Customers bag their own groceries at a WinCo Foods location (Credit: Joe Jaszewski/AP)
On November 5, 2014, Mary Jacobs writes in Forbes:
In Corvallis, Oregon, a couple miles north of the Oregon State University campus, sits a WinCo Foods discount supermarket and, unless you’re in need of groceries, you might drive by without noticing it. I assure you, however, it’s an extraordinary building, a laboratory of capitalism worthy of pilgrimages by the world’s great business schools.
Inside the store labor 130 employees of WinCo – grocery clerks, shelf stockers, display builders, bakery workers – and their combined retirement savings roughly comes to an astounding $100 million. And that figure is growing rapidly, such that in a few years the average wealth of these employees could easily exceed $1 million. Quite a few individual workers already have account balances above that level.
Outside of Wall Street and Silicon Valley, the WinCo store represents an unusually concentrated – and unlikely — grouping of millionaires. The secret to their wealth is employee ownership. Since 1985, WinCo, which operates 98 stores across eight states from its headquarters in Boise , Idaho, has been employee owned, with an Employee Stock Ownership Plan, or ESOP, as the vehicle for its workers’ main retirement savings. (WinCo also has a 401k and about 70% of workers participate.)
The company is by all indications well managed, grows steadily and provides its clientele of families on a budget a combination of low prices, wide selection and efficient and friendly service. Sales for fiscal 2015 are expected at about $6 billion. Same store sales growth and expansion into new markets have propelled WinCo’s profits and thus its ESOP stock past competitors and, indeed, past most growth stocks. The shares have risen at a compounded annual rate of about 20% since 1986. Purchased for $10 million from its former owners in 1985, company workers today hold shares valued at close to $3 billion.
The Corvallis store, with a long-tenured staff, leads all other WinCo stores in accumulated wealth. But it’s hardly an outlier: workers at a Lancaster, Calif., store have piled up more than $75 million; Redding, Calif., more than $65 million; Twin Falls, Idaho, more than $54 million; and those who work at the company’s distribution centers have combined ESOP accounts valued at more than $165 million.In Corvallis, the story of Cathy Burch and of her twin sister, Deborah Cook, explains not only the WinCo miracle but also much about the retirement savings crisis in the U.S. On the same day 23 years ago, Cathy and Deborah, then aged 19, walked into the WinCo store and applied for jobs. Each of the women was already a young mother and they were looking for steady work to provide for their families. Retirement savings weren’t on their radar screens.
WinCo at the time had an anti-nepotism policy and could only hire one sister; Cathy scored slightly higher on an employment test and joined part-time, working two days a week, which she fit in around a 40-hour schedule at a fast food outlet. After a year flipping burgers, Cathy received a 5-cent hourly raise and was offended by the smallness of the sum. She quit and went full-time at WinCo. In the years since, Cathy has worked a variety of front-line jobs at WinCo, including checker, shelf stocker, inventory orderer and, when I spoke to her one recent morning at about 4:30 a.m., she was headed off to do “go-backs” for the day, restocking items that customers put into their carts but later choose not to buy.
These aren’t tasks we normally associate with robust retirement savings, and the Employee Benefit Research Institute would tell you that most Americans in Cathy’s situation have either no savings at all or an account such as a 401k containing less than $50,000.
Cathy tells me, while getting ready for work, “I have almost $1 million in stock.” She’s 42. “If I wanted to, I could retire right now,” she adds. Instead, she plans to work a good deal longer, perhaps another 15 years, to fund a comfortable retirement for herself and her husband, Kevin, and also to help their five children, ages 13 to 27, get a good start in life.
“This is the chance of a lifetime,” Cathy tells me. “The work is hard. But it’s consistent. I’m used to it. When people quit WinCo, I ask them, ‘Are you crazy?’ ”
WinCo uses an Employee Stock Ownership Plan (ESOP), originally conceived and designed by Louis O, Kelso. Kelso was a political economist in the classical tradition of Smith, Marx and Keynes. He was also a corporate and financial lawyer, author, lecturer and merchant banker who is chiefly remembered today as the inventor and pioneer of the Employee Stock Ownership Plan (ESOP), the prototype of the leveraged buyout invented to enable working people without savings to buy stock in their employer company and pay for it out of its future dividend yield.
Louis Kelso was my business partner in Agenda 2000 Inc. in the late 1960s and 1970s. Agenda 2000 was an advocacy firm developing financial mechanisms designed to empower ALL citizens to become owners of wealth-creating-income producing capital assets. The ESOP is just one of several financial mechanism designed.
Currently, the Center for Economic and Social Justice (www.cesj.org) is the advocacy group for these approaches to solving wealth inequality and poverty.
