US supermarket operator Safeway has announced that it has taken Dominick's, its Chicago-based grocery retail chain, off the market.

Safeway announced in November 2002 that it was putting the Dominick's division up for sale, after a dispute with unions.

"The unions and the winning bidder have told us they cannot reach an agreement on an acceptable labour contract," said Safeway chairman, president and chief executive officer, Steve Burd. "As a result, it makes more sense for us to stop marketing the chain and focus instead on improving Dominick's operations. Safeway shareholders will be better served by having us operate the stores instead of selling them for an unacceptably low price." 

The United Food and Commercial Workers union, which represents the chain's nearly 9,000 workers, had demanded that any potential buyers should not cut staff benefits, even if Dominick's continued to lose market share, reported Reuters.

Safeway also said it would install Randall Onstead as president of Dominick's to lead the effort to bolster the chain. Prior to joining Safeway, Onstead was chairman and CEO of Randall's Food Markets in Houston. He left the company when Randall's merged with Safeway in September 1999, but remained as a consultant to Safeway. 

Onstead replaces Scott Grimmett, who will become president of Safeway's Denver division.