Sun Capital’s cuts spark union drive at Marsh Supermarkets

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For most of his 23 years at Marsh Supermarkets Inc., James Fleming ignored overtures from the United Food and Commercial Workers.

“There was no need to [respond],” said Fleming, a 44-year-old who, until last month, managed a frozen food section in the Marsh store at West 56th Street and Georgetown Road. “They treated us really well there.”

Fleming’s attitude began to change after the Florida-based private equity firm Sun Capital bought the publicly traded grocery chain in 2006 and replaced the Marsh family members who ran it. Next time the union came around, Fleming and others found they had plenty of complaints—reduced hours, more work and lower pay.

The union’s Indianapolis-based Local 700 represents 8,000 Kroger store employees, but until recently, it didn’t have a toehold in Marsh’s 100 Indiana stores. Now, union executives are gearing up for an election Sept. 17 at the Beech Grove store.

A favorable vote would apply only to that store. The United Food and Commercial Workers would have to prevail in votes at every location to provide union representation for the entire chain.

Marsh Supermarkets spokeswoman Connie Gardner denied widespread discontent among the company’s roughly 8,000 employees.

“The difficult economy has certainly added stress to everyone’s lives. However, we do not believe overall that we have an issue with morale at our stores or that our workers are disgruntled,” she said in an e-mail.

Some Marsh employees believe Sun’s recent decision to take the chain off the market has added momentum to the unionization effort. Sun, which bought the chain for $88 million in cash and the assumption of $237 million in debt, found no takers after it began marketing Marsh for $130 million to $150 million late last year.

Sun, which has spruced up dozens of stores, says it plans to continue investing in the chain and might expand.

If Sun had been able to sell Marsh, “It’s my opinion it may have stopped everything,” a Marsh employee at the Beech Grove store said. “If we had been acquired by a company that was a grocer with a reputable reputation, I think we would’ve wanted to see what was around that corner first.”

The employee, who didn’t want to give his name for fear of retaliation, now figures he’ll be dealing with the current management for the foreseeable future.

The vote in Beech Grove is part of a potentially long process. The National Labor Relations Board defined the Beech Grove bargaining unit as 44 employees—a fraction of Marsh’s work force in 45 Indianapolis-area stores. Even if they vote for union representation, they still have to negotiate a contract with Marsh.

Gardner would not comment on how the union’s presence would affect Marsh’s operations, but former executive Danny O’Malia was willing to make an educated guess.

“It could have a big impact on the service and the cost,” O’Malia said.

Marsh employees say upper-level workers received raises in recent weeks, though they’d seen no regular increases for the past several years.

Gardner did not respond to specific employee complaints, but said, “Over the past years, Sun’s and Marsh’s primary focus has been on stabilizing the business and preparing it for future growth. We have done so by reinvesting into the business, and have worked to enhance the chain’s operations. … We believe we have been able to protect the jobs of nearly 8,000 Marsh workers and build job security going forward.”

CEO Frank Lazaran told IBJ late last year that Marsh has closed more than a dozen stores, cut more than 30 percent of a 500-person headquarters staff, cut inventories, and sold all but a few real estate parcels including the stores it had owned; the chain now leases its store space.

Lazaran said the cuts have reduced overhead by $70 million since 2006.

The cost-cutting reached the store level. Fleming said his hours were cut, but sales picked up, so he had less time to do more work. Last November, Marsh ended its practice of paying time-and-a-half on Sundays and holidays to employees hired before 1991.

“That was like another part-time job sometimes,” Fleming said.

Wage comparisons

Marsh hasn’t matched Kroger’s wages.

Hourly wages at Marsh range from the minimum wage, $7.25 per hour, to $13 per hour for jobs like meat department manager, said Anthony Tracy, a UFCW international representative working on the Marsh campaign.

Kroger, by comparison, also starts clerks—cashiers, baggers and the like—who have no experience at $7.25 per hour, a union official said. The top of the pay scale for clerks is $12.45. Clerks whose employment dates back a certain number of years also can earn premium pay on Sundays.

Department managers can earn $15.15 to $16.60, depending on store volume.

Union executives want to counter the notion that organized labor would make Marsh less profitable.

“Kroger is a union store,” Tracy said. “They’ve been able to thrive and become the second-largest grocer in the world.”

At the same time, Tracy said, “The labor cost is pretty much the only thing [Marsh] can control. Without a union, they can control that any way they want.”

Kroger spokesman John Elliott said Kroger and the union have a history of working well together here.

“Day in, day out, it’s a good relationship. We focus on mutual interests. We keep the associate first priority.”

Making a pitch

Union representatives have been talking to Marsh employees about other benefits at Kroger, such as pensions for full-time employees and avenues for part-time employees to gain full-time status.

Fleming and the Beech Grove employee said Marsh eliminated its pension plan for rank-and-file employees in the 1990s and replaced it with a 401(k). The Beech Grove employee said that, until recently, he was under the impression he had a pension.

He said his overriding reason for wanting to organize is job security. Store employees noticed the cuts at headquarters.

“We had known these people,” he said. “All [of a] sudden, people start vanishing.”

The employee said that, as part of cost-cutting, Marsh twice offered him buyouts, but he declined. The $5,000 he would have received under one offer would have disappeared quickly, he said, and he wanted to keep his job, which pays $11.10 after a recent 30-cent raise.

The union’s drive has forced Marsh to deal with the National Labor Relations Board. The UFCW filed an unfair labor practice charge in June after one employee was terminated. The union alleges it was retaliation for his involvement delivering a petition to Marsh’s east-side headquarters.

The UFCW filed an unfair labor practice charge Aug. 25 after management disciplined Fleming earlier in the month over performance. Fleming and the union believe it was retaliation for discussing the union drive this summer on Amos Brown’s talk-radio show. Fleming’s picture also appears on the website, which is affiliated with Local 700.

Recently, Fleming received a 50-cent raise to $14 per hour as a department manager. Because of the turmoil, however, he stepped out of that job and is working just two days a week.

Fleming said most of his co-workers weren’t interested in organizing.

“They work 14 or 20 hours a week. They’re on different welfare programs, like food stamps,” he said. “They can make it.”

He believes the union gained traction in Beech Grove because the store has more long-term employees.

Marsh had contested certain managers’ right to vote, but the NLRB ruled in employees’ favor. Eight department heads, such as floral and dairy managers, do not play a supervisory role, the NLRB ruled, and will vote on Sept. 17.•

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