Newsletter Article
July 2022

What’s Behind the Resiliency of ESOP Food Companies?

A recently published NCEO report explored the impact of the COVID-19 pandemic on ESOP and non-ESOP companies in the U.S. food production, distribution, and sales industries.

Companies in these food-related industries, as in many other sectors of the U.S. economy, were heavily burdened by the coronavirus crisis, but the study found that ESOP food companies and their employees experienced key advantages in workforce retention, benefits, retirement security, and firm performance when compared to non-ESOP food companies.

ESOPs are common in a number of food industry sectors, especially supermarkets. ESOP-owned supermarket companies include Publix, with over 220,000 employees; Winco, with over 20,000; Brookshire Brothers, with over 16,000; and Houchens with over 15,000. Schreiber Foods, with over 9,000 employees, is one of the largest private-label dairy manufacturers in the world; KeHe Foods, with over 5,000 employees, is one of the largest food distributors. ESOPs are found in a number the largest convenience store chains, including Wawa, Stewarts Shops, and PDQ. Recently, a number of restaurants have become employee-owned, including the iconic Hell’s Kitchen in Minneapolis and Edible Beats, a chain of popular restaurants in the Denver area.

Drawing on a survey of 112 ESOP food companies and 222 non-ESOP food companies, the study found that ESOP food companies had lower median quit and involuntary separation rates in 2020, were more likely to report an increase in revenue between 2019 and 2020, and rated the performance of their workforces more highly.

What might explain these advantages for ESOP companies? This study and past research have shown that ESOP companies tend to provide good benefits and invest in their employee-owners in ways that go beyond the ESOP retirement plan. Many (though far from all) ESOP companies also work to create an “ownership culture” that encourages employees to see the connection between their day-to-day work and the company’s (and their ESOP account balances’) growth. These factors likely contribute to employee engagement and loyalty, and may have helped lay strong foundations for companies heading into the pandemic. This survey provided an opportunity to ask ESOP executives for more insight.

We asked the ESOP survey respondents to describe in their own words how employee ownership affected their company’s ability to respond to the coronavirus crisis, if at all. Responses stressed the importance of the ESOP in fostering employee commitment and buy-in, as well as a strong sense of community and collective purpose, in affecting how these companies weathered the pandemic.

Respondents reported that their employees displayed an increased sense of “dedication,” “commitment,” and “ownership” during the coronavirus crisis. Responses commonly included phrases like “employees are committed to doing as much as they can to help the company,” or “employees felt a sense of ownership and duty.”

Respondents also reported a sense of community mentality when discussing the impact of employee ownership. Respondents highlighted the importance of their “tight-knit” employee base and the value of responding to the crisis as a “collective group,” suggesting that the community mentality that ownership culture fosters helped their businesses perform during the crisis.

The responses ESOP food companies provided regarding employee commitment and performance were reflected in the study’s core quantitative findings. ESOP food companies experienced a median quit rate that was 14% lower than non-ESOP food companies and were 16% less likely to view employee retention as a very large challenge. ESOP food company respondents were also 9% more likely to report strongly positive feelings about the performance of their workforce during the pandemic.

While ESOP companies were not immune to the economic impacts of the pandemic, responses from the survey underline the benefit that employee ownership can have in bolstering workforce commitment and buy-in, making businesses better equipped to respond to crises.