LANDOVER, Md. (FNS) -- Giant Food here replenished its stocks and launched into a post-strike marketing mode last week after an agreement was reached with striking truckers who disrupted supply channels for five weeks.
The supermarket's offer of lifetime job security for its 320 Teamster-member drivers is what clinched the settlement, reached last week. In return, the union's Local 639 said it won't protest the chain's expected increased use of direct-store-deliveries by suppliers at stores in Giant's new expansion area of Pennsylvania, New York and New Jersey, clustered in the Delaware Valley.
For Giant's established area around Washington, the new contract spells out when direct-store-deliveries will be permitted. Essentially, the chain can contract out delivery of products within a merchandise category, such as lettuce and stonefruits within the perishables segment. The contract, however, bars Giant from replacing the chain's trucker deliveries of an entire category by outsiders.
Giant's interest in reducing trucking costs through DSD prompted the walkout. Wages weren't at issue. Indeed, although current drivers will receive a $500 annual bonus, the union agreed to a wage freeze for existing employees and a lower starting salary for new drivers of $13.50, which would increase to $19.07 over the contract's five-year life. The base wage for current drivers is $19.07.
"I think the only real break they got in outsourcing is in the Delaware Valley stores," said John Steger, president of Local 639. "The explanation the company has given is that those stores just aren't doing well enough and they want to supply them cheaper."
Commenting on the settlement, a Giant spokesman said, "We are very pleased with the contract settlement because we strongly wanted to gain the efficiencies that will be generated by subcontracting."
The spokesman added that about 10% to 12% of the chain's deliveries are made by outside contractors and he wouldn't estimate how much that might increase in coming years.
Moreover, he said that while Giant's overall sales were negatively affected and market share was lost -- the extent of which he declined to estimate -- the chain's expansion plans remain on track. He said the company is planning an advertising and promotion campaign to win back lost business.
"We're going to do all we can to bring back customers and attract new customers to Giant Food," he said.
Wall Street analysts expect the effects of the strike, which also idled the chain's central bakery and 2,000-worker warehouse, to be short-lived. Customer frustration from product shortages was widely reported as Giant struggled to maintain a temporary supply channel pieced together with wholesalers.
"I think they came out of the strike in fairly good shape, given that it got some flexibility with outside delivery and a two-tier pay system with the Teamsters," said Kurt Funderburg of Ferris Baker Watts.
"They will ultimately regain the market share they have lost, but I think it will come at a cost," he said. "They will have to pay more on promotion and advertising as a result of the strike, which will have further effect on the bottom line."
