by Kevin Griffin/The Griffin Report
Before the story broke in the media earlier this month about the campaign to oust Arthur T. Demoulas as head of The Market Basket chain, I began receiving emails and phone calls from friends and colleagues in the trade at an alarming rate. It’s been a while since I’ve heard from so many people with such strong feelings—and especially on just one side of an issue.
To fill you in on the details, here’s a little background: Market Basket, the (DEBT FREE) family-owned and -operated grocery chain founded in 1963, and long considered one of the most successful regional grocery store chains in America, has been back in the spotlight with another family dispute. The short version of the story goes like this: Arthur S. Demoulas, who holds a (less than 1 percent) controlling interest in the family-held business, was attempting to have his cousin, Arthur T. Demoulas, removed as head of the company in a board vote July 18. Arthur S. led the charge to have the business assume new debt to the tune of $1.5 Billion (that’s not a typo—it’s Billion with a capital B) so the shareholders could “recapitalize” the business and “create value” for the shareholders. In layman’s terms, Arthur S. (and his side) wanted to borrow lots and lots of money to make huge distributions to family members (shareholders), many of whom are not involved in the business. It’s in effect saddling up the donkey with too much weight for all the wrong reasons. Arthur T. Demoulas (the company’s largest shareholder) has been running the company (like a champion, in my opinion) for years now and has been delivering consistent, unprecedented growth—and stellar profit margins by any measure. I’ve had an inside peek at the numbers and believe me when I tell I tell you that most similar businesses could only dream of such success. It is astounding that the board would want to remove Arthur T. from a job that he does so well—especially considering that nobody else in the family is remotely involved or interested in running the joint.
I had the chance to catch up with Arthur T. prior to the July 18 vote and told him then that I hoped things go his way—and that everyone I know in the trade also was hoping that the campaign to remove him is defeated—and that I would indeed do my best to communicate his thoughts to the industry and our readership in an effort to raise awareness of the issue. Below are some comments (on the record) from Arthur T. Demoulas:
• “I have always said that at Market Basket we are in the people business first and the food business second. Our philosophy is to treat our people with respect and share the success with them. That was a principle that my father, Mr. T. A. Demoulas, felt very strongly about and I agree. We have rewarded our employees with profit sharing for 50 years now, along with good benefits—which is only right since they are the reason for so much of our success. And our reward is the length of service of our employees. The average length of stay of a Market Basket manager is 34 years.”
• “Market Basket’s operating philosophy is that we take care of our customers even when they are not looking. We consider ourselves a supermarket with a heart. It matters to us that they know they will get more for their dollar and that we help them extend their family food budget. Our formula is to combine respect, simplicity, low cost of operation, quality merchandise, good value, cleanliness and great customer service.”
• “The direction that the board appears to be heading—taking on major debt, raising margin (higher prices) and slowing capital expenditures—will undo the model that has made Market Basket extraordinarily successful. There are far too many examples of companies who have gone down this path and then failed.”
• “For the past 14 years, the previous board did an extraordinarily good job of separating family disputes from the operations of the business and the governance of the business. I remain hopeful that the new board will do the same. They have a fiduciary responsibility to the company, its employees, and the communities we serve, not just the shareholders. By any measure, the model is successful.”
It sounds like Arthur T. Demoulas was on the firing line for sharing the wealth! The company’s 25,000 employees are rewarded for their dedication and loyalty with extraordinary generosity in pay and benefits. Imagine working for a company that pays all of your health benefits and contributes 15 percent of your salary to the company profit-sharing plan each year. Imagine working for a company that pays every single employee a generous holiday bonus no matter what. In fact, many long-time Market Basket employees retire from the company with well over $1 million in their profit-sharing plans.
Arthur T. remains in place thanks to an overwhelming groundswell of support, awareness, advertising and public relations from Market Basket customers, associates, employees, vendors and the media. I’m hoping Arthur T. and his team remain in place for a long time at Market Basket and keep the company on the successful track it’s been on for many years now—and that greed doesn’t get the best of the board.
The Griffin Report is a Shelby publication based in Massachusetts. Kevin Griffin serves as its publisher. More on the Market Basket story appears on the cover of The Griffin Report’s July print edition.