Publix became the nation's most profitable grocer by doing the opposite of what Walmart does.
Publix, the fastest-growing grocery chain in America, isn’t a corporate giant that exploits workers, but an employee-owned company that’s more profitable than any of its competitors.
Unlike Walmart’s hourly workers, who just got a raise to $9 and $10 an hour, Publix workers get a piece of the company after putting in 1,000 hours and working for the company for over a year. Each employee-owner takes home an additional 8.5 percent of their take-home pay every year in stock options. According to Forbes, 58,000 of the company’s 159,000 workers are on track to become owners, and the company makes sure each potential owner gets a broad sense of the business by rotating them through its grocery sector, distribution network, and real estate division.
This year, Publix was ranked as one of FORTUNE’s top 100 companies to work based on an anonymous employee survey, which asks questions based on pay and benefits, working conditions, communication with management, and diversity. Publix is only one of 12 companies to be consistently listed by employees as a top place to work every year since the list’s inception in 1998. But Publix isn’t dominant in just the grocery industry — its pharmacies are also consistently outperforming top pharmacies. A 2013 Marketforce survey of customers at CVS, Walgreens, Rite Aid, and Publix rated Publix as providing the most satisfying customer experience.
That high rating by customers is the driving force behind Publix’s success. CEO Todd Jones — who was a Publix bagger in the late 1960s — told Forbes the company’s success depends on keeping customers happy. In 2007, Publix ranked first in the same American Consumer Satisfaction Index that ranked Walmart last.
“We believe that there are three ways to differentiate: service, quality and price,” Jones said. “You’ve got to be good at two of them, and the best at one. We make service our number one, then quality and then price.”
To take supply-side economists at their word, a company that puts so much time and money into customer service, and shares profits so recklessly with so many workers, would mean they’re going broke, right?
In comparison to the biggest grocery store chains, Publix is the most profitable, posting $27.5 billion in 2012 revenue, and profit margins of 5.6 percent that same year. When compared to Walmart’s 3.8 percent margins, along with Kroger, which only made margins of 1.6 percent, Publix is eating its competition for lunch. Even though Walmart pulls 16 times more in annual revenue, the employee-owned chain still has over $100 million more in cash and investments on its balance sheet ($6.8 billion) than Walmart ($6.7 billion).
And despite the company’s altruistic actions toward workers and customers, it still manages to provide lower prices than Walmart. This 2012 chart shows prices of essential items at Publix and Walmart, and shows how much Publix shoppers save by not spending their money at Walmart:
Whether or not Publix will become the premiere grocery chain in America remains to be seen. But what the company has proven beyond all doubt is that conventional wisdom degrading employee ownership of a company as bad for business is just a myth.
