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The Washington Post reports this morning on how an "explosion of competitors" in the nation's capitol is eroding market share at both Ahold's Giant Food and Safeway, ratcheting up the pressure on the two chains as they engage in labor negotiations with the United Food and Commercial Workers (UFCW) on a contract that ends in just a week.

On the one hand, the chains say they need to save on labor costs in order to be more competitive with the likes of Costco, Wal-Mart, Food Lion, BJ's Wholesale Club, Target, Whole Foods, and two newer entrants, Harris Teeter and Wegmans. And on the other, it seems likely that Giant and Safeway would be unwilling to endure an extended strike of the sort that cost the Safeway, Kroger and Albertsons more than a billion dollars in sales.

The reality of the situation, according to the ,i>Post, is that between 1993 and 2003, the DC-area grocery market grew by 44 percent, from $7.2 billion to $10.3 billion in annual sales. But the companies that took advantage of the growth were Wal-Mart, BJ's, and Whole Foods - while both Giant and Safeway lost market share.
KC's View:
Talk about being caught between a rock and a hard place. We just hope that the union doesn't overestimate the strength of its position.

It'd be nice if both sides actually took an enlightened approach to the current competitive situation, and worked out a deal that made the chains better able to compete while giving the unionized workers some skin in the game - knowing that if they help Giant and Safeway succeed, they'll seem some financial benefit out of it. (Continued employment isn’t enough - you have to give people a financial incentive.)

But we remain dubious that this kind of enlightenment is possible. It is far more likely that the two sides will re-fight old battles.