Labor

The Triumph of Core American Values in the Epic Battle for a Grocery Store Chain

The Market Basket conflict illustrates why recognizing the contributions of workers is the key to success.

Photo Credit: Shutterstock.com

Over the last few years conflicts between management and labor have generated considerable press and the story lines have mostly focused on the downsizing or firing of workers. But a different narrative unfolded this summer when a battle for control of a large and profitable New England grocery chain made headlines as two cousins, Arthur T. Demoulas and Arthur S. Demoulas, fought over who would manage the growing chain of stores. Managerial control of Market Basket changed in June 2014, when Arthur S. convinced the board of directors to fire his cousin, who had been managing the company, and hire a new management team.

This unleashed a storm of protest and a reaction from the company’s 25,000 supermarket employees, from low-level managers to workers, including store supervisors, shelf stockers and cashiers, who walked out over the firing of their CEO, bringing the company to the verge of collapse.

But why would supermarket workers and managers walk off the job in defense of their CEO?

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The prevailing explanation about what took place at Market Basket is a tale of compassion versus greed straight out of It’s a Wonderful Life. The striking workers certainly embraced this dichotomy between “good” Arthur T. and “bad” Arthur S., two cousins locked in a family feud over control of the enterprise that goes back decades. As one fired warehouse manager told the Lowell Sun during the conflict, “I’ll follow Arthur T. to the end of the world.”

However, the emphasis on good versus bad oversimplifies the matter and masks important questions. Why would workers voluntarily follow their former CEO to the unemployment line? How did Market Basket workers achieve their goal in an era when most collective action by labor fails?

Founded by Greek immigrants in 1917 as a small grocery shop in Lowell’s Acre neighborhood, Market Basket now has over 70 stores across Massachusetts, New Hampshire and Maine. How did the enterprise become so successful? Top managers at Market Basket, led by Arthur T., seem to have recognized that value—that is, profit—is created on the shop floor, where workers’ efforts helped the company achieve a considerable competitive advantage over similar grocery enterprises.

Market Basket’s management team created a work environment that emphasized cooperative shop-floor relations. Over time, workers came to identify with the goals of the company. This explains a critical difference between the Market Basket case and other labor conflicts in American history: managers and workers assumed leadership roles during the strike and ensured that store operations would cease.

Arthur T. recognized how important workers were to the success of the business, so the company’s organizational structure was geared toward acknowledging and rewarding them. Workers were given a stake in the company, profit sharing and bonuses. Arthur T. knew most workers in the company by name, he knew something about their lives, and he continuously reminded them that they were key to the company’s success. These genuine personal connections contributed to the workers’ high level of effort, loyalty and commitment.

Market Basket adopted a slightly different business model than most supermarkets. Instead of making its profits on high margins, Market Basket focuses on volume. As customers across New England know, its prices on everything are much lower—produce is often priced at half of what competing supermarkets charge—and as result its stores are packed, with huge lines at the checkouts from open to close. Other grocery chains, notably Shaw's/Star Market, have recently dropped their prices to compete with Market Basket, and have launched major ad campaigns to advertise their new and better deals. Yet even with these new attempts to compete on cost, Market Basket’s prices for most items are still lower.

The battle for Market Basket was waged over sharing the rewards of economic success and having a management team committed to building cooperative relations with its workforce. Market Basket customers seem to have recognized this, and they provided overwhelming support for the strikers and for Arthur T. Demoulas. At workers’ urging, they shopped at other, more expensive, supermarkets, often posting their receipts on Market Basket windows afterward to drive the point home.

In December 2014 Arthur T. finalized his purchase of the chain of grocery stores. To Market Basket employees, he was more than simply a CEO who paid good wages and knew their names; he symbolized a business strategy that was proven to work and that provided stable employment for tens of thousands. His firing represented the elimination of that approach, ushering in a labor conflict that, at its core, was less about jobs or wages than it was about values.

Louis Ferleger is Chair, Professor of History at Boston University

Matthew Lavallee is a PhD candidate in the Boston University History Department.