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Thursday, August 28, 2014

Analysis: Can the Market Basket grocery chain ever return as we knew it?

Whatever happens within the fractious Demoulas family, it’s not going to be easy for the Market Basket chain to return to its glory days atop New Hampshire’s grocery world.

The main uncertainty is whether customers who have loyally supported the employee-led boycott will loyally return when the boycott ends, assuming Market Basket as we knew it survives. ...

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Whatever happens within the fractious Demoulas family, it’s not going to be easy for the Market Basket chain to return to its glory days atop New Hampshire’s grocery world.

The main uncertainty is whether customers who have loyally supported the employee-led boycott will loyally return when the boycott ends, assuming Market Basket as we knew it survives.

“That’s the $64,000 question,” said Amy Schmidt, Economics and Business Department chair at Saint Anselm College.

“I’m a Market Basket shopper and I’m going back, looking forward to them reopening. But I’m sure there are people who have discovered ‘They have this at Hannafords that I like,’ or they get used to the store’s layout ... and they won’t go back.”

It’s also unclear whether Market Basket’s reputation for low prices, largely credited to its management practices over the past two decades, will survive after the financing and operational changes required by a buyout.

Deposed CEO Arthur T. Demoulas is said to be offering more than $1.5 billion in a stock-purchase plan to buy the 50.5 percent of the 71-store business that he doesn’t already own from his cousin Arthur S. Demoulas and colleagues. The cousins have been fighting over control of Demoulas Market Basket for a quarter-century, with the current standoff starting in July, when Arthur T. was removed following a shake-up on the board of directors.

If the purchase goes forward, it will saddle the previously debt-free company with new costs. Arthur T. Demoulas has pledged not to take those costs out of employee benefits, such as profit-sharing bonuses, which generated so much worker support during the family tussle, but that won’t be easy.

“It’s now going to have debt, which is going to change the operation,” said Barbara Draper, director of the UNH Center for Family Business.

Just getting the stores back up to full speed if a deal is reached will be hard. A modern grocery store contains many thousands of items provided by scores of different vendors making deliveries at all hours, and several major vendors have stopped doing business with Market Basket during this five-week showdown, citing erroneous bills and other issues. Replacing them quickly will be hard.

“Customers are going to come back and some of the shelves are still going to be empty,” Schmidt said. “It is going to take weeks to get all of the produce and meat and dairy back on the shelves. They’re starting at zero, and some distributors have moved on. The question is whether (customers) will accept that.”

Then there’s Arthur T. Demoulas, whose nickname “Artie T.” has become a rallying cry for thousands of supporters who depict him as a savior of the working class. He has been the operations manager of the company during recent years, as it ran roughshod over most grocery competition, going so far as to drive Stop & Stop completely out of New Hampshire, but things may be different if the deal is accepted.

“I’ve been reading minutes of the board meeting, and he likes not answering to anybody. Now he’s going to have to answer to his creditors,” Schmidt said. “He’s not used to having to deal with that.”

Draper, while agreeing that “I don’t know how the management is going to shake out,” said family spats don’t have to be fatal to a business.

“Often this happens, where one family member buys out the other person and goes on to run the company quite successfully. I can think of three or four in my experience where it has worked out OK,” she said.

She acknowledged, however, that the Demoulas situation is unusually large and fraught.

“It’s phenomenal – I’m getting calls from all around the country. Everybody knows about it,” she said.

“But am I surprised that it’s taking this long to negotiate a deal? Absolutely not. Think of all that’s involved, attorneys on both sides, and everybody’s represented.”

“These deals take a long time even when people are in good relationships, and for smaller businesses. You don’t put this paperwork together overnight,” she said.

David Brooks can be reached at 594-6531 or dbrooks@nashua
telegraph.com. Also, follow Brooks on Twitter (@GraniteGeek).