Analysis
Profits fall, stores close: Grocery chains and Bush's "Ownership Society"
By Seth Sandronsky
Online Journal Contributing Writer


Jun 13, 2006, 00:32

There are too many U.S. grocery chain stores, said George Whalin, head of Retail Management Consultants, in The Sacramento Bee of June 7. Call it overcapacity in the grocery industry.

A few new owners of the Albertsons grocery chain are responding accordingly. In early June, three companies purchased Albertsons, Inc., for the tidy sum of $17 billion.

One of the trio, Cerberus Partners, an investment firm based in New York, partnered with the commercial real estate firm of Kimco Realty Corp. To halt a fall in profits for Albertsons during the past four years, 100 of its stores nationwide will be closing, 37 of which are located in Northern California.

These �under-performing stores� did not bring an acceptable return on investment to owners, according to Albertsons spokeswoman Quyen Ha. And the consequences for Albertsons employees?

How many of them will become jobless is not yet known. Contrast their bitter fate with that of Larry Johnston, CEO of Albertsons.

Mr. Johnston earned about $60 million as Albertsons shareholders lost around $900 million between 2000 and 2003, said Graef Crystal, a business professor at UC Berkeley, in a report on KTVB NewsChannel 7, the NBC station in Boise, Idaho on July 8, 2003. Nice work if you can get it.

Albertsons competes for profits and market share in the grocery industry with discounter Wal-Mart Stores Inc., owned by the Walton family of multi-billionaires. Their wealth is built on the backs of Wal-Mart�s hourly work force, which earns lower wages than unionized Albertsons workers.

As the good Marxists in corporate America know, low wages plus high productivity boost profit rates. Driven thusly, grocery companies compete to undersell their rivals and put them out of business.

Wal-Mart is pursuing this strategy with a vengeance in California. In early 2006, Kroger-owned Ralphs fell to the Wal-Mart discount rout, departing the Sacramento area, having shut down eight of its stores in the capital region.

Two years earlier, unionized Southern California grocery workers endured a five-month strike and lockout, trying to prevent Safeway-owned Vons, Ralphs and Albertsons from making deep cuts to employees� health benefits and hourly wages. On one hand, the employers did not get all of the cuts they wanted at the end of the five months.

On the other hand, new-hire grocery workers in the south of the state were forced to labor for lower wages and fork out higher co-pays for their health benefits. The grocery chains had sought such cuts due to competition from Wal-Mart.

It is unclear how many Albertsons workers will be fired as a result of the upcoming store closures. What is clear is that overcapacity runs a red line through the U.S. economy, from airlines to cars, and more.

Currently, the shake out underway in the marketplace of U.S. grocery chains is falling hard on wage earners. They are living the lives of pay cuts and layoffs under President George W. Bush�s �Ownership Society.�

National health care would provide a cushion for the human harm created by overcapacity in the U.S. economy. It is time to think and act outside the box of the usual labor union-company agreements fueled by market share and profits.