Supermarket industry analyst David Livingston, owner of Wisconsin-based DJL Research, said a likely reason for the stalled Maine expansion is a management shake-up in 2014 that led to customer boycotts and culminated in a shareholder buyout. It started with an old family feud that escalated to a battle of wills between the grocery chain’s employees and executive leadership.
In the summer of 2014, Market Basket enraged many of its roughly 25,000 employees by firing their beloved longtime CEO, Arthur T. Demoulas.
Workers at all levels, from grocery baggers to district managers, spoke out in opposition to Demoulas’ ouster by the company’s board of directors, made up of family members who shared ownership of the privately held chain.
Employees said they supported Demoulas for his personal touch, his vow to keep the chain family owned and his commitment to support a company fund that pays annual bonuses to employees. They worried that the new leadership would cut pay and benefits, despite assurances that it remained committed to customers and workers.
A cousin of Demoulas who controlled the board at that time led the push to remove him as CEO following a decades-long dispute over ownership rights and a difference of opinion about the company’s rapid expansion.
In response, workers posted signs and placed petitions inside Market Basket stores to garner public support for Demoulas’ reinstatement. They protested by refusing to make deliveries, leaving parts of the produce and fresh meat sections understocked or empty in stores. Customers followed suit by vowing to shop elsewhere until Demoulas was given his job back.
In December 2014, the dispute was resolved and the boycott lifted after Demoulas announced that he had completed a buyout of the 50.5 percent of the company he hadn’t previously owned, and that he would be returning to the position of CEO. He immediately issued a total of $49 million in bonuses to company employees who had weathered the turmoil.
SHOPPERS’ CHANGING HABITS
But Livingston said the buyout likely saddled Market Basket with a significant financial burden that limited its ability to invest in expansion. While Demoulas did not disclose the price he paid, analysts and company insiders at the time estimated it was roughly $1.5 billion.
“What I am guessing is that it probably took a lot of capital or debt to get control of the company,” Livingston said. “It might have been a wake-up call as well that they need to be realistic on their labor expenses. If I recall, the CEO was quite generous and this did not go over well with other family members.”