As the big grocery company puts itself up for sale, its 80,000 union workers wonder what the future holds.
Organized labor has never made much headway in retail, with the crucial exception of the grocery aisle: The nation's largest traditional supermarket companies, including Eden Prairie-based Supervalu, have long been heavily unionized.
But with Supervalu's future in doubt, a pall of uncertainty has settled over the company's 80,000-plus union workers, including 68,000 members of the United Food and Commercial Workers, many of whom work at Cub Foods, the Twin Cities' largest supermarket chain. Parts or all of Supervalu could be sold, and some buyers could have little regard for union labor.
Meanwhile, scores of labor contracts at Supervalu -- one of the nation's largest supermarket operators -- are currently up for renegotiation, and the company's possible dismantling will only muddy the negotiating process.
"Uncertainty is the enemy of collective bargaining," said John Budd, a labor relations expert at the University of Minnesota's Carlson School of Management. "The more uncertainty there is, the harder it is for negotiators to read the environment and figure out what their options are."
In Supervalu's current fiscal year, which began Feb. 26, contracts covering 42 percent of its unionized employees are set to expire, according to a federal securities filing. In the Twin Cities, Cub's two main contracts with the United Food and Commercial Workers (UFCW) expire in early March and early April 2013.
Despite Supervalu's turmoil, local UFCW leaders say they're not worrying yet, given that Cub is regarded as one of Supervalu's more solid chains.
"I think our membership will be OK because Cub is a strong market leader," said Don Seaquist, president of UFCW Local 1189, which represents grocery workers in St. Paul and Duluth. "They hold their own in the metro area."
Ray Sawicky, president of UFCW Local 653, which represents west metro grocery workers, agreed. "At this point the threat level is green [low], but in a few months it could be red." Given the uncertainty, the outlook for union workers could change quickly, he said.
Each with about 10,000 members, UFCW locals 653 and 1189 are two of Minnesota's larger union locals of any kind. They represent workers at several supermarket chains, including Rainbow, Byerly's and Lunds.
But Cub, with over 3,000 union employees in Minnesota, is the two locals' largest employer. And in July, Cub's embattled owner Supervalu -- its stock at a 30-year low and its sales in a free fall -- put itself up for sale, whole or in pieces. The company is simultaneously trying to engineer a turnaround.
Supervalu operates 11 chains and runs a large grocery wholesale business, which includes a sprawling operation in Hopkins with just under 700 workers represented by Teamsters Local 120.
Roughly 60 percent of Supervalu's 130,000 workers nationwide are unionized, the majority of them UFCW members. Only Cincinnati-based Kroger and northern California-based Safeway have more UFCW supermarket members than Supervalu.
By putting itself on the block, Supervalu has created an array of scenarios for its union workers. "The worst case scenario is that a [Supervalu] chain gets sold to a company or [private equity] fund that is aggressively antiunion and aggressively concerned with cost cutting," said the U of M's Budd.
Any expense shearing would come on top of waves of cost-cutting already undertaken by Supervalu. The chain has laid off more than 4,000 union and nonunion employees over the past two years, including about 200 part-time workers at Cub.
Private equity buyers could also pose a problem for union workers since they are primarily looking for short-term profits, often by slashing costs and selling assets, including real estate, Budd said.
"The best-case scenario for [workers at a Supervalu chain] is to be bought by another heavily unionized organization," he said. For Cub, that would most likely mean Kroger, which has little presence in Minnesota. Cub could give it instant market heft.
But Supervalu has a challenge fetching a fair price for some of its chains, regardless of whether the buyer is union or nonunion, analysts say.
"If they could get somebody to buy Shaw's or Acme or Albertsons I think they would do it in a heartbeat, but nobody wants them," said John Dean, a Twin Cities supermarket consultant.
Jewel 'valuable asset'
Shaw's and Acme are Supervalu-owned chains respectively in New England and Philadelphia, while Albertsons is a western banner particularly big in Southern California.
Jewel, Supervalu's chain in Chicago, is generally seen as its best traditional supermarket asset. Despite losing share in recent years to discounters, Jewel remains the dominant grocer in the Chicago market.
Only one other major Supervalu chain is No. 1 in its market: Cub.
"Jewel is a very valuable asset, and so is Cub," Dean said. "Cub is successful even though others in the retail grocery business in the Twin Cities are taking market share."
Indeed, Cub's Twin Cities market share of 20 percent in 2011 is down from 24 percent in 2006, according to a recent report from Barclays citing data from Metro Market Studies. But conventional supermarkets everywhere have been losing share for decades with the rise of groceries at Wal-Mart, Target and other nonunion discount operators.
And since many of those conventional stores were unionized, organized labor has lost out, too.
About 19 percent of all grocery workers were covered by labor contracts in 2011, down from 28 percent in 1991, according to federal statistics compiled by Barry Hirsch, an economics professor at Georgia State University.
However, the rate of union decline in the supermarket industry has leveled off in the past decade. And some unionized grocery chains still thrive, perhaps most notably Kroger, the country's largest supermarket operator along with nonunion Wal-Mart.
Over the past five years, Kroger's sales have grown 37 percent and its earnings per share have mostly climbed, including a 14 percent bump in its most recent fiscal year.
Mike Hughlett • 612-673-7003