STRIKE COULD DRIVE SAFEWAY OUT OF CANADA: ANALYSTS

David Ghitelman

PLEASANTON, Calif. -- A strike by supermarket workers in British Columbia that analysts say could cause Safeway here to sell its Canadian operations is scheduled to begin next Monday.

United Food and Commercial Workers Union Local 1518, Vancouver, British Columbia, which represents 4,700 cashiers, grocery and produce clerks at 49 Safeway supermarkets in the southern part of the province, said last week its members would go on strike one minute after midnight on Monday morning "if there is not a ratified collective agreement in place prior to the deadline."

Earlier this month, in an election requested by Safeway and supervised by the British Columbia Labour Relations Board, the local's membership voted 55% in favor of rejecting the company's final offer.

Previously, in August, union members, whose most recent contract expired in March, had followed the recommendation of their leadership and voted 53% in favor of rejecting substantially the same offer. In April, the membership had voted 98% in favor of authorizing a strike.

The dispute, according to the union, centers on a variety of issues, including wages, wage tiers, job classifications and pension benefits. Or as a union spokesman told SN about Safeway's last, best offer: "It's not good enough."

Representatives of Safeway Canada could not be reached for comment.

Analysts told SN that a strike now could propel Safeway to leave Canada.

Perry Caicco, an analyst with CIBC World Markets, Toronto, said that Safeway's future north of the border "very much depends on the outcome of this labor issue. If they get the contract they want, they would not go."

Asked what Safeway might do if the union decides to strike, Caicco replied, "In that case, they might be seeking other options."

Gary Giblen, senior vice president and director of research, C L King Associates, New York, said, "Safeway has clearly drawn a line in the sand. They must get union concessions. They've seen the fruitlessness of getting mired in a bad situation."

Caicco explained that in British Columbia, Safeway was attempting to get wage parity with Real Canadian Super Stores, the Western Canadian supercenter chain operated by Loblaw Cos., Toronto. "RCSS is the price leader, and is gaining share," he said. "In most people's opinion, Safeway has been the highest-priced player in the market out there."

Safeway has had a troubled labor history in the province. In 1996, the company suffered through a 40-day strike at all 86 of its stores in British Columbia, where provincial laws forbid the hiring of replacement workers during a labor dispute. That strike, and an overlapping 44-day strike in Denver, cut company profits by about 6 cents per share, according to Andrew Wolf, an equity analyst with BB&T Capital Markets, Richmond, Va.

Wolf estimated that because of the forced store closures, the Canadian strike was responsible for probably about 4 cents per share of that damage. He said that the company's financial pain from a strike could be smaller this time around because fewer stores are involved.

Caicco noted that at the heart of Safeway's difficulty with labor in British Columbia may be a cultural difference. Canadian companies, he said, tend to be more accommodating to labor than their U.S. counterparts.

"Canada's a very unionized country," he observed. "Most companies have found that they have to have a strong working relationship with the union. The union has to be a participant.

"In the U.S., it's more us vs. them. That doesn't play well in Canada."

The UFCW spokesman raised a similar issue. He noted that until the last year or two, Safeway Canada had been relatively autonomous. "Now, there's more control out of California than in the past," he said.