A Backgrounder: The Market Basket Strike

Published October 28th, 2014 -  - 10.28.1414


Introduction

Many New England residents paid close attention to the Market Basket developments this summer. For our readers outside the region, we have provided a summary of the events in this labor struggle. Significantly, the Market Basket saga may hold important lessons for other ongoing campaigns, including the fast food campaign, which Professor Sachs discusses here.

The Market Basket saga was a seminal example of community-based worker organizing without unionization. Employees of 71 supermarkets went on strike in Maine, New Hampshire, and eastern Massachusetts. The strike left the supermarket aisles empty of perishable goods and customers for weeks though stores remained open.

The Market Basket Model

Market Basket operates 71 supermarkets with 25,000 employees. Employees said that then-CEO, Arthur T. Demoulas, had treated them well and often asked about their families. Arthur T. gave generous salaries and benefits to his employees. Managers and supervisors could earn six figures as they advanced in their positions, experienced cashiers earned more than $40,000 a year, and full-time clerks got $12 per hour, well above the state minimum wage of $8 per hour. Many workers also reported receiving bonuses up to four times a year, which often amounted to six to eight weeks of pay.

In addition, Market Basket also matched 15% of each employee’s pay and contributed the amount to their retirement plans. Because of Market Basket’s generous plan, some longtime workers retire with more than $1 million in savings. Unlike most supermarket chains, Market Basket prides itself on its family culture. It is not unusual for workers to have worked at the chain for decades or for multiple generations of a single family to have worked there.

Under Arthur T.’s leadership, the chain was committed to offering low prices to customers. In fact, some have noted that “Market Basket is the sole reason Walmart has been unable to gain a foothold in New England.”

The Leadership Change

The conflict arose after the Board of Directors ousted Arthur T. following a longstanding family feud on June 23, 2014. For much of the summer, until Arthur T. was allowed to return as CEO, the chain was under the control of Arthur T.’s cousin, Arthur S. Demoulas. Two new CEOs were hired to run the business in Arthur T.’s place.

Arthur T. had been president of company since 2008. Market Basket employees felt a certain loyalty to Arthur T. and many cited his generous treatment of workers. They were worried that the new leaderships would sell the chain to another business, cut wages and benefits, or otherwise demolish the current business model.

Protest

Market Basket employees wasted little time in protesting against the Arthur S. leadership. On July 12, Market Basket employees in Burlington, MA started to stuff customers’ shopping bags with pamphlets. On July 15, hundreds of employees circled the Market Basket headquarters building in Tewksbury, MA and demanded Arthur T.’s return. Signs near the street entrance to the parking area read “We got your back Mr. D. Stay Market Basket Strong!” In an unusual display of solidarity, rank-and-file employees joined supervisors and managers in demanding Arthur T.’s return. The protest was peaceful with some employees returning to work afterwards while others went home.

On July 17, the two new CEOs of Market Basket issued a warning to workers that they would be fired if they failed to return to work. However, thousands of workers continued to protest outside the company headquarters. At the protest on July 18, Steve Paulenka, an operations supervisor and organizer with 40 years of experience at the store, announced that only three of the 75 scheduled deliveries had been made by that afternoon.

Many employees who were not protesting at headquarters converted their stores and parking lots into local protest platforms. With the supermarket increasingly becoming a “dry goods” store, customers were few and far between. The few customers that came to Market Basket during the protests often engaged in “intense discussions” about the unfolding events.   Customers who went into the supermarket were met by signs all over the walls that praised Arthur T. and his business model. To broadcast their concerns and encourage customers to boycott the company, employees utilized Facebook and other social media. At the time of this article, the “Save Market Basket” Facebook group had 90, 211 “likes.”

On July 20, the CEOs fired eight managers who had led the protests, including Paulenka. The next day, approximately 5,000 workers protested outside headquarters. Breaking his silence, Arthur T. also issued a public statement urging the fired workers to be reinstated “in the best interest of the company and our customers.”

Whether due to loyalty to Arthur T. and customers or declining sales due to the protests, several retailers cut ties with Market Basket. Employees also gained political allies, including State Senator Barry Finegold, who represents Tewksbury and published a letter urging customers to boycott Market Basket in solidarity. In total, thirty lawmakers in Massachusetts alone publicly supported the employees. Fueled by loyalty to Market Basket’s low prices, but perhaps more inspired by the employees’ passion, customers showed their discontent of the new leadership. Some customers boycotted the chain, while others taped receipts from competitors to the windows of Market Basket stores to emphasize how much money the chain was losing.

On August 1, Market Basket issued a letter to all managers notifying them that they would not be paid for their “ongoing failure to report to work.” The company again warned employees to return to work within a few days or be fired. By then, Market Basket had lost up to $10 million per day. At least two of its stores fell behind on their August lease payments due to declining revenue.

According to one estimate, sales were down 95% during the protests. The company cut hours of thousands of part-time workers as a result. Although some part-time workers found other jobs in the interim, most of them continued to picket. Despite the company’s threats, there were no other reports of management firing other employees.

Resolution

In mid-August, after six weeks of protest, the governors of Massachusetts and New Hampshire intervened to help broker a deal between Arthur T. and his relatives. Finally, on August 27, the feuding family closed the deal when Arthur T. offered to pay more than $1.6 billion to buy the company. His return was met by cheers and applause by employees and customers alike, all of whom had played a vital role in the six-week standoff. Full-time and part-time employees (including the ones with their hours cut) have since returned to work. The laid-off managers, including Paulenka, have also been reinstated.

And so ended what has been called “one of the strangest labor actions in American business history.” According to some observers, the Market Basket saga demonstrates what a positive work culture can achieve in promoting employee loyalty, customer satisfaction, and in most cases, higher revenue.

As at least one commentator has pointed out, “the great irony here is that if Market Basket workers had been in a union, it’s nearly impossible to imagine them striking to restore their fired boss and defeat the Wall Street business model of his cousin, Arthur S.” Interestingly, had the employees been unionized, they may very well have been constrained by a no-strike clause and the “narrow post-WWII vision of our labor unions.”

Other commentators have noted that persuading employees to strike in key sectors of the supply chain was crucial. Much of the protests’ success can be attributed to striking workers in trucking and warehousing who interrupted the flow of goods to stores, leading customers to have another reason to stop frequenting them. Photos on social media of empty shelves and stores without employees or customers were also influential. That managers were instrumental to rallying workers together is also a testament to the fact that the lines between “employee” and “supervisor” may be blurred,

Nonetheless, Arthur T.’s reinstatement does not mean that Market Basket will automatically return to its normal functions. Arthur T.’s buyout of Market Basket was made possible by the private equity firm, Blackstone Group, which contributed $550 million. Arthur T. must now face the challenge of answering to a different group of shareholders while restoring relationships with vendors and customers after the company lost substantial revenue.

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