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The Minimum Wage Controversy

Mike Benito,
General Manager, Pay-Less Supermarkets

“How do we justify not forcing the issue now? Because there are still bankruptcies going on and a lot of companies are struggling. Some people make it seem like we’re completely out of the woods financially, and we’re not. We’re getting there and as we move forward, there’s no question that pay levels will go up.”

Michael T. Benito, 41, garnered a lot of grocery experience before he signed on with Pay-Less Supermarkets. A member of the Martinez clan, he began to work at the old Pedro’s Ice Plant after the summer of his eighth grade and later moved to their market. “First it was weekends and then, after the 10th grade while I was going to Father Duenas, it almost became full time,” he said.

While his five years with Pedro’s provided him with practical skills that certainly have helped him in his career, it was a lesson his father taught him at the beginning of his employment that may have been the most valuable of all — a lesson that is revealed during the interview that follows.

Benito completed high school in California and studied accounting at San Jose State University. While living in the mainland he, worked at a lumber yard and print shop and was a tutor for Native Americans.

Upon returning to Guam he joined Pay-Less working in the meat department, then the produce department. He also ran the graveyard crew before receiving his first promotion to assistant store manager of the company’s Hagatna store in 1989.

In 1992 Benito was promoted to store manager for the Oka, Tamuning outlet and later was transferred to run the Dededo facility. With his sights set on the general manager’s position at Pay-Less, he was instead offered the considerable task to turn around a floundering Market Wholesale & Distributors operation, then a division of Pay-Less. Though he saw it as a detour from his goal, he also recognized opportunity and set out to separate the company from Pay-Less and provide it with its own firm foundation. He views his success in making Market Wholesale profitable as a key to his eventual promotion to the GM position at Pay-Less in 2005, after he had served as assistant general manager for three years.

Benito has been involved with numerous public service groups, both on his own and through the Pay-Less Community Foundation. His participation includes: past chairman of Guam Crime Stoppers; past president of the Academy of Our Lady of Guam Advisory Board; past director of Big Brothers Big Sisters of Guam; director of the Pay-Less Community Foundation; and member of the Guam Police Commission.

He is the current chairman of the board of the Guam Chamber of Commerce and chaired its Retail Merchants Committee in 2005.

In addition he is chairman of the board of Guahan Waste Control, director of H2O Water Company and secretary for Pay-Less Super-markets Inc.

Among Benito’s hobbies are boating, fishing and basketball.

He is married to the former Marie Calvo, and the Benitos have four children.

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Interview

- Besides the entire issue of shipping, what is the biggest challenge for a retail grocery in Guam?

Personnel. Not very many people go into the supermarket business thinking that it’s going to be a career. It’s more of a transitory thing as most people come in just looking for a job. Fortunately, they wind up seeing it as a long-term proposition. All of our managers and supervisors were baggers or cashiers when they started. But it’s always been difficult to get people to see the grocery business as a permanent career choice, especially during the boom times when there’s a labor shortage. Then, when you get someone in, they’re usually not starting at the the highest end of the pay spectrum, so it’s a challenge to keep them motivated so you can get them to the point where they can be elevated.

- Once you get somebody into the system, what’s the likelihood that they'll stay in the grocery field?

Our retention rate is good, and over 40 percent of our workers have been with us for 20 years or longer. If we can just get them to about five or six years, we’re okay.

- With so many new items being produced, how do you determine which brands to carry?

We analyze our product movement reports all the time. We have over 35,000 active stock keeping units (SKUs) in our stores at any given time, and we have to be aware of what’s moving and what isn’t. It’s impossible to carry everything, and one program that helps is where manufacturers pay slotting allowances. They actually give you marketing money to put a product in, and we’re required to carry that item for a specific period of time. After that we can decide to keep it or move it out. In addition to that, products that we see from local distributors or our major suppliers fall under the manager’s call. It’s a tedious job and if you’re not careful, you can get stuck with a lot of dead inventory.

- The grocery business has often been likened to real estate. You have a limited amount of space and product promoters vie for and often pay a premium to be placed in good locations that may give them an advantage over their competitors. Does Pay-Less offer better shelf space at a price?

No, we don’t. We have small stores and you’re right, shelf space is at an absolute premium. If we have people dictating to us where we can put a chunk of our inventory — just because they throw a few dollars at us — we could be in real trouble. While that extra money might be nice up front, if those products aren’t moving and that space isn’t bringing the profit we need, then I'm losing money and that loss would far exceed anything vendors would pay for better locations. We offer distributors a program where they can be a sponsor of a promotion, and we’ll give them a premium spot. They didn’t pay for that, but since they’re partnering with us in a sense, we’ll upgrade their location for a limited time.

- How much psychology goes into product placement and store design for Pay-Less?

One of our main suppliers, Associated Grocers, is big in that type of thing. We give them a layout of the store and product movement reports, and they come back with a plan for what should go where based upon their own market studies. You get a schematic for each four-foot section with instructions that you can put in four rows of this, two rows of that, and they’ll plot the whole thing for you. In Guam this is a little more difficult than mainland grocers. There you can get deliveries every day from distribution centers that are usually within a 60- to 100-mile radius. You can get anything you need and at any time. Here, we bring in most of our items once a week, and this means we require some flexibility from those rigid plans. If a product doesn’t come in the shipment, we’re out for the next week. This is why you sometimes see that we “bleed” a product on the shelves, stretching it across to give us a full look. It means that we didn’t get a shipment and we’re covering a gap.

- A couple of years ago you made a move to expand your health food inventory beginning with the Micronesia Mall store. How significant is this market segment for you, and will you do the same in your other outlets?

All of our stores carry health food products, but the mall is the only one where we designate a spot in the store for them. We’ve seen trends in the states where people integrate those items throughout their stores. In example, your chill section would have all chilled products, including the health variety. Eventually, we’ll probably do that at the mall store, too. There are a lot of people who would rather see all of a particular product type together, health brands included. To answer the second part of the question, health food is not yet a huge category by itself. A fairly large segment of the market will spot-buy a few natural or low-fat items, but they’re not buying those things exclusively.

- Is there much of a difference in buyer preference from store to store, and what percentage of inventory does that impact?

There are slight differences from store to store, but for the most part, it’s pretty consistent wherever you go. In the business they say that 20 percent of the product is 80 percent of the sales, and that 20 percent everybody has. From that point on, every store manager has a little flexibility in what to carry. Customers often ask for things and the manager complies, and that accounts for some of that. But we try to manage that because if you don’t, you have eight rows of turnips and nobody’s buying.

Many retail grocers in the mainland U.S. have added a number of outside services and concessions to attract additional traffic. Pay-Less has limited this activity to banks. Do you look to do more in the future, and what services interest you?

The banks have done well for us, as have the donuts. We also concession out our deli and the sushi place. Again, it’s an issue of space. The projects we have do well for us, and while I’m not currently chasing anything in that category, you always have to be open to new ideas. Associated Grocers has had a great relationship with Starbucks, and a lot of their independent stores have Starbucks operations in their stores. If that ever became available, we’d jump all over it.

- In the time you’ve been the general manager, what would you point to as your greatest achievement?

We used to run with $7 million worth of on-hand inventory at all times. We’ve gotten that down to $3 million, and we’re doing a lot more sales now than we ever did before, and the reason why is that it’s all about shelf management, turning inventories on a regular basis, and we budget for that. You need to have X amount of turns for meat, freeze and chill foods, produce, grocery and variety. We get weekly deliveries from mainland suppliers and daily deliveries from local suppliers, so why do I need all those extra millions tied up in inventory?

- You had a career goal to land the job you now have yet took a detour for six years to manage Market Wholesale. How did that come about?

I had been the store manager at Oka Pay-Less and was managing the Dededo store when the need arose for someone to take over Market Wholesale and Distributors. It was then an offshoot of Pay-Less and wasn’t doing well, and the tough economic times made it clear that a change was necessary. I got a call from Mr. Calvo (the late Edward M. Calvo), and he said was going to give me an opportunity to turn it around. My goal had always been the position I have now, so I wasn’t sure if it was the right move for me, but I took it and I’m glad that I did. That was absolutely the best training ground I could have had. As a division of Pay-Less, its accounting, payroll and administrative functions were being handled by Pay-Less, and I realized that the only way we would ever know if the company could sustain itself would be to spin it off and make it operate on its own. Let it sink or swim. We did our own accounting, had our own sales force, paid our own bills and collected our own money. It worked.

- How difficult was it to place products with competitors of Pay-Less?

Very difficult. They viewed it that we were a division of Pay-Less. Buyers had the attitude of, “Why should I support you? You’re Payless.” I would go see Mrs. Kim of Kim Chee Supermarket or Mrs. Koo of 7 Day, and I wouldn’t try to sell one thing. We’d just talk. You know how they say, “Never leave without the sale” — well, I look at it differently ... never leave without a relationship being made. We developed the relationship, then it was easy to offer a deal and get the products in the stores. The other thing that I did was made sure that Pay-Less never got anything extra over another store unless it earned it through its volume. It paid the same prices that everybody else paid. That was made clear from the very beginning, that it wouldn’t be successful if we approached it any other way. After awhile, people began to see us as just another company, not that we were an affiliate of Pay-Less.

- To some extent you had put your career on the line. Did you feel any degree of risk in making the move?

Maybe a little at first but that quickly gave way to the realization that we were having fun, and we were building something positive. I was off on my own, and I was given a lot of room to grow. I was given the freedom to make mistakes, and there’s no doubt that I made more than my fair share of them. But Mr. Calvo was good at allowing that, and so was the late Wayne Brown, Pay-Less’ general manager, who had been my boss. At the end of the day we grew sales and turned a profit. It was a great experience.

- If a wholesaler makes a bad decision on a product line and it fails miserably, how much could they lose?

It depends on the product. If it’s a beverage, then the loss might not be so bad but certainly in the thousands of dollars. When I first went to Market Wholesale, we had gotten into a line of chemicals, and they were so sure of success that they had three containers ordered before the first one landed. Well, a lot of people were selling chemicals, and at the time people weren’t putting out heavy dollars for them, so you really had to know your business to make money with them. We wound up with a lot of stock on our hands and let’s put it this way, the butcher room at Pay-Less used my products to clean with, and every other sister company that needed chemicals used them too. We got stuck good on that one to the tune of hundreds of thousands of dollars.

- It seems that the chamber’s key issue for many years has been to see GovGuam reduce staffing and/or privatize, and the results for the effort expended are up for debate.

We had a big opportunity to drive down the size of government during the economic boom, and it didn’t happen, but it would have been easier because there was a safety net — there were other jobs available. It’s hard to cut back when the economy is bad, and those other jobs don’t exist. There’s no place for people to go. We’re looking at another boom time on the horizon, and I think we’ll again have the right circumstances to reduce government to its correct size. It’s not just downsizing, but rightsizing that is the key — because some departments will have to grow such as the police.

- Most states and even now cities and townships have addressed the minimum wage issue with increases being approved far in excess of what lawmakers in Guam have proposed. Given that most of America is going the other way on this topic, how does the chamber justify its stance in opposition to an increase?

We’ve always believed that the market should dictate what the wage should be. When this construction booms hits from the military, there is going to be such demand for talent from companies coming in here that wages will rise. Look at Pay-Less Supermarkets. I’ve got computer operators trained, managers, butchers, electricians, accountants, people handling accounts and a lot more. These new employers will look around and figure that it will be better to hire away a trained workforce than train their own. They’ll say, “You’re making 12 bucks an hour now, what if I give you 16?” If I want to keep my staff, I’m going to have to bring my wages up. How do we justify not forcing the issue now? Because there are still bankruptcies going on and a lot of companies are struggling. Some people make it seem like we’re completely out of the woods financially, and we’re not. We’re getting there and as we move forward, there’s no question that pay levels will go up.

- What is the principal goal of the Pay-Less Community Foundation?

To support other non-profit organizations. Pay-Less spends a lot of money year in and year out donating to various non-profits. We tend to gravitate to smaller organizations, and I’ve been a member of some, as has Kathy Sgro, and we came to the conclusion that what many of them needed was a grant writer. We came up with the idea of hiring a grant writer on our own, and now Pay-Less Supermarkets has one on our payroll. What we do is go in and help these groups that are already operating but need just a little help in the area of developing grants. We’ve found that many have a problem getting grants because they have no track record or their clientele may be small. So our grant writer, Cynthia Cabot, is trying to pool these organizations together, as many have very similar mission statements. We’ve had some successes already, and we’re happy to be part of the effort to allow these groups to be able to get the funding necessary to do the work that our community needs.

- If you had a career or managerial decision that you could have reversed, what is it and why?

Like I said earlier, I’ve fallen flat on my face a bunch of times, both here at Pay-Less and also at Market Wholesale. Fortunately, my pluses outweigh the minuses. I don’t know that I’d totally erase anything, but I can recall the failed 90-acre shrimp farm in the Philippines. We were trying to grow the large shrimp that everybody likes, but no matter what we did it just didn’t happen. We got them so big and they were fine, but any bigger than that and they just died on us. And there have also been a lot of hokey marketing ideas over the years that I liked and went for, but, again, I believe you have to try things if you’re going to grow, and I wouldn’t change any of it.

- Which leadership skills are underrated?

People skills are underrated by a big margin. It doesn’t matter how smart and how talented you think you are. If you can’t lead that horse to water and make him want to drink, then you might as well forget it. Being able to deal with people is everything, particularly in a business like ours.

- Why would a worker want you to be their leader and mentor?

I want our employees to be the happiest, most productive, most loyal of any in Guam, and I see to it that we do everything we can to make that happen. What helped shape that was the time I worked for a print shop in Sacramento years ago, and the lady who trained me was just horrendous. Back then there weren’t all the fancy machines that printers have today, it was a much more tedious and lengthy process, and it took a long time to learn how to do everything. Well, I made two back-to-back mistakes that cost this company big dollars and upset one of their best customers. It was terrible. But every time I was trying to ask her a question, she made it seem like I was bugging her or in her way. So I stopped asking, and that’s when I made the mistake. Even at that time I made myself a promise that I would never, ever do that to anybody who worked for me. Giving people the respect they deserve is not only the right thing to do, it’s also best for the business because they’ll produce more.

- What is the single best piece of advice you ever received?

I’m not sure he said it as advice, but my father, God bless him, taught me the best lesson I ever learned when I was working at Pedro’s in my ninth grade year. They had these grease traps, where you washed down all of these grease and oils (from the meat) that had built up. In those days there were no companies to call to clean the traps so you had to open it up, take a Folgers can and reach in to scoop all of this rotten gross stuff that had built up, then take it to the trash and then to the dump. Peter Maanao was the assistant manager at the time, and he told me that this was part of my job. I said, “No way.” My dad was the general manager, and so I walked away and went to my dad’s office. When he asked what I was doing there, I said, “You know what Pete wants me to do? He wants me to clean that grease trap. No way, I’m not doing that.” My dad took me by the arm and walked me back over there. He brought out Pete and I figured he was going to rip this guy. He said, “Pete, you see this job? This is Mike’s permanent job (laughing). Then he looked at me and said, “Don't you ever disrespect anybody, treating them as if you’re better than them.” I’ve kept that lesson with me all of these years. Whether it’s a bagger, janitor or president of a company, you give the same respect.

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