Whither Market Basket?

For Bill Marsden, the former director of operations for Tewksbury, Mass.-based Demoulas Supermarkets, operator of 71 Market Basket stores in New England, the end came without ceremony: After 56 years with the grocery chain, he was fired by e-mail. Now he's "sickened and saddened at the demise of a great company."

The abrupt parting came in the immediate wake of a leadership change that saw control of the company's board of directors shift from Arthur T. Demoulas to his cousin, Arthur S. Demoulas. Also let go were Arthur T., the company's CEO, and Joseph Rockwell, its VP of grocery sales and marketing. Marsden estimates that the three top executives had put in a combined 115 years of service to Demoulas Supermarkets. Other Arthur T. loyalists, including Sue Dufresne, his longtime assistant for 18 years, resigned.

To lead the company going forward, the reconstituted board has hired Felicia Thornton as co-CEO and COO, and James Gooch as co-CEO and chief administrative officer.

The impetus behind what Marsden bemoans as a "tragic" change at the family-run business is simple, he says: "Greed has taken over the company." His pointed comment refers to the ongoing feud between the Arthur T. and Arthur S. factions to determine Demoulas Supermarkets' fate –- a long-simmering saga that recently boiled over with the installation of new management and the firings of Marsden, Rockwell and Arthur T.

PG received no reply to a request to the company for comments on the transition.

In Dufresne's account of the tumult, Arthur S. and his supporters were driven by "an extreme thirst for more cash," and were in turn motivated to put the business at risk for financial gains. Subsequently, a lone shareholder's decision to switch allegiance from Arthur T. to Arthur S. precipitated the control shift, adds Dufresne, who emphasizes that while the conflict between the two sides goes back decades, the company had many good years of productive and efficient operations.

Market Basket Culture Shock

Marsden, who started at Market Basket as a 14-year-old bagger under Arthur T.'s father, T.A. Demoulas, now suspects that the tight-knit, extended-family structure of the company -– which he believes was a crucial element in its "tremendous success" over the years –- is bound to change under the new leaders. In turn, Marsden expects a dramatic culture shift to a more impersonal, Wall Street-style company that will place much more emphasis on shareholder returns, short-term growth and liquidity than on the historic pillars of the company's success –- namely, excellent customer service and satisfied, highly motivated associates.

Dufresne believes the current board "rejected and disrespected" the company's past successes, adding that the new leadership's actions can't be explained or justified from a purely business point of view. "There's a lot of emotion in it," she observes.

Further speculating on what the future holds, Marsden foresees Demoulas' employee profit-sharing and bonus programs falling by the wayside in light of what he characterizes as the new leaders' belief that they're "too generous."

Marsden also expresses concern that the company will ultimately be sold.

Under the guidance of Arthur T. –- who Marsden says doubled the size of the company to a $4 billion enterprise during his decade at the helm –- the regional grocery chain focused on promoting associates from within and hiring multiple generations of families. "We never considered ourselves a chain, but a small, family-owned company," recalls Marsden, pointing to the "open-door" policy that allowed employees direct access to top execs, which he says has now given way to a lack of faith in the new leadership and board.

When asked whether employees, many of whom were vocal in their support of Arthur T., are concerned about retaliation, Dufresne confirms that "everyone's on edge," echoing Marsden’s sense of employees' wariness of the management team now in place, as a result its being "less than truthful" concerning changes in personnel and benefits.

What Might Be in Store

As for what differences shoppers might see in the stores, Marsden fears that the company's 4 percent across-the-board discount on purchases is in "serious danger" of being discontinued, given his view of the board's desire to direct more money to shareholders.

For her part, Dufresne believes that while "messing with the 4 percent discount would be suicide," the company could raise underlying prices as it institutes a new operating model vastly different from Demoulas' longstanding philosophy of offering customers "more for your dollar." Other store-level changes she anticipates are fewer staffers, a decline in customer service, and reduced investments in renovations and upgrades -- in short, "less of a commitment on many levels."

Although Arthur T. is now only a shareholder himself, with no position on the current board, Marsden hopes it will eventually see the error of its ways and ask him to return to the helm, as "what they're doing won’t work."

Dufresne won't predict what the board might ultimately decide with regard to Arthur T., but she affirms he’ll "always do his best to protect [the company's] model, philosophy and people –- I don’t see him giving that up."

Although his dream of "another 20 years" at Demoulas is now over, Marsden believes that going to the press -– something he acknowledges the "very private" company was never comfortable with -- is one way he can help the grocer get back on the right track. "We still believe in the business and will fight for it," he asserts.

For background on PG's coverage of this story, see Managing Editor Bridget Goldschmidt's Aisle Chatter post.