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(NECN: Peter Howe, Easton/Brockton, Mass.) - It was a Friday bombshell for workers at two of New England’s most popular supermarket chains: The parent company of Shaw’s and Star Market said it’s laying off 700 workers at 169 New England stores - about 4 percent of its total workforce.
"These types of layoffs, this is a very devastating situation," said Peter M. Derouen, director of political and legislative affairs for Local 791 of the United Food & Commercial Workers, which represents 4,400 workers at 23 Shaw’s stores in Massachusetts and 10 in Rhode Island, as well as workers at distribution facilities in Methuen, Mass., and Wells, Maine.
Derouen said 260 of the 700 people losing their jobs are members of Local 791, but thanks to a no-layoff clause negotiated in their last contract, the situation was much less bad for union members than it could have been. All of the union members being laid off "are part-time employees with less than one year's service. So this thing, as bad as it is, it could have been a vastly more detrimental situation had that agreement not been in place" protecting workers hired before January 2011, Derouen said. The Local 791 workers getting laid off "are on a recall list. So if those stores that they’re laid off from do start to hire again, they'll be the first people notified to get hired back," Derouen said.
Derouen said it appears of the 440 non-union members, anyone can be laid off, regardless of seniority. Officials of Star and Shaw’s did not respond to requests for comment.
Some likely context around the layoffs: Supervalu Inc., the Minnesota-based parent company of Shaw’s and Stars, is mired in deep financial trouble and growing losses, and over the summer effectively put itself up for sale. On Tuesday, The Wall Street Journal reported that Cerberus Capital Management LP – the same New York firm behind the Steward hospital chain – was trying to line up financing for a $5 billion takeover bid for Supervalu. Cerberus has made huge profits buying and turning around the Albertson’s supermarket chain.
One classic pattern: In the final stages of negotiating a sale, a company targeted for takeover by a private-equity shop will be pressured to impose layoffs to bolster the profitability of the business, and to spare the new investors from taking blame for firing workers.
Joshua Pierce, chief of research with Baystate Financial in Boston, noted that supermarkets are a gruelingly competitive, low-margin business in New England and many other areas.
"Typically when you see job cuts and layoffs, it's for one of two reasons. One might be a private equity play. You're trying to reduce your overhead, make yourself look more profitable," Pierce said. "The other side is just competition getting fierce."
Pierce pointed to Whole Foods expanding around Boston by buying six Johnnie’s Foodmaster locations and Wegman’s setting up operations in Northborough and, next year, the Chestnut Hill section of Newton.
"Maybe they’re just trying to make sure they're strategically positioned for whatever that competition's going to bring," Pierce said.
Derouen agreed that there is a highly "competitive environment for supermarkets in New England. You have Stop & Shop, you have Shaw’s, you have Hannaford Brothers, you have Market Basket … Now everybody’s fighting for that dollar. In addition, you have traditionally non-food-type places selling food such as package stores, you've got Target, you've got the Wal-Marts of the world all selling food. So there's a very competitive environment out there, and profit margins are not very big."
With videographer Rich Mazzarella and video editor Kevin Krisak.