How a union can lose its clout
The fall of a meatpackers union sends a grim warning to striking south state grocery workers.
By Dale Kasler -- Bee Staff Writer - (Published November 3, 2003)

If striking Southern California grocery workers believe their middle-class existence is being threatened by powerful new trends, their union leaders know the feeling all too well.

The United Food and Commercial Workers, which represents the 70,000 supermarket workers striking in Southern California, fought a similar battle about 35 years ago in the Midwest meatpacking business -- and lost.

Over time, a middle-class occupation became a low-wage job. Now some experts believe history could repeat itself in grocery stores.

Labor historians said the economic forces at work three decades apart are eerily similar: A new company enters an industry, armed with new technologies and a ferocious dedication to taking costs out of the business. Its arrival forces established companies to change their ways or face extinction. Wages fall.

Today the company is Wal-Mart Stores Inc., the retailing colossus that is making a huge splash in the supermarket business with state-of-the-art inventory systems, massive purchasing power -- and nonunion pay scales.

Traditional supermarkets, citing the threat from 40 supermarkets Wal-Mart plans in California, are demanding wage and benefit concessions from their workers.

That prompted strikes in Southern California and several Midwest cities, strikes that could spread to Sacramento when grocery contracts expire next summer. (One of the Midwestern strikes, in St. Louis, was settled Friday.)

In the 1960s, the company was an up-and-comer called Iowa Beef Processors Inc. It revolutionized meatpacking with assembly-line technology that demanded far fewer skills of its workers -- and paid lower wages. It clobbered old-line competitors such as Swift and Armour and, through a series of contentious and sometimes violent strikes, succeeded in cutting pay.

"There is definitely a parallel," said Nelson Lichtenstein, a labor historian at the University of California, Santa Barbara. "Wal-Mart combines the same things as IBP: technologically proficient ... with a super hard-line labor policy.

"You have the transformation of the industry (and) a sort of ratcheting down of labor standards."

The UFCW fears that supermarket wages, which average about $13 an hour in Southern California, could be driven to the $8-an-hour range that retailing consultants say is paid by Wal-Mart.

That would track what happened in meatpacking: When IBP was founded in the early 1960s, packinghouse workers earned 16 percent more than the average American factory worker, according to the Bureau of Labor Statistics. Today they earn 25 percent less.

"They had gone from being very well paid, the kind of manufacturing job that fathers handed down to sons -- in a 30-year period they became underpaid," said Donald Stull, a University of Kansas anthropologist who's studied meatpacking workers.

UFCW officials say the supermarket chains are exaggerating the Wal-Mart threat in order to fatten up their profits. But they also acknowledge that Wal-Mart's growth in the grocery business took them by surprise, and they're well aware of the IBP precedent.

"There is some reason to be concerned," said longtime UFCW official Al Zack, who worked with the meatpacking locals in the 1980s and now oversees the union's efforts to organize Wal-Mart employees. So far those efforts have been largely unsuccessful.

Zack, assistant director of strategic programs at the union's headquarters in Washington, D.C., said Wal-Mart's supermarket strategy "snuck up on people" in the union in the late 1990s. Similarly, IBP quietly built up its strength in meatpacking in the 1960s and 1970s until it became practically unstoppable, he said.

"If there's a parallel between the two companies, it's the focus on bringing value to the customer," said Gary Mickelson, a spokesman for IBP, now part of Tyson Foods Inc. "IBP's primary focus was not on wages or being the biggest, it was simply about providing a high-quality product in a more efficient way."

IBP's genius was in technology and geography. It automated the meatpacking process, bringing assembly-line systems to what had been a high-skill craft of cutting up animal carcasses.

The change enabled IBP to cut carcasses into smaller pieces, enabling supermarkets to trim their costly butcher staffs. That gave IBP a marketing edge over other meatpackers, said Roger Horowitz, a University of Delaware labor historian.

In addition, the automation let IBP pay its own workers far less.

"They broke down the disassembly process into smaller and smaller activities," Stull said. "One person is making the same cut or same activity over and over and over. When the skills go down, you don't have to pay as much."

Meatpacking then moved from urban centers such as Chicago and Kansas City to the rural Midwest, away from the union strongholds. By the time it picked up on what was happening, the Amalgamated Meatcutters' Union, the forerunner of the UFCW, was overmatched.

"It was a real rout for a while until we got ourselves a little bit better organized," Zack said. Even after it organized some plants, staged several strikes and made some gains in pay and benefits at certain plants, the union was largely forced to make significant wage concessions. IBP's success left other meatpackers in ruins and gave rise to a new generation of low-cost, low-wage firms.

Wal-Mart got big by dominating small-town America, especially in areas far removed from unions. It brought remarkable technological innovations to retailing, including sophisticated ordering and inventory systems that substantially reduced costs. It also used its size to obtain better terms from suppliers.

Wal-Mart moved headlong into the grocery business in the late 1990s, when it introduced its Supercenter concept -- megastores that sell groceries along with general department-store merchandise. Since then, it has become the nation's largest supermarket chain, with $82 billion in annual sales and 19 percent of the market.

"Wal-Mart's growing domination of consumers' grocery and drug spending will devastate the competition and place new demands on suppliers," says the consulting firm Retail Forward. "As Wal-Mart grows, it will transform its competitors, its suppliers and the industries it dominates."

Peter Kanelos, a Wal-Mart spokesman, declined to comment on any parallels with IBP and said predictions of Wal-Mart's dominance in the California food industry are overblown.

"Can we really have that much of an impact?" he mused. "It doesn't seem like 40 supercenters pose much of a threat."

Retail industry analysts counter that this number is just the start.

Wal-Mart owes part of its grocery success to IBP. In 2000, butchers at a Wal-Mart supermarket in Texas voted to join the UFCW. The retailer then closed its butcher departments nationwide and sold only "case-ready" beef -- meat that was precut at a specially designed IBP packinghouse in Iowa and didn't need further butchering at the supermarkets.

Wal-Mart said it was shifting to case-ready beef anyway and didn't act to keep the union out. After the union complained, a National Labor Relations Board judge ordered Wal-Mart to reopen the Texas butcher department and bargain with the workers. Wal-Mart is appealing.