Specialty Food Magazine is the leading publication for retailers, manufacturers and foodservice professionals in the specialty food trade. It provides news, trends and business-building insights that help readers keep their businesses competitive.
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The Grocery Strategy Some industries, it seems, are tailor-made for employee ownership. Imagine, if you will, you're the owner of a regional supermarket chain, and it's time to sell—who would you sell to? If you're Bill Supermarkets in Small Town, America, it's likely there's already a Safeway or other megastore nearby, so you'd need to find a strategic, financially motivated buyer. But if you sell instead to your employees, you get the tax benefits, both you and your staff get a fair deal, and, as a community-oriented, small-town busi- ness owner, you don't end up selling to an outsider, the very idea of which had turned your stomach during many a daydream. The ESOP space is crammed with grocers large and small. Behemoths like Houchens Industries, an employee-owned supermarket operator from Bowling Green, Kentucky, and other grocery chain owners have been aggressive in making acquisitions over the last few years. But it's not only the largest play- ers dominating the game. Coborn's, the Midwest grocery chain, has grown through acquisitions and opening stores in new mar- kets. With an active real estate team always on the lookout for new opportunities, since 2012, Coborn's has acquired 13 stores and opened five more. At this point, there are as many com- panies being acquired by existing ESOPs every year as there are new ESOPs being set up, "very much a new trend," notes the NCEO's Rosen. As ESOPs mature and pay off acquisition debt and convert to 100 percent S ESOPs (untaxed), those compa- nies tend to accumulate cash. Because they also perform better, they have more profits to retain. And they are making strategic investments that are paying off. Several of Coborn's recent acquisitions have involved the heads of smaller compa- nies approaching CEO Chris Coborn as they consider retirement. Often they don't have family to take over the business, "but their community needs a grocery store," says communications manager Kurowski, and they ask if Coborn's would consider acquiring the enterprise. The St. Cloud, Minnesota, compa- ny's decision to become employee-owned in 2006 was made, in part, based on the success stories managers heard from other grocers that made the switch. Coborn's worked with peers like Niemann Foods in Quincy, Illinois, evaluating its business models and the language the company used. That sharing helped Coborn's managers shape the final plan. "The grocery industry is collaborative ... the independent grocers anyway," Kurowski says. "So many of us are in our own regions and not competing with one another." If employee growth is an indicator of whether an ESOP has worked, Coborn's is a success story. In 2006, it put 6,000 employ- ees to work. Now, that number has grown to about 8,000. Of that, this year, more than 3,000 are in the ESOP plan. Incentivizing Beyond Money The promise of a payout when leaving the company is an obvious incentive for buying into an ESOP. But many managers agree 5 EFFECTIVE EMPLOYEE INCENTIVES From the start, employee owners have the motivation to work hard and push their peers to do the same, since the company's success and profitability is directly tied to their retirement plans. But sometime it takes more to ensure full buy-in and participation from workers. Here are five top incentives, after money, for motivating employees—whether you operate an ESOP or not—as shared by company leaders. Involve all employees in understanding the business through open-book management. This involves work on the part of managers, but that is gained back quickly, because once people have a deep understanding of the business and financials, managers can get more informed and helpful feedback and ideas from their teams. Treat employees like you would treat a customer. A leader's first job is to serve the organization, not the other way around. One method is for managers early on to deal with staff as they would with customers, to support them in the same way they would support a customer, because when people feel supported, they do better work. Establish a rewards or recognition program. Employees have responded positively to programs that recognize standout behavior, or that are more interactive, like allowing staff to acknowledge each other. It empowers employee owners to participate and feel like a stronger part of the team. Create an avenue for change for staff. Programs for a free flow of new ideas from workers offer another way to help employee owners buy into their new roles. It can also help create efficiencies in positions, as the workers themselves often know ways to make better use of their time. Set up an employee ownership (or general staff) committee. This will help facilitate communication between senior leadership and front-line staff to ensure employees are aware of important company decisions being made, and so no ideas or concerns get lost in the shuffle. 32 ❘ SPECIALTY FOOD MAGAZINE specialtyfood.com