Dominick’s
Conscientiously Owned
and Operated
Initiative
For Full Employment
Presented September 2005
Table
of Contents
Section
One: Executive
Summary
Section
Two: Objectives
Section Three: Profit Margins
A.
Chicago, Illinois Unemployment Statistics
B.
Correlation Between Unemployment and Societal
Ills
C.
Black Spending
a.
Patterns
b.
Potential
Section
Five: The
Grocery Industry
Section
Six: Safeway
Section
Seven: Dominick’s
A.
Company Analysis
a.
Market Share
i.
Location
ii.
Competition
b.
Employees
c.
E-Commerce
B.
Dominick’s Financial Data
Section
Nine: E-Commerce
Section
Ten: Real Estate
Section One: Executive Summary
According to the Illinois Coalition
for Jobs, Growth & Prosperity, “Too many people in
Illinois are out of work. For more than a decade, our great
state has fallen behind the Rest of the Midwest (RMW:
Indiana, Michigan, Missouri, Ohio and Wisconsin) and the
Nation in job growth. Unlike our neighboring states,
Illinois' job losses continue to threaten our future. In
fact, if we had just kept up, we would have hundreds of
thousands more working men and women right now:”
Illinois would have 432,000 more
jobs (monthly average) in 2004 if each sector had grown at
National rates since 1990.
Illinois would have 244,300 more
jobs (monthly average) in 2004 if each sector had grown at
the RMW growth rate since 1990.
Since January 1990, 212,100 Illinois
manufacturing workers lost their jobs. These numbers are
especially troubling when you put a face to them, for each
job loss is a personal tragedy for a family and the
community in which they reside. Clearly the answer to a
brighter economic future is job growth.
CFABC is advancing this initiative to foster full employment in Chicago,
because we recognize that unemployment promotes poverty,
which is fast becoming an urban phenomenon capable of
devastating current and future generations of disadvantaged
people. We understand that many
communities are impoverished, not because of a lack of
dollars available to members of the community, but because
of faulty spending patterns.,
The survival of the urban poor who live from paycheck-to-paycheck is
inextricably tied to the behavior of urban labor markets,
especially the capacity of these local markets and
industries to generate serious employment. Experts have
examined the historical inhibitors and constraints to
employment creation by urban companies, and have found a
lack of effort or general unwillingness to increase
permanent employment.
Consequently,
this initiative outlines a concept for conscientious
ownership and control of Dominick’s, ideally, through an
existing corporation, or a new one expressly created to
fulfill this purpose. This corporation would be managed and
directed by proven Grocery industry professionals.
Management’s first priority would be to ensure a
beneficial operation in every since of the word.
Although
there are other formidable options, we have chosen to focus
on the purchase of Dominick's Finer Foods, the
second-largest supermarket operator in the metropolitan
Chicago area. Dominick’s is still an under-appreciated
member of the large Safeway
family. Dominick's has about 100 stores; 70 of them are
combination food stores and drugstores, offering such
services as expanded produce areas, floral departments, and
in-store cafes, under the Dominick's Fresh Store name. The
rest are mostly conventional supermarkets. Dominick's also
operates a commissary that produces its prepared foods.
After paying
about $2 billion to acquire the chain in 1998, some industry
analysts said Safeway would only get about $350 million to
$400 million during last year's efforts to sell the
division. They blamed the company's mismanagement of
Dominick's for causing it to tumble from a strong second
position in the nation's third-largest retail market to weak
competition for the dominant Jewel-Osco chain, owned by
archrival Albertson's Inc.
The Grocery industry is ripe for
expansion and development throughout Chicago, especially
within the Black and Latino neighborhoods. In it’s
recently released “Race, Place, Policy, and the State of
Black Chicago” the Chicago Urban League concluded, “Part
of the health problem for African-Americans may be a
shortage of full‑service grocery stores selling fresh
fruits and vegetables necessary for a good diet.”
In fact, “Twenty of the city’s
23 Dominick’s are in disproportionately white
neighborhoods. Thirty-three of the city’s 40 Jewel’s are
in such predominantly Caucasian community areas.”
Additional jobs creation could be realized through an
aggressive Dominick’s Expansion Plan, which would result
in saturation of local shopping communities. This could be
achieved through the development of small to mid-sized
grocery stores 1.4 miles apart. This expansion would provide
much needed access to quality stores and substantially
increase local employment.
This
forceful expansion program would be similar to the one being
employed by banks building and opening branches in
Chicagoland neighborhoods at an unprecedented rate. The
corporation would utilize programs and funding from State
and Local governmental agencies, designed to encourage
employment creation.
Grocery industry experts recognize
that small grocers can grow and prosper even with new
superstore competition. Generally, small food stores cannot
compete on the basis of price and selection, but they can
offer special products and services that the superstores do
not offer. These factors and the ability to fill these
voids, particularly in the Black community, lends itself to
the viability of the additional Dominick’s stores this
initiative recommends.
In examining this initiative for profitability, we must look
beyond the profit from product sales and services. We must
also consider the long-term profitability from the purchase
and eventual sale of Real Estate, acquired for company
development and expansion purposes
The
potential for Dominick’s increased profitability through
brick and mortar expansion, is enhanced as a result of the
growing acceptability of E-Commerce, and increased use of
online shopping for home delivery. Thus, a combination of
traditional grocery stores and bricks and clicks outlets has
tremendous growth potential.
Through this
initiative, using Dominick’s as an anchor, full employment
in Chicago can become a reality.
Section
Two: Objectives
To foster
Full Employment within Chicago’s underserved communities;
To dominate
of a specific market or industry central to jobs creation;
To promote
community and economic development;
To develop a
model for Full Employment that may be applied in communities
throughout the entire country;
To further
enable indigenous people to shop within their local
community;
To
strategically expand the Dominick’s market and, thereby,
allow Chicagoans to benefit from dollars spent by diverse
consumers, nationwide.
Section
Three: Profit Margins
Profit margins in the grocery retail
industry are very narrow. In order to increase or maintain
acceptable profit margins, management must develop
strategies to reduce costs, such as productivity
improvements, shrink reduction, distribution center
efficiencies and other similar strategies. Failure to
achieve forecasted cost reductions might have a material
adverse effect on the corporation.
On the other hand, changes in the
product mix may also be key to Dominick’s increased
profitability.
Section
Four: Situational Analysis
The need for
Full Employment in Chicago’s has never been more obvious.
The greatest need is within the Black community. Currently
the U.S. rate of Black unemployment is just shy of 10%. This
is disproportionately higher than among other racial and
ethnic groups. An increase in Black employment would
substantially strengthen Chicago, and overall, reduce the
need for welfare and charity.
Chicago’s
highest level of unemployment is within the geographic Black
community. Among the key contributing factors is the fact
that Blacks do not own a significant percentage of the
businesses operating within the Black community. Since most
employers tend to hire family, friends, and people who look
like them, Blacks are the last to be hired, even by owners
and entities operating within the Black community.
Historically,
there has been inadequate Black consumer spending with Black
businesses. Arguably, Black’s would spend more with Blacks
if there were more expertly marketed Conscientiously owned
businesses in the community offering high quality products
at reasonable prices. Through this initiative, we endeavor
to promote the development of such a business.
Conscientious
ownership, operation, and control of Dominick’s, with a
plan for further saturation of the market through the
development of small to mid-sized grocery stores,
approximately 1.4 miles apart, would provide unprecedented
opportunity for people to shop within their communities.
Additionally, such expansion through additional store
development would foster the creation of good paying union
jobs with benefits. This would facilitate employment of
people who live in the community. These additional
Dominick’s employees would likely spend in the their
community, thereby strengthening the community tax base, and
fostering the creation of residual employment, within other
entities that flourish as a result of increased spending.
We have
chosen demonstrate the awesome potential of this initiative
by focusing on the community most chronically in need of
employment and opportunity. According to the Chicago Urban
League, the 2000 U.S. Census concluded, ”black median
household income was just 58 percent of white median
household income in the metropolitan area. The median income
of the average neighborhood inhabited by African-Americans
in the Chicago metropolitan area ($36,298) is just 59
percent of the median income in the average neighborhood
inhabited by whites in the same metropolitan area
($61,952).”
Furthermore
the Chicago Urban League informs us that, “a fourth of the
metropolitan area’s black households were officially poor
in the 2000 Census, compared to just 5.6 percent white and
16 percent of Latin households. Sixteen percent of the
central city’s blacks were living in what researchers now
call “deep poverty” – at less than half of the federal
government’s notoriously low and inadequate poverty
level.”
According to
new data from the Selig Center for Economic Growth at the
University of Georgia, total buying power for all U.S.
consumers rose from $4.3 trillion in 1990 to $9.9 trillion
in 2000.
It is projected that in 2007,
African Americans may account for 62 percent of combined
buying power, or $853 billion.
While buying power for the white
market should increase 112 percent between 1990 and 2007,
buying power for Latinos should increase by 315 percent;
Asian Americans should increase by 287 percent; and African
Americans by 170 percent.
A.
Use of the term “Black Spending” versus
“African American Spending”
In
this context, the term Black spending is preferred because
it encompasses not only African Americans, but also persons
from other cultures and countries, who are similarly
situated and perceived to be African American.
“The
latest findings demonstrate how resilient the black consumer
market is,” said Ken Smikle, president of Target Market
News and publisher of the report. “African‑Americans
are still showing a rise in income and they are having a
tremendous impact on the marketplace, and manufacturers
cannot afford to take them for granted.”
According to a Target Market News report, black households
had $631 billion in earned income in 2002, an increase of
4.8% over the $602 billion earned in 2001
a.
Black Spending Patterns
Target
Market News found, that while other ethnic groups are
growing in population, black consumers are still
out-spending all other groups in apparel, food, beverages,
cars, and trucks, home furnishings, telephone service and
travel.
Additionally, Target Market News found the purchases made by
black women are the single biggest influence on the growth
of African-American spending. With more income to spend,
black women have increased expenditures over last year in
categories in which they are the dominant buyers. These
include child care (+8%), personal care products (+18%),
gifts (+155%), food (+3%), women’s apparel (+2%),
women’s footwear (+13%).
b.
Chicago Black Spending Potential
Eclipsed
only by New York, Chicago is the number two Black spending
market within the United States.
c.
Employment
Bureau of Labor Statistics of the U.S. Department of Labor, JULY 2005
Nonfarm
employment grew by 207,000 in July, and the unemployment
rate was unchanged at 5.0 percent. Over the month, payroll
employment rose in many service‑providing industries.
d. Unemployment
Bureau
of Labor Statistics of the U.S. Department of Labor, JULY
2005
Both
the number of unemployed persons, 7.5 million, and the
unemployment rate, 5.0 percent, was unchanged in July. A
year earlier, the number of unemployed was 8.2 million and
the jobless rate was 5.5 percent.
Over
the month, the unemployment rates for most major worker
groups—adult men (4.3 percent), adult women (4.7 percent),
teenagers (16.1 percent), whites (4.3 percent), and
Hispanics or Latinos (5.5 percent)--showed little or no
change. The
jobless rate for blacks declined from 10.3 to 9.5 percent
over the month. The
unemployment rate for Asians was 5.2 percent, not seasonally
adjusted.
Persons
Not in the Labor Force
In
July, 1.5 million persons were marginally attached to the
labor force, about the same as a year earlier.
These individuals wanted and were available to work
and had looked for a job sometime in the prior 12 months.
They were not counted as unemployed, however, because they
did not actively search for work in the 4 weeks preceding
the survey. There were 499,000 discouraged workers in July,
about the same as a year earlier. Discouraged workers, a
subset of the marginally attached, were not currently
looking for work
e.
Black Unemployment
Over the past several decades the
unemployment rate for blacks has been double that of whites.
The exception was at the start of the new millennium. Black
unemployment fell to below 7 percent in 1999 and 2000, the
lowest rate on record, says Betsy Leondar-Wright, a
sociologist and co-author of the State of the Dream 2004.
At the time black workers were enjoying
the highest level of employment, the nation also was
experiencing unprecedented economic growth. Overall
unemployment in 2000 was at an all-time low of 4 percent
and, contrary to what many economists theorized, black
unemployment dropped, too, without setting off inflation.
But now black workers are battling the
worst job market in 25 years. And, in an anemic economy,
black workers have a harder time bouncing back, says Leondar‑Wright
and other observers.
f.
Correlation Between Unemployment and Societal Ills
Employment constitutes the main, and frequently the only source of
income for most families living in urban areas, so more
often than not the lack of it leads to poverty. Labor income
accounts for as much as 90 percent of total expenditure and
at least 75 percent of total income among poor (non-poor)
households in urban areas.
The
survival of the urban poor who live from
paycheck-to-paycheck is inextricably tied to the behavior of
urban labor markets, especially the capacity of these local
markets and industries to generate serious employment.
The
poor tend to be less educated than the non-poor and they
tend to work smaller, informal firms, which have low levels
of labor productivity and appear to face the most
constraints to employment creation and expansion. Training
policies and policies aimed at the promotion of micro and
small enterprises may then go a long way in helping the
urban poor.
It
is a well-documented and well-accepted fact that poverty
breeds crime, hopelessness and despair. Arguably, many of
the ills, idiosyncrasies, and dysfunctional attributes
present in Chicago’s Black community are attributable to
unemployment. We have to do more than just talk about the
ills in our community we must act to eliminate them.
Experts
have examined the historical inhibitors and constraints to
employment creation by urban companies, and have found a
lack of effort or general unwillingness to increase
permanent employment. The need for this initiative, designed
to reverse this trend, has never been greater.
This
plausible Dominick’s conscientiously owned and operated
initiative may very well be the silver bullet capable of
eradicating poverty and despair within communities
everywhere.
Section
Five: The Grocery Industry
Retail grocery sales were approximately $650 billion
nationally in 2004 and retail food sales were $425 billion
in 2004.
Supermarkets accounted for 55% of the US retail grocery
market, followed by convenience stores with 16%,
warehouse/clubs with 9%, and dollar stores with almost 2%
during the year.
In 2004, fruit and vegetable sales were approximately $74
billion and are predicted to grow 15% in the US from 2004 to
2008.
Growth areas include private label, home meal replacements,
organic and natural foods, ethnic foods, and online grocery
sales.
By 2008, the US retail grocery industry is projected to reach
$720 billion.
The
Average Profit Margin in the Grocery industry is 2%.
Dominick’s achieves a greater return per square foot, as
well as per employee than the average Grocery store.
The
potential for increased Dominick’s profitability through
brick and mortar expansion is enhanced as a result of the
growing acceptability of E-Commerce, and increased use of
online shopping for home delivery. Thus, a combination of
traditional grocery stores and bricks and clicks outlets has
tremendous growth potential.
SUPERMARKET
FACTS
Industry Overview 2004
(These
operating results are typical of FMI’s member
supermarkets. They represent average performance based on
data from a cross-section of FMI members.)
|
Number
of employees- 2002
|
3.4
million
|
|
Total
supermarket sales-2004
|
$457.4
billion
TREND
|
|
Number
of supermarkets--2004 ($2 million or more in annual
sales)
|
34,252
TREND
|
|
Net
profit after taxes, 2003/2004
|
0.88%
TREND
|
|
Median
Average Store Size in Square Feet
|
45,561
TREND
|
|
Weekly
sales per supermarket 2003
|
$348,130
TREND
|
Percentage of disposable income spent on food--USDA figure for 2003 food-at-home food away-from-home
|
6.1%
4.0
TREND
|
|
Weekly
sales per square foot of selling area-2004
|
$8.68
|
|
Sales
per customer transaction-2004
|
$24.64
|
|
Sales
per labor hour-2004
|
$79.77
|
|
Average
# of trips per week consumers make to the
supermarket-2004
|
2.2
|
Sources: U.S. Department of Labor,
U.S. Department of Agriculture, Progressive
Grocer magazine, U.S. Census Bureau, and Food
Marketing Institute
Food Marketing Institute (FMI)
conducts programs in research, education, industry relations
and public affairs on behalf of its 1,500 member companies -
food retailers and wholesalers - in the United States and
around the world. FMI's U.S. members operate approximately
26,000 retail food stores with a combined annual sales
volume of $340 billion - three-quarters of all food retail
store sales in the United States. FMI's retail membership is
composed of large multi-store chains, regional firms and
independent supermarkets. Its international membership
includes 200 companies from 60 countries.
By
Type of Store
Grocery Store. Any retail store
selling a line of dry grocery, canned goods, or nonfood
items, plus some perishable items
Supermarket. Any full service grocery store with annual
sales of $2 million or more.
Convenience Store. Compact, drive-to store offering a
limited line of high-convenience items. Over half sell
gasoline and some sort of fast food. They are often open
long hours and provide easy access for the consumer.
Independent. An operator of up to ten retail stores.
Chain. An operator of eleven or more retail stores.
By
Store Format
Limited
Assortment Store. A store with fewer than 1,500 items,
primarily dry grocery with few, if any, perishables. Small
gross margin and workforce. Virtually no service.
Supercenters. A
large food/drug combination store and mass merchandiser
under a single roof that offers a wide variety of food and
nonfood merchandise. These stores average more than 150,000
square feet and typically devote as much as 40 percent of
the space to grocery items.
Warehouse
Store. A store with more than 1,500 items, primarily dry
grocery, with some perishables. Small gross margin and
workforce. Limited service. Most have scanner checkouts.
Warehouse stores tend to eliminate frills and concentrate on
price appeal. A hybrid warehouse store has the same
characteristics but includes over 7,500 items, mostly
perishables, and possibly some specialized service
departments, such as a deli.
Superstore. A
supermarket with at least 30,000 square feet, doing $12
million or more annually and offering an expanded selection
of nonfood items. Offers specialty departments and extensive
services.
Combination
Store. Same as a superstore, but the space devoted to
nonfood items is 40 percent or more of total. Evolved from
combination food and drug stores through common checkout.
Wholesale Club. A
membership retail/wholesale hybrid with a varied selection
and limited variety of products presented in a
warehouse-type atmosphere. These 90,000-plus square-foot
stores have 60 percent to 70 percent general merchandise and
health and beauty care products, as well as a grocery line
dedicated to large sizes and bulk sales. Membership is
offered to both businesses and consumers.
.
Section Six: Safeway
For many
Americans, "going to Safeway" is synonymous with
"going to the grocery store." Safeway is one of
North America's largest food retailers, with about 1,800
stores located mostly in the western, midwestern, and
mid-Atlantic regions of the US, as well as western Canada.
It also operates regional supermarket companies, including
The Vons Companies (primarily in Southern California), Dominick's
Finer Foods (Chicago),
Carr-Gottstein Foods (Alaska's largest retailer), Genuardi's
Family Markets (eastern US), and Randall's Food Markets
(Texas). It owns about 54% of e-retailer GroceryWorks.com.
Outside of the US, Safeway owns 49% of Casa Ley, which
operates about 115 food and variety stores in western
Mexico.
Key Numbers
|
Company Type
|
Public (NYSE: SWY)
|
|
Fiscal Year-End
|
December
|
|
2004 Sales (mil.)
|
$35,822.9
|
|
1-Year Sales Growth
|
0.8%
|
|
2004 Net Income (mil.)
|
$560.2
|
|
2004 Employees
|
191,000
|
|
1-Year Employee Growth
|
(8.2%)
|
Key People
Chairman, President, and CEO
Steven
A. (Steve) Burd
EVP and CFO
Robert
L. Edwards
EVP and Chief Marketing Officer
Brian
C. Cornell
Top Competitors
Kroger
Wal-Mart
Albertson's
12:21 PM PDT, September 2, 2005
latimes.com : Business
By Jesus Sanchez, Times Staff Writer
Albertsons
Inc., the nation's second-largest supermarket chain, today
said it might put itself on the auction block as the company
faces growing competition from rivals, including discount
giant Wal-Mart Stores Inc.
The Boise, Idaho-based company, which also owns the Sav-on
drugstore chain as well as Bristol Farms gourmet markets,
said its board had agreed to hire the investment banking
firms Goldman Sachs & Co. and the Blackstone Group to
explore "strategic alternatives to increase shareholder
value, including a possible sale of the company."
Shares of Albertsons stock, which had
been trading near its one-year low, soared more than 12% in
late afternoon trading on the New York Stock Exchange
The company said, "There can be no assurance that any
transaction will occur."
Albertsons, which operates about 2,500 supermarkets and
drugstores in 37 states, has been waging an increasingly
tough battle with other conventional grocery chains and with
mass-merchandisers such as Wal-Mart, which are becoming a
huge force in groceries by using cut-rate prices.
Alberstons has also spent the last year recovering from the
costly Southern California supermarket strike, which ended
in early 2004. Albertsons, like its rivals, spent heavily to
draw back shoppers to its stores once the strike ended.
A
year ago, Albertsons agreed to buy the Carson-based Bristol
Farms in a transaction that gave the company entry into the
gourmet market business
Company Analysis
Dominick's
Finer Foods exists as a disgruntled member of the expansive Safeway
family. Dominick's has about 100 stores; 70 of them are
combination food stores and drugstores, offering such
services as expanded produce areas, floral departments, and
in-store cafes, under the Dominick's Fresh Store name. The
rest are mostly conventional supermarkets. Dominick's also
operates a commissary that produces its prepared foods.
Supermarket giant Safeway, which bought Dominick's in 1998,
has decided to keep the chain, which was on the block for a
year and failed to attract a buyer.
Roundy's and
others were rumored in the past to be on the verge of
acquiring Dominick's. Deals were scuttled, however, because
Safeway and the unions representing workers at Dominick's,
primarily the United Food and Commercial Workers (UFCW),
were unable to hammer out a contract.
Recently,
Safeway spokesperson Brian Dowling has declined to comment
on sale rumors but did offer an update on the Dominick's
labor situation. "We have made some good progress with
the Teamsters union, but it's taking longer than we expected
with the UFCW."
Safeway
isn't quite ready to sell it until it at least has a deal
with the union over a new labor agreement
Key
People
President
Bruce Everette
CFO
Theresa Kersgiter
VP.
Marketing Operations
Donald G. Fitzgerald
a.
Market
Share
Dominick’s
is the second-largest supermarket operator in the
metropolitan Chicago area (after Albertson's Jewel-Osco
supermarket chain). Dominick's
market share in the Chicago region has been on a steady
decline, falling to 15 percent in 2004 from 23 percent four
years ago, according to Gale Group research. By comparison,
Jewel food stores held a 45 percent market share in 2004.
i.
Location
Dominick’s
operates throughout the greater Chicagoland area.
ii.
Competition
Aldi
Corporation- keeps
it cheap so shoppers can, too. Discount food retailer. One
of the world's biggest grocery chains, running more than
7,400 stores worldwide? Offers deeply discounted prices on
about 700 popular food items (a typical grocery store has
25,000). No frills ALDI (short for "Albrecht
Discounts") buys cheap land mostly on city outskirts,
builds cheap warehouses, keeps a tiny staff, and carries
mostly private‑label items, displaying them on pallets
rather than shelves. ALDI has more than 780 stores in 26 US
states, but Germany (where ALDI has a 40% share of the
grocery market) accounts for about two-thirds of sales.
Brothers and co-founders Theo and Karl Albrecht own the
company.
Cub
Foods-operates about 75 discount grocery stores in four
Midwestern states. With about half of its stores in
Minnesota, it is the largest grocery retailer in the
Minneapolis-St. Paul metro area. Another 31 Cub Foods stores
are franchised by independent retailers. Founded in 1968 as
one of the first warehouse-style discount food stores, Cub
Foods was acquired in 1980 by food wholesaler and retailer SUPERVALU.
While Cub Foods was the first to enter most of its markets
with a no-frills format, it has since lost market share to
big box discounters, including Wal-Mart
and Target. Cub Foods exited the Colorado market in 2003 when it
closed or sold (to Kroger)
all nine stores it operated there.
Jewel-Osco-operates
nearly 190 combination food-and-drug stores and 75
free-standing drugstores in Illinois, Indiana, Iowa, and
Wisconsin. The regional chain is the #1 seller of groceries
in the Chicago area with about a third of the market,
trailed by Safeway-owned
Dominick's and deep-discounter ALDI. Jewel-Osco trails rival Walgreen in pharmacy sales. Started as the Jewel Tea Company in
1899, today the company is the Midwest division of Albertson's, the #2 US supermarket chain behind Kroger.
(Albertson's acquired Jewel when it bought American Stores
in 1999.) Albertson's acquired five supermarkets in Illinois
from bankrupt retailer Eagle
Food Centers, to add to Jewel-Osco's store count.
b.
Dominick’s Employees
As of 2003
Dominick’s had 14,000 employees.
11,500
were union employees
United
Food and Commercial Workers Locals 881 and 1546 represent
about 7,000 Dominick’s cashiers, baggers, stockers and
other grocery workers. Local 1546 also represents another
1,800 workers in Dominick's deli, meat and fish departments.
Teamsters
Ratify Contract With Safeway, Inc.'s Dominick's Grocery
June
07, 2005
Safeway,
Inc. announced that more than 500 drivers, warehouse and
distribution workers overwhelmingly approved a strong new
agreement with Dominick's Grocery, a subsidiary of the
Company. The workers are members of Teamsters Local 703 in
Chicago, Illinois and provide the warehousing and delivery
of the majority of grocery, produce, dairy, deli, meat,
frozen foods and general merchandise to the 111 Dominick's
stores in the area.
c.
Dominick’s Financial Data
2002 Revenue
($mil) $34,301.00
2002
Earnings
($mil) $1,253.90
d.
Dominick’s Sale and Purchase Considerations
After
paying about $2 billion to acquire Dominick’s in 1998,
Safeway placed the chain up for sale in November 2002;
Dominick's was valued at approximately $315 million, almost
$1.5 billion below its original purchase price.
The
Threat of Wal-Mart
Wal-Mart
does pose a real threat to existing supermarket chains.
Wal-Mart pays its grocery workers significantly less, an
estimat0ed $10 less per hour in wages and benefits,
than the large supermarkets nationwide.
Supermarket
Industry Restructuring: Dubious Mergers and Acquisitions
Grocery chain executives such as Steve Burd (Safeway, CEO)
have sought to lower labor costs. Burd sought to gain market
share in the early 1990's by engaging in a buying spree of
other supermarket chains, which ultimately resulted in
sagging profits and tremendous debt burden for these
companies.
A single merger deal in 1998- Safeway's acquisition of
113-store Dominick's supermarket chain in Chicago for $1.8
billion -devastated Safeway's bottom line. Following the
acquisition, Dominick's profits plummeted and when Safeway
placed the chain up for sale in November 2002, Dominick's
was valued at approximately $315 million, almost $1.5
billion below its original purchase price. The $130 million
in cost-cutting which Burd was working to extract from the
Southern California UFCW union contract pales in comparison
to the costs associated with these recent failed mergers and
acquisitions.
The
history of the grocery chains' mergers and acquisitions
underscores the point that the choice to reduce labor costs
is more complex than the entrance of low-cost competitors
such as Wal-Mart into the market. The price, as is evident
in the Southern California contract outcome, is the
reduction of benefits and wages and ultimately the stability
of grocery industry jobs.
Illinois Coalition for Jobs, Growth & Prosperity
Our Mission is to secure the future of
Illinois by educating, informing and activating the public,
stakeholders and elected officials to develop, promote and
implement a stable pro-job, pro-growth, pro-investment
climate in Illinois.
Too many people in Illinois are out of work. For more
than a decade, our great state has fallen behind the Rest of
the Midwest (RMW: Indiana, Michigan, Missouri, Ohio and
Wisconsin) and the Nation in job growth. Unlike our
neighboring states, Illinois' job losses continue to
threaten our future. In fact, if we had just kept up, we
would have hundreds of thousands more working men and women
right now:
- Illinois would have 432,000
more jobs (monthly average) in 2004 if each sector had
grown at National rates since 1990.
- Illinois would have 244,300
more jobs (monthly average) in 2004 if each sector had
grown at the RMW growth rate since 1990.
Since January 1990, 212,100 Illinois
manufacturing workers lost their jobs. These numbers are
especially troubling when you put a face to them, for each
job loss is a personal tragedy for a family and the
community in which they reside. Clearly the answer to a
brighter economic future is job growth. For these reasons,
major employer groups representing thousands of employers
and more than a million Illinois workers have united to
launch the Illinois Coalition for Jobs, Growth &
Prosperity. Founding members include:
For more information, visit the Illinois
Coalition for Jobs website or contact Rob
Nash via email or at 312-494-6787.
Empowerment
Zone Program
The Empowerment Zone (EZ) program offers special financing and tax
incentives for qualified businesses in order to stimulate
private investment and create jobs within designated
communities. These incentives include:
- Employer wage
credits of up to $3,000 for wages and certain training
expenses paid on behalf of a qualified zone resident
that works within an EZ;
- Tax deductions
of up to $37,500 of the cost to certain EZ property;
- Tax-exempt bond financing
for businesses seeking to expand within the EZ;
- Employer wage credits up
to $2,100 for hiring "high-risk youth" who
reside in Empowerment Zones or Enterprise Communities.
Empowerment Zone businesses that are located in one of
Chicago's Enterprise Zones may be eligible for additional
benefits, including property, sales and income tax relief
Chicago's
Empowerment Zone consists of three non-contiguous areas on
the City's West, near Southwest and South Sides.
Enterprise Zone Program
Enterprise Zones are geographic areas designated by the City and
certified by the State of Illinois to receive various tax
incentives and other benefits, including:
- Exemption
from city & state sales tax on building materials
purchased in Chicago
- 6.25% sales tax
exemption on machinery and equipment used in
manufacturing or assembly, or pollution control;
- Exemption from
the state tax on gas and electricity as well as
administrative charges;
- Exemption from
real estate title transfer tax;
- $500 income tax credit
for each job created for disadvantaged or dislocated
workers;
- Investment tax credits;
- Property tax reduction;
- Low interest loans.
Economic
Development for a Growing Economy (EDGE)
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