Our Opinion: A basket case


Many of our readers on the west side of the Connecticut River have been traveling to the Granite State to shop at the Market Basket in Swanzey that opened two years ago.

Despite the more-than-30-minute-drive it takes to get there, shoppers have found that the store's prices, variety of products and wide, well-lit aisles are well worth the trip. People also travel there because of the many smiling employees that are waiting there to help them find items or check them out.

There's a reason why people like to work at Market Basket: Employees receive quarterly profit-sharing and yearly bonuses that often equal up to several months worth of salary. And with $4.6 billion in revenue last year (with net incomes of $217 million), that is a tidy sum added to a paycheck. And that's not all. Under Arthur T. Demoulas, employees have had guaranteed annual raises, a high starting salary (in Massachusetts, that's $12 an hour) and vacation time.

But Market Basket's unsullied reputation has taken a few hits recently as a result of a power struggle between two family factions with opposing business philosophies and deep resentments toward each other.

On one side is a cousin (Arthur T. Demoulas, who we will refer to as "T") who believes Market Basket has an obligation to provide inexpensive products while taking care of the employees who keep the customers coming back on a regular basis. On the other side is another cousin (Arthur S. Demoulas, "S") who believes the company should be charging more for its products, should eliminate profit-sharing with its employees and should pay out more of the profits to less than a dozen family members. Last month, with the help of one family member who switched alliances from T to S, S and the board of directors fired T. In response, many store workers, including a number at Market Basket's corporate headquarters, walked out in protest, resulting in a number of long-term employees losing their job.

Following these public relations disasters for Market Basket's board (which includes a former Sprint Nextel exec, a former adviser for UBS, a director of an investment firm, a tax law attorney, and the chairman of a medical device company), picketers have become a common sight at the store in Swanzey and around the region. What has also become a common sight is half-filled parking lots where in the past they have been mostly filled as many customers have decided, for one reason or another, to shop elsewhere for the time being.

The Boston Globe notes the shift in shopping has resulted in the loss of millions of dollars every day for Market Basket.

"It is unclear how much longer the company's 71 supermarkets ... can remain open given its broken supply chain, which has prevented food from making it from warehouses into stores," writes the Globe's Cary Ross.

Even though Market Basket is not much heard of outside of New England, it is the nation's 127th largest privately held company in the country, and it's story has grabbed the attention of the nation.

Chris Faraone, writing for Esquire, notes there are a few reasons why people are paying attention.

"Market Basket's formula proves that executives and managers and cashiers can all profit, together," he writes. "And it proves that none of this matters in the American economy if those at the top aren't getting more than enough."

Market Basket's recent imbroglio is emblematic of the class warfare the monied elite have been waging on the middle class since before the 2008 economic crash.

"The American economy no longer exists to support a thriving middle class, or to help the weakest among us attain a livable wage for an honest day's work," writes Faraone. "It is solely in existence to add to the pile of wealth for the unchecked at the top."

Despite the loyalty the employees are showing to T, his hands are not all that clean either. But to understand the whole soap opera nature of this ongoing debacle, one needs to understand the chain's history.

The first Demoulas grocery store opened nearly a century ago in Lowell, Mass., and in 1954, George and Telemachus Demoulas purchased the brand from their parents. In 1971, George (father of S) died and Telemachus (father of T) took over. Since then, the ownership of the grocery chain has been embroiled in controversy and lawsuits.

According to the Globe, T's father lost a massive fraud lawsuit in 1990 in which he was found liable for stealing the ownership shares of his brother's family members, including S.

Evan Horowitz, writing for the Globe, notes that throughout the 1990s, family members accused one another of greed, drug abuse, and extramarital affairs. Remarkably, writes Horowitz, S and T actually had a fistfight during a court recess. In 2000, the Massachusetts Supreme Court ordered T to pay more than $200 million to S and his side after the court concluded T had illegally transferred company assets to his own side. According to Esquire, T and S also had a squabble after T replenished nearly $50 million in employee profit shares that bottomed out in 2008 and again last year when S moved to pay out $300 million in dividends to shareholders. And last year, the board voted to distribute $250 million to the nine family shareholders.

"Before this was a lightning rod for workers' rights, it was simply fisticuffs at the family barbecue," notes Faraone.

S and the board are entertaining offers for the Market Basket chain of stores, including from Cerberus, which already owns such major grocery store chains as Shaw's, Safeway, Star Market, Acme, Jewel-Osco, and Albertsons. T has indicated he would like to buy 50.5 percent interest in the company, which is valued at between $3 billion and $3.5 billion.

What was the board's reaction to T's bid? "While Mr. Demoulas' offer provides a path toward solving many of the problems he has helped to create, it is but one alternative among the options the Board is reviewing provides a path toward solving many of the problems he has helped to create."

It's up to the shareholders, the families of the Demoulas brothers, to agree to any sale.

If a conglomerate buys the stores, notes Faraone, "There's a chance this grand experiment will disappear forever. It would become a bellwether for a corporate America that has created a caste for itself, where workers can only expect to be treated fairly until the rug they have made is eventually pulled out from beneath them."

So while this mess is not as cut and dried as good guy versus bad guy, there is no doubt the employees of Market Basket and the many people who have come to rely on its low prices would be better off with Arthur T. Demoulas in charge. Whether or not our readers decide to skip shopping at Market Basket for the time being is up to them. And if that decision makes any difference to the feuding family members in this ongoing soap opera is doubtful. Most of them seem only to be interested in how much money they can milk out of their cash cow before it dries up. That's too bad, because companies with a conscience such as Market Basket are few and far between. We need more of them, not less.


If you'd like to leave a comment (or a tip or a question) about this story with the editors, please email us. We also welcome letters to the editor for publication; you can do that by filling out our letters form and submitting it to the newsroom.

Powered by Creative Circle Media Solutions