Deep roots to Demoulas family feud
“Factions of the super-rich Demoulas family, divided by bitter claims of fraud and deceit, are battling each other over ownership rights of their huge supermarket empire.”
You’ve probably seen other stories that start like that. Frankly, it sounds like a broken record by now.
But I wrote those words in a story introducing readers to the feuding Demoulas family in the Herald — on July 25, 1991. Back then, the news was fresh as a juicy melon. It was the first time the outrageous food fight between two factions of the Demoulas family spilled into public view, a decent business-story scoop, if I say so myself.
Today, I could write a new Demoulas story that started with the same words and it would still capture the current state of affairs. That includes the latest bizarre chapter.
In case you missed it, last week one side of the family ousted the other from control of the empire that owns Market Basket supermarkets and other businesses. Arthur T. Demoulas was out and his nemesis cousin, Arthur S. Demoulas, named hand-picked executives to replace him. That outcome had seemed likely, if not inevitable, ever since one director on the company’s six-member board switched allegiances a year ago.
How did the victors celebrate? They sent two directors with a police escort to the Indian Ridge Country Club in Andover to change the locks — a pretty clear message to people in charge there. The club is owned by the supermarket company and most of its managers are loyal to Arthur T.
Thankfully, the new Demoulas regime dialed down the confrontation before a public relations storm could gather too much punch.
The more things change in this family, the more they stay the same.
Long ago, when I first stumbled onto the Demoulas conflict, it was described in great detail in a civil lawsuit. Clerks at Middlesex Superior Court couldn’t keep the file in a cabinet. It was so big they used boxes and two office chairs to wheel the public record around as needed.
The basis of the lawsuit was simple. Ownership of the supermarket empire had once been split down the middle between the two sides of the Demoulas family. A death in the family and more than a decade of business maneuvering shifted that balance.
Arthur S.’s branch eventually charged that it had been defrauded of much of its ownership by rival relatives and won convincingly in court. Along the way, the parties and their lawyers set new low standards for the things they were prepared to say and do to win.
A family feud for the ages was born.
After the court case finally ran its course, the supermarket business was owned in nearly equal shares by two sides of one family that hated each other. Those are not ideal circumstances for any business venture.
But the family’s stores, operating in one of the most competitive retail industries I know, flourished and continued to grow. Market Basket developed an incredibly loyal customer base, complete with a Facebook page, drawn to its low prices and good quality.
The company now generates $4.6 billion in annual revenue at 71 stores and employs about 25,000 people.
Arthur S. served as chairman of the business but his cousin became president and ran the day-to-day operations. Arthur T. was a hands-on supermarket executive who wanted to use the company’s cash flow to fund more expansion. Relatives on the other side were said to be more interested in the cash than the expansion.
In fact, there is a big pile of money at stake. The business, which is owned by just nine people, generated $217 million in profits in 2012. In legal documents, Arthur T. has said his cousin’s side of the family received $425 million in payments above and beyond cash to cover taxes over a decade.
Another conflict came to a head last July. Arthur S. led an attempt to fire his cousin as president, alleging business misconduct among other things. Arthur S. didn’t win right away, but the board soon voted to distribute $300 million to the company’s stockholders.
Now Arthur S. has succeeded in pushing his cousin out of his job running the family business. Other shoes are sure to drop.
But don’t bet on anyone giving up. The Demoulas factions are still divided, still bitter, and have shown an almost limitless will to fight on.
Let’s hope a good company continues to survive all that.