BevMo Chain Ends Full Time Employment For Store Workers; They Say No Way and Join With UFCW Union to Demand 'A Better BevMo'

Labor Day 2010

The store-level employees, CEO (Alan Johnson) and owners (New York and London-based private equity firm TowerBrook Capital Partners), along with the UFCW union's local 5, of Concord, California-based beverage and food superstore chain BevMo (once known as Beverages & More) are involved in a battle that very much mirrors the state of the U.S. economy and labor relations today, as we celebrate Labor Day today.

The state of the economy and labor on Labor Day is, sadly: High unemployment with no near-term chance of reduction; increased wage stagnation; a growth in income disparity that could, if not checked soon, have significant negative social implications for American society; and a growing towards the elimination of full time jobs, replacing them with part time status.

Beginning a few months ago, San Francisco Bay Area headquartered BevMo, which has 104 stores in California and Arizona, started to reduce the hours of many of its full-time employees, telling them it was a temporary adjustment in order to function in the poor economy. BevMo sells wine, beer, spirits, non-alcoholic beverages, snack foods, specialty foods and related non-foods items at discount prices in its stores, which average about 10,000 -to- 12,000 square-feet. It also operates an online store nationally.

In early August, BevMo made the hourly cuts official company policy.

On August 3, Maria de Vries of BevMo's HR department, sent the brief memo below to all of the retailer's full-time store-level employees, telling them that beginning in August all employees previously categorized as full time would now be officially categorized as part time. In other words, full time (40 hours week) would no longer be considered an employment status at BevMo for store-level workers.

Below (in italics) is the the August 3, 2010 memo:

To:
From: Maria de Vries
RE: Optional Transition premium Relief

Effective August 1, 2010, your hours will be reduced from full time to part time status. As a result of this change, you will lose eligibility for benefits under the BevMo Health and Welfare Plan. We recognize that losing eligibility for benefits can create a substantial hardship for employees and their families. To help our employees adjust to the loss of benefits due to this change in employment status, there will be an optional transition period during which you can remain on our benefit plan through January 29, 2011. Employer contributions towards benefits and employee contributions made through payroll deductions will remain the same during this period. If you do not want to take advantage of this transitional relief you will be permitted to cease payroll deductions as exemptions that will allow for continued eligibility will only be sought for individuals who would like to take advantage of this transitional period.

You can view a photocopy of the August 3, 2010 memo here.

Prior to receiving the memo on August 3, a group of San Francisco Bay Area BevMo store employees had already formed a committee, which they named the "BevMo Workers Committee," and allied with the United Food & Commercial Worker's (UFCW) union local 5, which represents unionized retail food and grocery workers throughout the San Francisco Bay Area, and in other parts of Northern California.

On August 12, just nine days after BevMo CEO Alan Johnson had the memo sent to the full time employees, formalizing the change of their status to part time, the BevMo store employees (a few who are pictured above) coalition and UFCW local 5 staged a rally at Oakland's Jack London Square, across the street from A BevMo store. At the rally, the employee coalition announced their plans to form a union at the 34 Northern California BevMo stores under local 5's jurisdiction. Joining the workers were local 5 president Ron Lind, Oakland Mayoral candidate and former California State Senate (Democrat) Speaker Pro Tem Don Perata, Shawn Stark from the Oakland Firefighters union and a few other supporters. Perata has been a major player in Bay Area and California politics for decades. Currently, he's the odds on favorite to be the next major of Oakland.

In conjunction with the August 12 rally, the employee coalition and UFCW local 5 issued a statement, in which they said: "On August 12 BevMo workers gathered at the Oakland store to announce a campaign to defeat takeaways by the company and organize a union. The company has eliminated full-time positions, resulting in the loss of medical benefits for employees made part-time and suspension of the company’s 401(K) plan. BevMo workers have decided to take the company’s actions head on and form a union to achieve their goals. The company for its part, instead of acting honorably has engaged the services of a union busting consultant and has started training managers to fight the workers attempts to unionize.

BevMo, however, issued its own statement on August 12, in which it said a number of the claims being made by the employees and local 5 are wrong. The statement (below in italics), directed at UFCW local 5 but not BevMo store employees, says:

"BevMo!, one of the country's leading alcoholic beverage-lifestyle superstore retailers, today addressed the numerous inaccurate and misleading public statements being made about the company by the United Food and Commercial Workers Union Local 5 (UFCW 5).

Despite some of the most difficult economic times our country, our state and our company have ever faced, we at BevMo! have always considered our employees first. We pride ourselves on providing our employees with competitive wages and benefits, and on investing in our employees' training and careers," said Alan Johnson, Chief Executive Officer of BevMo!

"It is categorically untrue that we have cut health care benefits or suspended our 401(k) plan – we continue to offer those benefits to our employees who are eligible and have enrolled in the plans. We are disappointed that the UFCW 5 has chosen to mislead our employees in this way."

Numerous inaccurate claims are being made.

Below are the facts:

Today BevMo! has over 500 full-time employees who are offered health care benefits and access to a 401(k) plan.

Some employees have had their hours reduced as BevMo! ensures its business is better positioned to provide good service to its customers and weather the economic storm.

BevMo! continues to offer health care benefits to those employees whose hours have been reduced. If those employees participated in the 401(k) plan, then the company continues to offer them access to that plan.

Regarding the health care benefits portion of BevMo's August 12 statement, it does appear to be counter to the August 3, 2010 company memo (see above) sent to full time employees, in which it's clearly stated that the change from full time to part time status includes a loss of company health care benefits; right away for those who don't choose to participate in the transition plan, and after January 29, 2011 for those who do.

In terms of the 401 (k) issue, BevMo has either already or is considering eliminating its company-employee match, which most companies offer in various forms - 25%, 50%, 75%, 100%, for example. That's the issue the store employees are concerned about. The 401 (k( plans would continue. Workers can make their own contributions, which recieve tax-deferred status. But BevMo wouldn't match the contributions, which it's done and has been its policy for most if not all of the 16 years the chain has been in business.

BevMo CEO Alan Johnson has clarified the health care issue, however. On August 13 he said BevMo plans to continue to provide store employees with health care benefits. And further, that the retailer has no plans to discontinue the benefits, adding BevMo didn't mean to imply in the August 3, 2010 memo to the full time employees that their benefits would be discontinued at the end of January 2011. (Read the memo above and decide for yourselves what was or wasn't meant.)

Broader coalition formed

The BevMo store employee coalition and UFCW local 5 has now morphed their campaign into a more comprehensive coalition, called the "Union Committee to Build a Better BevMo." The committee has issued a five-point white paper detailing what it wants from the fast-growing beverage superstore chain and its owner, private equity firm TowerBrook, which has an office in San Francisco.

Here are the five demands the committee is making, taken from its white paper:

1. Restoration of Full-time Jobs: "We feel that there needs to be a mutually agreed upon ration between FT and PT workers, as well as a guaranteed minimum of hours."

2. Restoration of Health Insurance: "While we are pleased to hear that on August 13, Alan Johnson clarified that "we have made clear that we will continue to provide (BevMo employees) with health care benefits and we have no plans to discontinue those benefits" and "we did not mean to imply in our initial communications to those employees that their benefits would be discontinued at the end of January 2011", we seek a mutually agreed upon health care plan.

3. Restoration of 401 (K): "We feel that it is disingenuous for Towerbrook Management to underplay to the media that the elimination of 401 (K) matching had on many loyal employees. Without any sort of pension, as held by hundreds of thousands of Unionized grocery workers, this 401 (K) served as the only way for many to supplement an unstable Social Security system."

4. Immediate $1 hour Wage Increase: "This increase is necessary to address the loss of income suffered by many because of a reduction of hours simultaneous to the hiring of more PT workers. It is also a fair demand given the lack of even cost of living pay increase simultaneous to the openings of new stores. We also reiterate our position of mutually agreed upon wage increases and not simply by :review."

5. Recognition of Union and Commencement of Bargaining: "We reiterate our desire to bargain with the Company in good faith. As BevMo has contracts with all its vendors so too should a mutually agreed upon contract be held with its employees. In the interest of transparency, we also urge Towerbrook to disclose the nature of the contract now held by recently hired ACG, a labor consultant group.

The employee-union committee submitted the white paper to BevMo CEO Johnson in August. As of the end of last week, a member of the committee said it has yet to receive a response from BevMo on the demands. BevMo says it isn't commenting on the demands.
A black tie affair: September 8 Rally and demonstration

As a result of not hearing from BevMo, the employees and UFCW local 5 say they've scheduled a rally for Wednesday, September 8, at TowerBrook corporate office in San Francisco's financial district. The committee has billed the rally as "BevMo workers strike back! A fight for full time positions. Tailgate @ TowerBrook, A September 8 Demonstration. [See above]

They call the rally a 'black & white affair,' and are asking participants to bring party favors to the mass demonstration in the plaza below the high-rise building at 555 California Street, where TowerBrook's San Francisco office is located.

Growing part time economy

As we celebrate labor day today, we're seeing a continuing increase in the number of U.S. companies, including some food and grocery retailers, that are moving away from having full time employees and hiring on a part time basis instead. Doing so allows employers to save a considerable amount of money on labor expenses, along with in some cases reducing or eliminating health coverage and pension/401 K plans for the part timers.

Part time work has always had its place in America, but usually as part of being a second income for most households. But as "part time" gets redefined as a "new normal" in the U.S., it also brings with it a drastic reduction in income for American families who may be caught in a situation in which both breadwinners have found themselves either changed to part time from full time status or only being able to find part time work, despite a desire and need to work full time.

Hopefully part time is more a function of the poor U. S. economy rather than on the way to achieving that "new normal" status. The reason I say this is because we're seeing a growing income disparity in the U.S. like never before. This situation is most focused on low-skilled workers, like retail clerks and others. These are jobs that generally require no post high school education.

Full time, at 40 hours a week, even a $12 hour grocery clerk job can bring home decent bacon, although for a family of even just three it's far from enough to live a very good lifestyle. But two-earners making that and working full time can live fairly well, relatively speaking of course. But reduce that $12 hour job from 40 hours a week to 25 - or even 30 - and the reduction in income becomes drastic. What to do? Get another part time job it you can.

BevMo & TowerBrook

On March 1, 2007, the TowerBrook private equity firm, which has $5 billion under its management, acquired BevMo, which was founded originally as Beverages & More and later shortened to BevMo because the stores acquired it as a nickname in 1994 by veteran northern California retailer and entrepreneur Steve Boone.

Prior to starting BevMo in 1994, Boone founded Liquor Barn, in 1979, which was a small chain in the San Francisco Bay Area similar to BevMo. Safeway Stores, Inc. acquired Liquor Barn from Boone in the mid-1980's. After operating the Liquor Barn stores for a few years, Safeway closed them, saying the format and chain didn't fit with its long term strategy.

From 1987 -to- 1990 Boone was president and CEO of Oakland, California-based imported goods (furniture, kitchenware and the like), wine and specialty foods reatailer Cost Plus World Market.

Boone sold BevMo, which struggled for many years, to private equity firm Madison Dearborn Partners in 2001. At one time it was thought the investment firm might close the chain. But TowerBrooke's acquisition in 2007 breathed new life into BevMo.

Since Towerbrook's acquisition of BevMo three years ago, the retailer has opened 40 new stores. According to CEO Alan Johnson, who was brought in to run the chain by its private equity firm owners, plans call for opening about 100 new stores over the next few years. BevMo had 2009 sales of over $500 million, according to Johnson.

TowerBrook is run by Co-CEO's Neal Moszkowski, in New York City, and Ramez Sousou, in London. Both men were formerly the Co-cheif executives of Soros private equity, one of the investment firms owned by billionaire investor and pro-union liberal/progressive globalist, activist and political player George Soros. Both also used to work for the Goldman Sachs investment bank.

In terms of its investment strategy, TowerBrook pursues control-oriented investments in large and middle market companies in the U.S. and Europe It says it partners with highly capable management teams who are seeking situations characterised by complexity. "We invest first to transform and then to build businesses. To this end, we have developed an investment strategy based on the twin principles of superior sourcing and adding value to each company we acquire," the form says in its strategy statement.

Most of the companies in TowerBrooke's portfolio are far from glamorous - and and probably not known to most people - except one - Jimmy Choo shoes, which it bought in February 2007, just one month before acquiring BevMo.

It's clear TowerBrook believes in the BevMo format. If not it wouldn't have acquired the chain in the first place and certainly wouldn't have already opened 40 new stores in three years, with plans to open another 100 in the next few years.

The private equity firm is rather low key, although it does operate a charitable foundation.

A long campaign

What's less clear is how it's going to deal with the unionization issue. Northern California, particularly the Bay Area, is a very strong union region. There's no current talk of unionizing the BevMo stores in the Central Valley or Southern California, or in Arizona; just the about 34 mentioned earlier in my column.

Private equity firms like TowerBrooke don't just enter (acquire a company), at some point they also exit (sell). Very few potential buyers are interested in a retail company that has a history of, or is embroiled in, a union organizing battle. That's something they have to take seriously into consideration in terms of their ownership - and the eventual existing of ownership - of BevMo.

The BevMo employee group, partnered with the union, is one of the strongest such groups I've seen organize in an attempt to seek union representation at a non-union chain in a very long time. For example, it's much more organized than the Fresh & Easy Neighborhood Market employees working with the UFCW in the attempt to unionized the Tesco Fresh & Easy stores.

There already appears to be a give-back - or perhaps the August 3 BevMo memo to the full time employees was just very poorly written - on the elimination of health insurance as part of the new part time status.

But TowerBrooke/BevMo wouldn't have hired what is called by management a labor consultant and called a union-buster by labor unions, if it doesn't plan to fight tooth and nail to try to keep the union out. Those of you who have hand on knowledge about good labor consultants/union busters from either or both ends of the spectrum, management or labor, will know fully the meaning of what I'm saying.

This campaign is just starting to heat up, and BevMo employees at stores in Southern California and Arizona are just learning about it and expressing interest as well, meaning it could spread to the other regions and to the other UFCW locals soon.

Meanwhile, BevMo is opening and numerous new stores, particularly in California but also in Arizona, this year and next. Stay tuned.