFCW locals for the past several weeks in an effort to reach an agreement prior to the contract's expiration at midnight on October 5. The skyrocketing cost of health care and pension benefits have been key issues throughout the negotiations.

"As responsible companies, we are seeking nothing more than a fair contract that will help us to remain competitive in the face of soaring health care and benefit costs and increased competition from lower-cost operators,” said John Burgon, Ralphs president. “In an industry in which the typical net profit margin is just two pennies on the dollar, the ability to manage costs is crucial to the long-term future of our businesses. All three of us want to continue offering comprehensive benefits to our existing employees and their families, but it must be within the context of the current marketplace.”

The cost of providing health care benefits to their grocery employees has risen by more than 50% during the four years of the expired contract. Health care costs are expected to continue rising in the years to come. The companies foresee these current plan costs continuing to escalate over the next contract term.

Albertsons Southern California Division President Dave Simonson explained, “Today Albertsons associates enjoy a package of excellent wages and extraordinary benefits. Our intent in these negotiations is to try and continue this—but we must do it in the context of the Southern California marketplace."

Simonson continued, "In light of the current competitive environment these proposals are generous and will continue to provide wages and benefits for our existing associates that are among the best in our industry.”

"There is a lot of uncertainty surrounding this negotiation because of the dramatic changes we have seen and experienced in our industry," said Vons President, Tom Keller. "We are seeing a significant influx of non-union, discount stores and unionized independent operators with union contract agreements that provide lower wages and significantly fewer benefits than we provide. These formats pay much lower labor expense than Vons does. This gives them an unfair advantage over other union operators."

Under the recently expired contract, a supermarket clerk can earn up to $17.90 in wages after just two years of employment. Clerks earning $17.90 per hour also earn very generous fringe benefits, such as $26.85 per hour for all hours worked on Sunday and $53.70 per hour for working on contractual holidays. Additionally, all eligible supermarket clerks from baggers to supervisors receive full health care coverage, paying no out-of-pocket premiums, while only requiring a $10 doctor visit co-pay. In addition, the HMO plan requires no premium paid by the employee, no co-pay for office visits, no deductible and only nominal prescription co-payments.

All three grocery companies have fully executed plans in place in preparation for a strike and will continue operating their stores and serving customers in the event the union calls one.

Ralphs Grocery Company was founded in 1873 and currently operates more than 470 conventional and warehouse-style supermarkets in California and southern Nevada, from its headquarters in Los Angeles.  The company is a division of The Kroger Co. (NYSE:KR), one of the nation’s largest food retailers, based in Cincinnati, Ohio.

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