Dominick's Supermarkets, Inc.---A Case Study
November 1998 - Dominick's Supermarkets, Inc. is a leading food and drug retailer in Chicago. Dominick's had 116 stores and sales of $2.6 billion for its last full fiscal year prior to the acquisition.
In 1998, Safeway bought Chicago based, Dominick's Finer Foods. According to analysts, Dominick's was doing "pretty well" before Safeway purchased the company. Two years after the death of owner Dominick DiMatteo's, the chain was acquired by a buyout group who ran the company successfully until it was purchased by Safeway in November of 1998. The year before Safeway purchased it, Dominick's net income rose nearly a third.
Dominick's success was attributed to their "Fresh Store" format, specializing in a wide range of perishables and prepared-foods, providing a variety of products and good customer service.
Safeway was interested in the profitability and market placement of Dominick's. "This transaction provides an outstanding opportunity for Safeway to continue on its growth path, while allowing us to enter the Chicago market for the first time. Dominick's has established an enviable reputation as a leading retailer in the Chicago region. We are excited about the prospects of our combination," said Steve Burd, Chairman, President and CEO of Safeway in a press statement.
But when Safeway purchased the company they cut back on the size of perishable and prepared foods offered, stopped the practice of special ordering items for customers and cut more than 20,000 hours from work schedules in an aim to bring Dominick's in line with Safeway standards.
Safeway also scaled back the number of different sizes and quantities of products it carried and began selling the Safeway Select Brand, running counter to Dominick's practice of offering a wide selection.
"Customers have bolted as the California-based grocer bent Dominick's to fit a corporate template, cutting back on product selection, stripping out locally based managers and purchasing decision-making and reversing the local chain's "Fresh Store" emphasis on perishables and prepared foods."--Crain's Chicago Business
Analysts have estimated that since Safeway acquired Dominick's, sales have dropped significantly, resulting in a loss of one fifth of their original market share.
Dominick's workers have someone fighting for them. Safeway is trying to take away wages and benefits in order to make up for their mismanagement. Workers at Dominick's are able to join together and fight back because they have the power of a union behind them. They are members the United Food and Commercial Workers (UFCW) who have a Fight Back fund to protect workers from Safeway's bully tactics of threats and intimidation.
Workers at Dominick's don't have to succumb because the UFCW is looking for the right way out of the Safeway's mismanagement. The UFCW has been in talks with potential buyers of the chain to run it the right way and save good union jobs.
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