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Vendor Severs Ties With Demoulas/Market Basket, Cites Management 'Blunders'

Aug 18, 2014 12:08PM ● By Bill Gilman
For the first time during the current labor strife, a major vendor has officially severed ties with Demoulas/Market Basket.
In a rare move, Boston Sword & Tuna owner Tim Malley released a public statement, explaining in great detail his company's displeasure with the current Demoulas' management. He cited several "blunders" by Demoulas' management both in dealing with his company and in dealing with the current labor crisis, which led to the decision to cut ties.

Tim Malley's statement reads as follows:

We are one of several suppliers of fresh seafood to Market Basket- possibly the largest. We provide a variety of wild items typically found in retail markets throughout New England, including Cod, Haddock, Scallops, swordfish and tuna. The largest volume we provide is farmed Atlantic salmon from Norway- over 30,000 pounds per week. It is a great value for Market Basket customers, and has helped us grow our business with MB over the ten years we have worked together.

Part of why it is so affordable is that we commit to one-year contracts every year. It is a two-way contract, meaning we contract with our Norwegian partners to buy a set quantity at a set price for a full year, and Market Basket makes the same commitment to us.

When Market Basket stopped accepting deliveries, the impact on us was significant. The wild product meant we were immediately buying 25-30,000 pounds per week less- a significant loss of income. The farmed salmon was a different story- we could not simply “not buy”. It kept coming and we were suddenly in the position of having to sell an extra 25,000 of perishable seafood every week. We were forced to significantly discount the fish to sell it. Between that and the loss of wild seafood sales we were looking at the possibility of layoffs of up to a dozen or more employees.

Boston Sword & Tuna President Michael Scola was able to get an appointment with management about ten days into the job action. They were very professional, and very sympathetic. They offered to do what they could to offset our losses, short of paying for fish they were unable to receive. An agreement was worked out between the parties to pay us every week a portion of our losses, and to catch up on unpaid bills from before the firing of Arthur T- an amount well into six figures. The weekly payment was only a fraction of the contract, and a smaller fraction of our overall losses. They assured Michael that “this will be over in a few days”- according to them they had already begun hiring drivers and replacement staff for admin and warehouse. This was the third week of July. Mike left with a check for most of the aging and payment for one week of salmon losses.

We had no idea whether any other vendors of any items were being treated the same. Did meat companies have contracts? Were they getting offsetting payments? We had no idea- all we knew was that we were getting some help, and that at least for the time being we could avoid layoffs. At the same time there was little doubt in our minds that the new CEO’s had any hope of reviving the company as long as key workers and customers stayed away. We knew from our own contacts that the damage extended far beyond the customers and associates that were getting most of the media coverage- vendors like us, and businesses in shopping centers around the stores were all experiencing huge losses.

For the next ten days we watched as the CEO’s made one incredible strategic blunder after another. While we had no doubt that the decisions were coming from either the Board or the ASD shareholders, they seemed to do and say things that only widened the gap between the new management and all the stakeholders. We felt that the CEO’s were mere pawns (although very well compensated ones) who had been dealt a very bad hand.

This was driven home when after ten days we received no more payments, and the management stopped returning phone calls and emails. We consulted our attorney and drafted a short note which Michael sent to the managers respectfully informing them that if the promised payments were not forthcoming we would have to look at our legal options. Within 6 hours of that email Michael received a phone call from them, very apologetic about having missed his calls and emails. They assured us that she would address the missed payments at the end of the week. Michael provided them with a detailed aging, included the amount in an email, and stated the amount on the phone.

That Friday Michael was met off premises by a sub-contracted security man from Market Basket. He gave Michael two envelopes containing checks. When Michael returned to the office and opened the envelopes, he found we had been overpaid by $83,000. He notified management right away, and was asked to void the check with the overpayment and return it, which he did.

At the beginning of the following week management contacted Michael to tell him they had hired a new “perishables manager”. She would be calling him and expected to start filling the warehouse by the end of that week. This seemed to completely contradict news reports about the sides “furiously negotiating” and was not what we considered promising. Knowing what we know about logistics and distribution, we knew there was no way that this was going to happen. We began to fear that the ASD side was not negotiating in good faith and that the whole thing would come crashing down. We had little choice but to go along in the hope of protecting our employees. The end of the week came and went, and no agreement was reached, and no orders for seafood came.

Then last week the CEO’s issued their ultimatum. Everyone from the associates to the customers to the vendors knew where these orders came from. It was pointless to blame the CEO’s who were just following orders. Everyone also knew the ultimatum would fail.

The final straw for me came this past week. First Michael received a call from a person (who like other new management came from Albertson’s) saying that he expected to give us our first order next Tuesday August 19. The order would be for 71 cases of each seafood item we normally provided. He added that because he could not find a code for Norwegian Salmon, he would be putting the order in for sockeye salmon. The 71 cases represented one case for each of the 71 Market Basket stores.

Michael again provided management with detailed billing information by scanned aging, and by summarizing the amount in an email. On Friday, when Michael had left on a vacation, the same security officer from Market Basket delivered the most recent payment. Michael had instructed our office manager to deposit the check. Checking the next day he found that once again we had been overpaid- this time by over $415,000.

We were dumbfounded. In my mind there could be only two answers to these accumulating mistakes and self-destructive strategies. One was that the CEO’s were way over their heads. How many mistakes like this were being made? How would the shareholders from either side of the feuding family feel knowing that mistakes of this magnitude were being made. The only other explanation seemed to be a deliberate attempt to sabotage the future of the company. Every pundit with a knowledge of business has stated that the only viable buyer is Arthur T. Could the Arthur S side of the family be so embittered by the defiance of Arthur T and all the stakeholders supporting him that their plan is to sell him- at full pre-conflict price- a pile of smoking rubble?

Going public with these facts has been a very difficult decision for us. We have enjoyed a business relationship with Market Basket, its former owners and buyers, which many in business never get to experience. We think the time has nearly run out for saving this great institution and all those who depend on it. We felt it was time to come forward and share whatever fate awaits the Market Basket faithful. In our opinion, the only way forward is for the fired associates to come back.

Tim Malley 

CEO Boston Sword & Tuna

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