Market Basket--another rebellion begins in Massachusetts

If you’ll recall the cause of the original Boston Tea Party, it wasn’t just about the latest tax on tea. Sure, that was the final action that broke the camel’s back and led to the revolt, but what it really was all about was that the people of Massachusetts had finally had enough. Their livelihoods and their freedoms were being abridged, one step at a time, and finally they took action.

My wife and I were at the Tewksbury rally on Monday, July 21, 2014, along with an estimated 5,000+ other people, and we’ve been struggling to make sense of it.Why were we so drawn to this rally? We’re not big union people by any stretch, but neither were the speakers at the rally. Sure we shop at Market Basket sometimes, but we don’t work there, and although we’d heard of the family feud that’s rocking Market Basket, we really didn’t know much else about it. Prior to a few weeks ago, if you’d asked me to name the CEO of Market Basket, I’d have only gotten the Demoulas surname correct. Whether it was Arthur T. or Arthur S. was just a coin flip, assuming there were two names for me to choose from. Now I sure know--it was Arthur T. Demoulas.

Some 5-6,000 Market Basket Associates at the Tewksbury rally

The employees say over and over again that they just have one demand—bring Arthur T. back with full authority, and I believe them, but there’s also a lot more to it. Arthur T. represents the company they’ve given their life to, and now it’s being taken away, in what has been and will continue to be a slow but steady erosion of how they are treated and how the company is run, and they have revolted. It’s truly unprecedented in American labor history, which is how the Board of Directors miscalculated so badly. It’s also why they very well might lose to the associates, which I doubt was ever even considered. If nothing else, it’s clear they didn’t anticipate or plan for this and have no game plan other than hoping it goes away. How else do you explain the public relations blunders and the counter productivity of the moves they’ve made?

First of all, about a year ago the Board of Directors pulled a lot of cash out of the company and distributed it to the shareholders, which consists of nine Demoulas family members. There’s nothing wrong with doing that—the company’s supposed to make money for its owners. However, the amount ($300,000,000) and timing (fast) gave it the look of milking a cash cow.

Then they fired the respected CEO Arthur T. and hired two co-CEOs, Felicia Thornton and Jim Gooch, neither of whom did anything to soothe fears that the Board was looking to slash costs, sell and cash out. Felicia Thornton is a veteran of the supermarket industry, and while with Albertsons as CFO was instrumental in its sale to SuperValu, a competing chain. Albertsons is no more, and Felicia made millions. Again, nothing wrong with that, but it does tend to reinforce speculation that things will be changing at Market Basket.

Jim Gooch, the second co-CEO, had a brief 1-1/2 year run as CEO of Radio Shack. It wasn’t a stellar performance, but I’m not so sure it can all be hung on Jim. Radio Shack is one of those places you wonder how it stays in business. He was, however, named one of the potential five worst CEOs by CNBC and awarded that honor by Wealthwire.com. Interestingly, Craig Herkert of Supervalu (which bought Albertsons) also received a nod as a potential candidate for the year’s worst CEO from CNBC. All in all, it’s not much to inspire the troops at Market Basket.

Then, the responses so far have been about as tone deaf as possible, although again, current Market Basket management is in uncharted territory so doesn’t have much history to fall back on. First, management put out an apology to their customers and blamed it on the employees, forgetting to use the word “associates”, as members of the Market Basket ‘family’ are known. Then, when existing management rebelled, the new management fired some of them by courier, with messages delivered to their homes—these were people who’d worked at Market Basket their whole life. It was meant to intimidate, but instead it fostered a sense of anger, as well as a feeling that there wasn’t so much to lose. On Monday, after the firings, the crowd size effectively doubled at the ‘bring back Arthur T.’ rally.

Not much selection in the produce section

Here’s why I think that the workers might actually win this thing, and that it’s not just a quixotic adventure doomed to fail. First, the Market Basket family (as opposed to the Demoulas family), from every level in the company, is sticking together. The most inspiring aspect of the Tewksbury rally was that all levels from the organization were represented, from corporate VP types to warehouse and operations managers, to cashiers, bagboys, forklift drivers and truckers. This is a huge because it limits the ability of the new CEOs to respond. Sure they hired some replacement drivers and are now moving a few things from the distribution center, but what about everyone else? Market Basket employs 25,000 people, and it seems like 24,998 are engaged in or sympathetic to this work action. It’s not like when Caterpillar goes on strike, and management has to drive trucks or work the assembly line. At Market Basket it seems like there is no one left to do anything, and the best the Board of Directors can hope for is that fear of losing their jobs keeps some employees showing up for work. 

Something used to be for sale here

But the customers are sticking together too. Over 100,000 Market Basket customers have signed in-store petitions in support of the workers, and these are probably the chain’s most loyal customers. And politicians are coming out in support too. Mainly it’s Democrats, but it’s also a few Republicans (that’s all there are in MA—a few. If I were Charlie Baker, I‘d head for the next rally). This isn’t your typical big labor unions vs. big business argument. It’s average citizens fighting against perceived corporate greed. As of today over 30 Massachusetts politicians have joined the fray, and are supporting a boycott of Market Basket until Arthur T. is back. That number is sure to grow.
 
Taking all that’s happening together, the chain has to be hemorrhaging cash—we stopped in at the Leominster Market Basket today to sign the petition (that we forgot to sign at the rally) and to show the kids what it was all about. The store was only about 25% as busy as usual. The shelves had more perishables than we expected—milk, for instance, was abundant (but possibly perishing due to a lack of customers), but other sections were depleted or completely empty. Produce aisles were a ghost town, and the meat sections were slim pickings. Also, store management is in open revolt against the new regime—signs of support for the rebellion are on display throughout the store and at the entrances. Petitions can be signed at the customer service window.

Store Management is in open rebellion too

Why is this like a second coming of the Boston Tea Party? Because for years now successful American companies have been plundered for short term financial gain, and I think the Market Basket family is saying “sorry, but it’s not happening here”. Prosperous, thriving companies have been purchased by private equity or hedge fund buyout groups which come in like a swarm of locusts-- employees are laid off, property sold off and rented back, costs and often quality are cut, and short term profits are increased, leaving the companies milked dry before being sold off or forced into bankruptcy. The financial wizards make millions and millions, and the average Joe American worker loses his good job and ends up on unemployment or at a minimum wage job. The employees of Market Basket see this as the end game, and I think they’ve collectively said “enough”. They just might win this.

Perhaps the biggest reason the associates of Market Basket might win this fight is that the Board of Directors has a fiduciary responsibility, and Market Basket can’t continue on this path. It simply costs too much in both the short and long run. If logic overrules the emotions of the situation, the Board will reassess their actions.

The strange thing about this is that if the Associates and Arthur T. win this round, Market Basket will emerge stronger, more profitable, and more valuable than ever before. People now know what Market Basket stood for—good food, low prices, and incredibly loyal associates.

Join the boycott.

 

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About the author: Jay Shenk, currently an IT and Operations consultant, previously worked for a private equity funded company (which acquired other companies), where he ran distribution, IT, and other operational departments. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. . He has also published a humorous novel about his personal experiences with private equity buyouts, Keeping Up, which is available online from Amazon.