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Now that they have finally reached labor peace with each other, Giant Eagle and its largest employees union said Tuesday that they will work together to do battle with non-union competitors in Western Pennsylvania -- including Wal-Mart.

"Wal-Mart is destroying grocery service all over the country,'' said Ron Lenhart, president of United Food and Commercial Workers Local 23.

Members of Local 23, which represents 5,300 clerks, deli, meat and bakery workers at 36 company-owned supermarkets in the region, voted 1,497-521 to ratify a new three-year contract.

After two decades of hostility, marked by a six-week strike in 1991, peaceful ratification of the new agreement signals a historic milestone in relations, both sides said at a joint news conference.

"This represents the beginning of a totally new relationship,'' said Daniel Shapira, special counsel for Western Pennsylvania's largest supermarket chain. "Giant Eagle and Local 23 have come to realize that we have to work together and be partners to enable Giant Eagle to grow, prosper and compete.''

Under the new contract, which takes effect retroactively to June 20, employees will receive salary increases of 40, 35 and 35 cents over the next three years. They also will continue to receive no-frills medical coverage at no cost. Those who opt for better coverage must pay 10 percent of the cost.

Prescription costs will rise from a flat $6 to up to $20 for maintenance prescriptions and up to $30 for acute medication.

The contract also offers buyouts to up to 50 workers. If more than 50 apply for a buyout, the company will discuss with the union whether to expand the offer. About 1,000 workers meet eligibility requirements, Shapira said.

The contract also gives Giant Eagle the greater staffing flexibility it had sought. Improved work rules will help the supermarket chain position itself as an upscale brand with better products and outstanding customer service, said Shapira, a brother of David Shapira, the privately held company's chief executive officer.

One of the first tangible signs of the new partnership was Daniel Shapira's disclosure that Giant Eagle was considering plans to build a new supermarket in Morgantown, W.Va., where it already owns one store.

Shapira said the company, which owns 140 supermarkets in four states, had ceased building new stores locally because of unfavorable contract terms.

Now that it has achieved labor peace with Giant Eagle, Local 23 will train its sights on organizing other Western Pennsylvania grocery chains. That includes Wal-Mart, though Lenhart admits the odds of organizing the world's largest retailer are slimmer than a slice of expensive prosciutto.

"They're a monster,'' Lenhart said.

Wal-Mart is reshaping the $700 billion supermarket industry with its competition-crushing formula of rock-bottom prices. Wal-Mart's non-union supermarkets beat unionized competitors' prices by 15 to 20 percent on such common staples as cereal and diapers (meat prices are about the same).

Wal-Marts can offer cheaper prices because they offer lower wages and fringe benefits. But UFCW organizers have been unable to unionize stores in other regions, Lenhart said.

As evidence of the gathering threat, Wal-Mart's local market share has grown from 2.7 percent to 15 percent from 2001 to 2003, while Giant Eagle's has declined from 52 percent to 44 percent over the same period.

"Nobody's in good shape where they're competing against Wal-Mart,'' said Jason Whitmer, an analyst with FTN Midwest Research in Cleveland.

Nevertheless, "Giant Eagle is one of the better private chains out there,'' he added.

Whitmer said he liked Giant Eagle's strategy of carving out an upscale niche for itself built around better products and premium customer service.

He compared Giant Eagle's management favorably to that of Cincinnati-based Kroger, the nation's second-largest supermarket chain, and said, "I wouldn't be surprised if these two merged someday.''

Rob Borella, a Giant Eagle spokesman, said the company is always exploring mergers and acquisitions, but there have been no talks with Kroger.

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