September 19, 2011 / 7:00 PM / 6 years ago

UPDATE 3-SoCal grocers, union avert strike with deal

* Operators include Albertsons, Ralphs and Vons

* Grocers parent companies are Supervalu, Kroger, Safeway

* S. California hosted bitter supermarket strike in 2003 (Adds analyst comment; updates shares)

By Lisa Baertlein

LOS ANGELES, Sept 19 (Reuters) - Albertsons, Ralphs and Vons and the union representing their Southern California supermarket employees reached a tentative agreement on a new labor contract on Monday, averting a threatened strike.

Negotiators for the United Food and Commercial Workers union said the new contract, which must be approved by union members, will cover 62,000 union supermarket workers in Southern California when it is ratified.

"The agreement increases wages, protects health care and pension benefits throughout the life of the three-year contract," the UFCW said in a statement.

The the deal came after a negotiating session lasting more than 24 hours. Specific details were not released.

Southern California is one of the most competitive food retailing markets in the United States. Many analyst see the region as a trend-setter for the rest of the industry.

Parties to the latest talks were involved in a bitter 141-day strike in Southern California that spanned 2003 and 2004. It was the longest work stoppage in the history of the U.S. grocery industry, costing an estimated $1.5 billion in lost sales to competitors and permanently shifting the loyalties of some shoppers.

Since that time, nonunion food sellers ranging from Wal-Mart Stores Inc (WMT.N), Costco Wholesale Corp (COST.O) and Target Corp (TGT.N) have been chipping away at their overall market share. At the same time niche players, ranging from upscale grocer Whole Foods Market Inc (WFM.O) to ethnic chains and even dollar stores, have taken a bite.

"We are pleased to have reached a tentative settlement agreement with the union that continues to preserve good wages, secure pensions and access to quality, affordable health care - while allowing us to be competitive in the marketplace," the grocers said in a joint statement on Monday.

Analysts said both sides had something to lose in the event of a strike. That is because such standoffs can accelerate store closures, contribute to market share losses and, ultimately, reduce the number of union jobs.

"The contract is probably mutual pain and compromise," BB&T Capital Markets analyst Andrew Wolf told Reuters.

The shares of Kroger Co (KR.N), which operates Ralphs stores, closed up 0.04 percent at $22.38 amid a broader market sell-off prompted by European debt fears.

Vons owner Safeway Inc SWY.N finished down almost 0.2 percent at $17.67.

Albertsons parent Supervalu Inc (SVU.N) saw its volatile shares fall 3.5 percent to close at $7.42. Supervalu -- which has been cutting workers, closing stores, selling assets and paying down debt -- has lagged many of its rivals in recent years and could least afford a strike.

The UFCW, frustrated over unproductive negotiations on wages and healthcare, increased pressure on the supermarkets when it canceled its extended contract, effective Sunday night. That action opened the door for it to call a strike and sparked intense negotiations. (Reporting by Lisa Baertlein; editing by Richard Chang, Tim Dobbyn and Andre Grenon)

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