It’s too early to call it a trend, but all non-union retailers surely have been put on notice with the recent unionization successes of Amazon and Starbucks. Another merchant where associates have also ratified a new, first-time contract is FreshDirect, the pure-play online grocer that was acquired in January 2021 by Ahold Delhaize from a group of investors. The under-the-radar organizational effort reached a critical juncture last October when associates at the perishables-driven delivery service first announced they had secured enough signatures to authorize an election. Parent firm Ahold Delhaize did not object to the process and the two sides have spent the last few months negotiating a new collective bargaining agreement which was finalized earlier this month.
The deal covers approximately 1,800 meatcutters, deli slicers, fish handlers and online order pickers in Manhattan and Brooklyn and at FreshDirect’s 400,000 square feet distribution center in the Bronx. United Food and Commercial Workers Local 342 based in Staten Island and Long Island will represent the workers. FreshDirect becomes the third Ahold Delhaize “brand” to be organized following Stop & Shop and Giant Food which have been union shops for more than 60 years. Food Lion, Hannaford and The Giant Company remain unorganized.
I couldn’t write a piece about unionization without bringing special attention to the recent behavior of returning Starbucks CEO Howard “Humble Howie” Schultz, who is back in charge albeit on an interim basis. The whole process surrounding his return to the leadership post of the company he built (but did not start) was puzzling in itself. Now-retired former chief executive Kevin Johnson gave the coffee kingpin plenty of notice of his departure, but I guess the board figured that “Humble Howie” remained the best man for the job. Since he assumed the helm earlier this month, Schultz has been visiting Starbucks stores to meet with associates to presumably deliver a message of confidence and goodwill.
“With significant pressures leading to the fracturing of our partner and customer experiences, I’ve been transparent about our missteps and the reason for my return – to reimagine Starbucks – built on our core values and guiding principles. I have complete confidence that together we will restore the trust and belief of our partners and deliver and elevated Starbucks experience to our partners and customers,” the new CEO said in a statement.
Kumbaya. May the force be with you.
However, the spirit of that statement seems to be at least partially contradicted by “Humble Howie’s” actions.
His “old school” (Neanderthal like?) mindset is that Starbucks (along with other U.S. businesses) is being “assaulted” by the threat of unionization. During the course of his store tours, he has also personally exchanged pleasantries with a barista, essentially saying that if the associate hated Starbucks so much, she should seek employment elsewhere. I grew up in an era where Schultz’s union views were the norm; the prevailing thought among retailers was that unions were unnecessary because “our company will treat our associates honorably and fairly.” But times have changed, with a new generation of employees entering the workforce Adding to that has been the carelessness and smugness of the leadership at some of these companies. Management-labor communications declined as some retailers continued to use the same anti-union playbook that they began following in the 1970s.
It’s pretty obvious that Starbucks falls into that category. With now more than 200 stores either unionized or going through the union organizing process (that number is increasing by double digits every week), the momentum clearly lies with the pro-union forces. That doesn’t mean that Starbucks will eventually become a fully-organized company at the retail level (I doubt that will happen), but Schultz’s confrontational style is only adding fuel to the pro-union organizing effort.
Hopefully “Humble Howie’s” interim redux as de facto King won’t last too much longer, because, despite his passion, he is sending the wrong message to Starbucks’ associates and to its shareholders.
‘Round The Trade
The unabated trend of increasing prices continues with no end in sight. Last month, inflation reached 8.5 percent which puts it on a 12-month pace to be the highest increase since 1981. Like the recession of 41 years ago, the steep rise of gasoline prices has been the leading catalyst, but food prices were also a leading contributor with beef, poultry and seafood jumping 13.7 percent and produce prices increasing 8.5 percent. It’s going to get worse before it gets better…Walmart has named John Rainey, former chief financial officer at PayPal, as its new CFO, effective June 6. Rainey will replace Brett Biggs who is leaving to pursue other opportunities. More Walmart news: the world’s largest retailer will pay $3 million in civil penalties after the Federal Trade Commission filed suit against it for “deceptive green claims” the company made about some clothing products it sold. The problem was that Walmart said those items were made from bamboo using an “eco-friendly process” when the textile items were actually made from rayon. And in trying to incentivize truck drivers to join their team, Walmart is raising starting pay for all drivers to as much as $110,00 annually (previously rookie drivers reportedly made $87,500 per year). Additionally, Walmart will train and pay for a new driver’s CDL license, which could cost as much as $5,000.
Some sales numbers to report. Costco continued its impressive comp sales run, posting an impressive 12.7 increase in March at its 573 U.S. stores. E-commerce revenue also jumped an impressive 8.9 percent. In assessing Costco’s top performing areas by category, assistant VP-finance and investor relations David Sherwood said that “food and sundries” posted the best results last month with comp store sales increasing in the low to mid-teens.
Albertsons also maintained its balance sheet momentum with a 7.5 percent gain in identical store sales and a net profit increase from $437 million to $455 million for its fourth quarter ended February 26. Digital sales rose 5 percent in Q4, too. For its full fiscal year, ID sales were flat (but up 16.8 percent when viewed on a two-year stacked basis). The large corporate chain, which operates nearly 2,300 stores, said it expects to spend $2 billion in fiscal 2022 (an increase from last year’s number of $1.61 billion) and projected an ID sales increase of 2-3 percent. At the follow-up financial analysts’ conference call, CEO Sharon McCollam responded to a question about Albertsons’ recent announcement that it is conducting a review of strategic alternatives targeted at enhancing its shareholder value (translation in my opinion: find a way for leading shareholder Cerberus Capital Management to exit from its 16-year investment). In a nutshell, the former Best Buy chief financial officer said,”…we’ll keep you guys updated as we move forward.”
And two former Albertsons executives have recently joined new retailing organizations. Trey Johnson, whose long career includes stints at the Boise-based chain and most recently at regional grocer Save Mart, will be the new chief merchant at discounter Save A Lot which also has a relatively new CEO in Leon Bergmann. And it’s good to see our buddy Shane Sampson back in the grocery biz. The industry veteran, who spent most of his career at Albertsons before leaving in 2019 as EVP-chief marketing and merchandising officer, is back in the saddle at Save Mart as executive chairman. That Modesto, CA-based merchant was recently acquired by Kingswood Capital Management from the Piccinini family. Sampson will be joining a company that operates about 200 Save Mart, Lucky’s and Food Maxx supermarkets, primarily in California’s Central Valley.
Local Notes
On the store closing and opening front, Rite Aid has confirmed that it will close another 145 unprofitable stores. This comes on top of the Camp Hill, PA drug chain’s December announcement that it would shutter 60 stores. No specific locations were given for this new round of closures, but after posting a loss from continuing operations of $389.1 million in its most recently completed fourth quarter, you’ll likely see even more trimming in the future.
As for new stores, Target opened its latest urban unit, a 33,000 square foot store in New York City’s Times Square. This new location marks the 92nd Tar-jay to open in the New York metro market and the Minneapolis-based merchant has at least 12 other new stores planned for the region. New stores in New Jersey include units in Eatontown, Kearny, Old Bridge and Wall Twp. In New York new Targets are slated for Lake Success and Yonkers, with additional stores to open in the five boroughs, including in Manhattan (Chelsea, Union Square, Soho and Harlem); Brooklyn (Flatbush & Church and Kings Plaza); Queens (Astoria and Long Island City); and on Fordham Road in the Bronx.
Big Y, the family-owned regional chain that operates about 70 supermarkets in Massachusetts and Connecticut, has announced it will open a Big Y Express Market near its headquarters in Springfield, MA. The 10,000 square foot new urban model will feature many fresh and local items geared to accommodate workers in downtown Springfield. Ranch 99 (corporate name Tawa Supermarket Inc.) opened its first Empire State store earlier this month, a 45,590 square foot store on Old Country Road in Westbury, NY. The Buena Park, CA-based Asian grocer currently operates 56 stores, primarily on the West Coast. It made its New York metro debut in 2017 when it opened a former Pathmark store in Edison, NJ. It subsequently opened two other Garden State units in Hackensack and Jersey City. A not surprisingly huge opening last month at the new Market Basket store in Hanover, MA. The 80,000 square foot supermarket is the Tewksbury, MA regional chain’s 87th overall and is part of a new 600,000 square foot development located on the property that once housed the Hanover Mall.
Foxtrot Market, the hybrid convenience store chain which has recently expanded its base beyond its Chicago headquarters, is coming to Boston later this year and to New York City, probably in 2023. Buoyed by a new round of $100 million private equity funding, Foxtrot, has continued to focus on its core merchandising model which includes prioritizing items from local vendors while also offering an e-commerce platform. Other new markets include Austin, TX, Miami and Nashville as well as adding to its existing store base in Chicago and Washington, DC.
FMI has named the finalists for its 2022 store manager of the year and that group includes a strong presence from retailers in the Mid-Atlantic and Northeast. For merchants that operate between one and 49 stores, Jose Marroquin from Inserra ShopRite; Scott Christi from Roche Bros.; and Stephanie Wright from the Monadnock (NH) Food Co-op qualified as finalists. For retailers that operate between 50 and 199 stores, Dionne Martin from Giant Food; Raymond Stockard from K-VA-T (Food City); and Rob Santoni from Weis Markets made the cut. Good luck to all – your job remains one of the most important in our business.
We have a couple obituaries to report this month, including one from the food industry. It is with a heavy heart that I report the death of Lester Cohen, retired president of C&S Wholesale Grocers, who passed away earlier this month at the age of 98. Lester began working at the family-owned firm, which was then based Worcester, MA, at the age of 5 in 1929. His steady hand and genial approach to the business helped C&S grow to be one of New England’s top wholesale grocers from the late ‘40s until 1980 when it made a seismic shift to become a third-party wholesaler and relocated to Brattleboro, VT. At that point, Lester’s son Rick, now executive chairman, had joined his father and developed a business model that changed the wholesale grocery business forever and ultimately made C&S the largest wholesale grocer in the country. But here’s what I remember about Lester Cohen, a man of great dignity and humanity: when I began my career writing about the grocery business for The Griffin Report in New England in 1973, he was one of the first people I met in the industry. He took me under his wing, introduced me to the Gould family (owners of Big D/Wonder Markets, C&S’s largest customer) and gave me the confidence to succeed. Not only was Lester one of the smartest guys in the business, he was also one of the nicest. If you haven’t seen it yet, there’s a touching video on Rick’s LinkedIn page of Rick and Lester reminiscing about the business that was shot just several weeks ago to celebrate Lester’s 98th birthday. A truly great man, Lester Cohen will be missed.
Also passing on was Gilbert Gottfried, 67. The undersized New York standup comic wasn’t everybody’s cup of tea, but his ability to make you laugh out loud at his much-traveled, sometimes tasteless, usually profane jokes was virtually unparalleled among his peers (by whom he was beloved). While he was well-known from his non-standup career asan actor (e.g., playing the parrot Iago in the animated movie “Aladdin” in 1992) and voice over talent (as the Aflac duck – a role from which he was ultimately fired), my lasting memory of Gottfried was from the 2008 Friar’s Club roast of now-discredited Matt Lauer, held live at the Hilton in New York City. Gottfried followed fellow comedians Richard Belzer, Lisa Lampanelli, Jeffrey Ross and the late Bob Saget in roasting the former “Today” show host. The diminutive comic with the shrieky voice and an impeccable sense of timing brought down the house with two hilarious (and tasteless stories) about Adolph Hitler and a pair of sisters who “entertained” the Spanish ambassador to the United Nations whenever he visited New York. I can’t go any further and keep those stories even “R” rated.