LANDOVER, Md. (FNS) -- Safeway last week said it has decided to build an $85 million distribution facility to service its East Coast stores instead of following an industry trend and contracting the service to an outside company.
The decision, revealed in a press conference here, came after almost three months of negotiations with Teamster officials representing 700 employees at the Oakland, Calif.-based chain's existing, outdated East Coast warehouse. A Safeway spokesman said a series of contract changes involving such issues as scheduling and job assignments were worked out to save $7 million a year. No wage concessions were made, the company said.
Union officials couldn't be reached for comment.
If this savings hadn't been realized, Safeway planned to contract with C&S Wholesale Grocers of Brattleboro, Vt., to service the supermarket's 124 East Coast Stores. C&S is carving out a growing distribution niche and last year added Grand Union, Wayne, N.J., and Edwards, Windsor Locks, Conn., to its list of clients. C&S supplies stores along the East Coast from its three New England distribution centers.
Although C&S would have saved Safeway $12 million, the supermarket spokesman said the chain nonetheless opted to maintain control over distribution. "We put a value on retaining control of the distribution," the spokesman said.
The new distribution center will be completed within 18 months and located about 20 miles from the current facility in Landover, Md. The new center will be the same size as the old -- about 700,000 square feet -- but more modern and efficient.
If Safeway were to have contracted with C&S it would be the first time the Oakland, Calif.-based chain sought outside distribution on a large scale. The company spokesman said even with the new warehouse the chain will continue to use a third party for frozen foods distribution on the East Coast. Safeway is opening six supermarkets in Maryland, Virginia and the District of Columbia this year.