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After not meeting financial projections, Brattleboro Food Co-op announces layoffs

BRATTLEBORO—Alex Gyori, general manager, sits at a table in the Brattleboro Food Co-op’s cafeteria, his hands folded, voice clear but quiet.

The Co-op has started 2013 with the announcement that it is laying off 11 employees, cutting an estimated 100 hours for other employees, and cutting expenses. Managers also agreed to take a 3 percent pay cut.

“We agonized for several weeks how we were going to get expenses to meet revenues,” Gyori said. “The last thing we wanted to do was lay off people.”

Although the Co-op reportedly had a good holiday retail season, Gyori said delays in opening its new store landed revenues short of projections.

“We want the community to know we’re trying to do it [the cuts] in a balanced way,” said Gyori.

According to Gyori, the mixed-use building housing the Co-op, offices, and Windham-Windsor Housing Trust’s 24 apartments was due to open fully in April 2012. Problems with the construction project, however, pushed the store’s full opening to July. Completing the parking lot took another four months.

The Co-op, in partnership with the Windham-Windsor Housing Trust and Housing Vermont, started construction on the new multistory, green-built, state-of-the-art building across the parking lot from the former single-story Co-op in 2010.

In a June 2012 special supplement in The Commons, Joyce Marcel reported that the building’s price tag was $9.2 million. The Co-op increased its store space from 14,600 square feet to 23,000 square feet. The new construction increased retail space 38 percent.

Gyori told Marcel that the new building would increase the Co-op’s mortgage. The store’s annual revenues of $17 million would have to balloon by 25 percent within a year after the new building opened its doors.

“It’s a lot of debt, but if we hit the sales level, we’ll be in fine shape,” Gyori said last year.

Staff received news of the layoffs Jan. 14. Gyori said that the Co-op intends to re-hire workers as sales grow.

Baybutt Construction in the spotlight

When asked what caused the delay for opening the new building, Gyori said there were issues with the contractor, Baybutt Construction Corp. of Keene, N.H.

About three to four months before the planned April 2012 opening, according to Gyori, the project team realized that the project was behind schedule. To regain ground, they asked Baybutt to add more subcontractors and crews.

Nevertheless, according to Gyori, the subcontractors said Baybutt had stopped paying them and declined to put more workers on the project.

The longer construction timeline drove up the project’s costs. Gyori said that the project has been paid for through a bond held by People’s United Bank. The Co-op has also drawn on its cash reserves to pay for operating expenses.

The project team vetted Baybutt before hiring the company as general contractor, he said. Had the team gotten a whiff of trouble, they probably wouldn’t have awarded the bid to Baybutt.

Gyori said it’s his understanding that Baybutt did not meet the contractual documentation needed for the bank to make payments and that the company’s situation and payments due to subcontractors now rests in the hands of a bond company.

Newspapers across New England have reported on Baybutt losing projects and leaving subcontractors unpaid. Subcontractors had stopped working on renovations to the Rockingham Free Public Library in Bellows Falls due to lack of pay earlier this month.

In early January, the state of Vermont told Baybutt it had defaulted on its more than $2 million contract for the state offices on Main Street in Brattleboro.

Projects in Massachusetts and New Hampshire have run into similar problems.

‘Prudent steps’

To respond to its diminished cash position, the Co-op decided to “take prudent steps now” until sales improved, said Gyori, adding that in the past, the Co-op used attrition to avoid layoffs after the holidays.

Gyori said that sales are growing, but not at the rate necessary to avoid cuts.

“It was necessary to take prudent steps to preserve the cash we have,” he said. He is not sure how long before sales reach the needed level.

“We’re not in dire straits,” said Gyori about the Co-op’s financial standing.

Instead, the store needed to take measures that would have an immediate impact on the bottom line. In Gyori’s experience, the Co-op has not laid off this many workers at one time.

Rumors at the Co-op had swirled around the notion that the layoffs were in response to workers voting 74 to 45, with 7 challenged votes, in favor of organizing with the United Food and Commercial Workers Union (UFCW).

“I don’t believe that’s the case,” said Rick Brown, secretary treasurer for UFCW Local 1459, based in Springfield, Mass.

Brown said layoffs after the holidays, or after a change in location, are “not uncommon,” and that the Co-op probably had “legitimate business reasons.”

He added he hoped the union and workers could find ways to entice the community to support the Co-op even more.

Some of the laid-off employees had contacted the union, said Brown. These employees were directed to the appropriate resources, such as the state unemployment office.

The workers and UFCW have not yet agreed on a contract, and the union has no financial situation with the Co-op, said Brown.

Workers and union representatives will schedule meetings to propose a negotiation process in the future.

Brown said he hoped business for the Co-op picked up soon and that “[we] all move forward in a positive way.”

The member-owned Co-op started in 1975 as a buying club. It now has about 5,900 members.

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Originally published in The Commons issue #187 (Wednesday, January 23, 2013).

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