Letter to PCC Markets Board of Directors

Update: The CEO who headed up the terrible decision left PCC in August 2021. In January 2022, PCC elevated its CFO, Krish Srinivasan, to the chief executive position. There has been little drama since.

Update (April 30, 2021): PCC announced its member dividend for 2020, a new approach it took, in which it divided a chunk of profit among all members who shopped during 2020, and have released a credit relative to spending. So it’s like a retroactive discount of about 1.7%, which is significant.

Original post follows.

I did a lot more shopping at PCC in 2020 than in recent years, in part because they opened a new store not far from my house (previously, other stores were a much longer drive), and because the new store was one of the few places I felt comfortable shopping in when I returned to in-store grocery purchasing. It has an airy layout, which turned out prophetic, and opening in the middle of the pandemic, they were able to start from a position of knowing what they needed for safety.

However, despite all the nonsense about 2020 being a financially challenging year, that’s not what the results showed. Profit, including one-time tax refunds, was $6.5m before the divided was issued. That’s a 1.7% profit margin. (The dividend was based on the percentage of $382m in revenue the came from member’s.)

That revenue and profit came during the most extraordinary period in grocery-store history and all the additional costs in 2020, including bonus pay and increased operational costs.

So this reinforces my point from earlier in the year: the CEO stated PCC couldn’t afford hazard pay and remain competitive, while the results from 2020 show that, in fact, they already had.

Update (as of Feb. 11, 2021): PCC reversed its position, opted to give the same $4/hour hazard pay that Seattle mandated voluntarily to all its employees throughout Puget Sound (through June), and announced it had “reached an understanding” with the grocery union to allow curbside grocery pick-ups with union employees.

Meanwhile, Kroger said it would close two of its underperforming QFC stores in Seattle (the ones formerly run by PCC’s new CEO) in response to the hazard pay mandate. Kroger saw profits go up tremendously in 2021, putting the lie to the typical thin grocery store margins statement. One of the stores is extremely tiny (though a favorite) in Capitol Hill, about five blocks from two other QFCs; the other, a rare store in the middle of a neighborhood with no much retail in the surrounding blocks. In both cases, PCC has stores nearby, and might benefit from QFC abandoning those neighborhoods out of pique.

This story went national, as a relative told me Kroger was “sticking it to Seattle” by closing stores; I explained that these were stores Kroger had obviously wanted to close for a long time—and that these one-story old-fashioned stores sit on extremely expensive real estate now. From the Seattle Times: “The value of the Capitol Hill QFC parcel jumped from roughly $3.5 million in 2016 to $14.6 million in 2020, according to King County records. The Wedgwood parcel rose from $12.7 million to $21.1 million over the same period.”

Dear board members,

As a 25-plus year member of PCC, I was appalled by CEO Suzy Montford’s letter to Mayor Jenny Durkan. I look to PCC for progressive actions that lift all boats.

The letter read exactly like the kind of misinformation I would expect from a corporate grocer concerned with profits, and it’s precisely what I worried about when I saw a Kroger executive was hired to lead PCC. Rarely have my concerns been so rapidly proven valid.

Among other points:

• Comparing 2019 profit with 2020 additional expenses without having audited 2020 results to examine is tendentious. PCC grosses $300m a year (in 2018 and 2019, roughly). Where does $3m extra fit into that?
• The $3m includes “staff member appreciation pay, bonuses.” Why is that not broken out? How many workers does PCC have? What is the median wage? How can we understand the impact on the city’s decision? This appears more to be a tool for PCC management to dole out bonuses instead of provide a lift to all employees.
• There is no mention of the dividends paid to members or other discounts. As someone with a family of four not thriving during the pandemic, I would gratefully give up my dividend on purchases in favor of the hazard pay the city has voted in.
• It was pointless. With a 9–0 vote, and agreement across the council’s spectrum of members, a mayoral veto would have been overridden. Why write something so disrespectful of your workers in such a case?
• It uses statistics in a mealy-mouthed corporated way. Seattle doesn’t have meatpacking plants and agricultural workers, by and large. Citing the state’s Labor and Industries report (and from November, before the recent surge of cases) does not provide a reasonable comparison as a percentage of all employees. Nonetheless, PCC should be complimented for its work on disease control among its staff; it sounds exemplary, and shouldn’t be used as a blunt tool to deter improvement of the conditions of workers who place themselves at risk, particularly with the UK variant of the coronavirus appearing in Washington State.
• Grocery workers, even unionized ones, reap and have reaped more of the pain of this pandemic than any but minimum-wage workers in the city. There is no disputing this, which is why PCC has paid bonuses and supplements in the past year to its workers.
• “Unlike large corporate grocers who saw a large sustained uptick in sales nationwide, we have not had a sustained increase in sales and do not have a national footprint to rely on to offset these costs nor the cost of doing business in Seattle.” You have members who could be told this and encouraged to shop at a unionized, member-owned store that has expanded locations in the last year in the face of the pandemic, and has done such an excellent job at COVID prevention.

I am extremely disappointed in PCC leadership about this letter, which is misleading, incomplete, and internally inconsistent. It embarrasses me as a member/shareholder, and it should provoke deep internal discussion about how the CEO has represented membership publicly.

Best,

Glenn Fleishman
[address redacted]