Ralphs Supermarket
A Ralphs marketplace in Southern California. Photo via Wikimedia Commons.

Earlier this month, the union contract between multiple chapters of the United Food and Commercial Workers Union and Ralphs expired for tens of thousands of grocery store workers in Southern California.

Naturally, there is a disconnect between what the union is demanding and what employers are willing to offer. While the union locals are pressing for substantial hourly wage increases for each of their members, Ralphs is approaching negotiations with three goals in mind: increasing wages for its employees, keeping groceries affordable for Californians, and operating a sustainable business.

Last fall, I was commissioned to conduct an analysis of the Kroger family of companies’ compensation packages for employees across four states, including California. Our report found that not only is Ralphs’ pay exceptionally competitive compared to its retail peers, Ralphs also plays an important role in Southern California communities — donating 10 million meals and providing $21.1 million in community giving in 2020.

Unsurprisingly, the union has underwritten a survey that cherry picks its own data points to show its membership is struggling to make ends meet, blaming grocers like Ralphs for their economic hardship. Rather than relying on subjective survey results, our report tells the real story by relying on complete government and corporate data for every employee in California.

When comparing Ralphs’ average hourly wages and benefits to government data, our analysis found Ralphs was significantly higher than the average hourly wages and benefits of all workers in the U.S. retail industry. The data proves that Ralphs pays its store employees fairly. In fact, Ralphs offers a market-leading compensation package.

One of the results of making these industry-leading investments in its employees while offering affordable groceries for Californians is a slim profit margin. Like other traditional grocers, Ralphs operates on a razor-thin margin of approximately 2%. This means that for every dollar Ralphs earns, only two cents are profit.

Ralphs and grocery retail profits are less than half of the private sector’s overall margin of 5.1%. Especially in Southern California, where Ralphs has only an 11% market share, a 2% profit margin makes it even more difficult to maintain and operate a sustainable business while still investing in wage increases without sending the price of groceries skyrocketing.

Notably, many of the other grocers vying for market share in California are non-union. By making unrealistic contract demands of unionized grocers, the union is making its members’ employers less competitive compared to its non-union counterparts — hurting their workforce in the long term.

Between increasing wages and managing the impact of record 7.9% inflation, grocers like Ralphs have a tough road ahead. For example, if Ralphs were to accept all of the terms outlined in the union’s proposal, unprofitable stores or those on the verge of becoming unprofitable would no longer be sustainable to operate after factoring in these additional costs.

That would mean the union’s proposals would likely force Ralphs to make the tough decision of passing additional costs onto Californians through higher grocery prices.

While this outcome isn’t desirable, I remain confident that Ralphs will reach an agreement that further rewards its employees, while still providing affordable groceries in Southern California communities and operating a sustainable business.

Kroger’s total economic impact in California each year amounts to $23.1 billion. Moreover, the company operates 297 stores under its Ralphs and Food 4 Less/Foods Co. brands, touching every corner of the state.

At the end of the day, the evidence is clear. Ralphs puts its employees first. And grocery shoppers throughout the Golden State know better than to believe any spin that claims otherwise.

The next time you are in the checkout line, please thank our neighborhood frontline grocery store workers for their unsung service. And let’s also remember the valuable contributions companies like Ralphs make to its Southern California employees, their families, and the diverse communities they serve.

Nam D. Pham, Ph. D., is managing partner of ndp | analytics, a strategic research firm that specializes in economic analysis of public policy and legal issues. The Kroger Company provided financial support to conduct the study “Kroger Stores Benefit Western Communities: An Assessment of the Enterprise’s Compensation Packages and the Economic Impacts in the West.”