Attack of the Wal-Martyrs

(Fortune Magazine) -- It's the week before Thanksgiving, and Chris Kofinis, the never-at-a-loss-for-words communications director for Wake Up Wal-Mart, is going through his organization's secret holiday campaign plan.

We're in his drab, windowless office in downtown Washington, D.C., surrounded by handmade posters, press clippings and assorted flip charts full of ideas and scheduling details. "You know, I probably shouldn't be doing this," he says as his cell phone rings. "If this got out, it would screw everything up. Wal-Mart would know too much."

On message: Wake Up Wal-Mart's Paul Blank, Buffy Wicks, Chris Kofinis, Laura Tatum and Jeremy Bird

Watchdogs: Andrew Grossman and Nu Wexler of Wal-Mart Watch. Backed by the Service Employees union, they have leaked several embarrassing Wal-Mart documents.

More from Fortune Will Mmmhops be a hit? NBA confirms L.A. Clippers sale to ex-Microsoft CEO Steve Ballmer FBI and SEC probe into Carl Icahn and golfer Phil Mickelson FORTUNE 500 Current Issue Subscribe to Fortune

The PowerPoint presentation entitled "Hope for the Holidays" details how the 1 1/2-year-old union-backed group plans to rattle Wal-Mart's carefully crafted image precisely when Americans are frequenting the mega-retailer most. It includes a ten-part timeline for attacking the company from mid-October through the end of the year.

The week before Christmas, for example, the group plans a mini-campaign titled "America, Pray for Wal-Mart to Change." It calls for reaching out to religious leaders and groups, targeted media buys and candlelight vigils in front of the stores, with families and children asking for health care. It's topped off by a national day of prayer.

"When you frame it as a family values and faith issue, almost all of Wal-Mart's core customers pay attention," Kofinis says. Another week the group plans to frame its campaign as a women's issue. "That's the whole idea behind what we do: We try to come up with innovative and creative ways to reach out to as many different demographic groups as possible."

Generate headlines, spin the news, trash your opponent. If this sounds like a presidential campaign, you're not too far off. Oh, and just as in The Boys on the Bus, these political junkies take few vacations, get little weekend rest and dating - well, that's for civilians.

In many ways, not much has changed since they were with the Howard Dean, Wesley Clark and John Kerry presidential campaigns. Only this time they think they're backing a winner. Even better, their candidate doesn't have to win - Wal-Mart (Charts) just has to lose. "If we want to talk about what kind of America we want for our children," says Kofinis, "we've got to talk about what is the responsibility of companies like Wal-Mart."

Plenty of companies complain they get bad press. But Kofinis and Paul Blank, the group's campaign director, are part of what is quite possibly the most relentless public relations assault ever launched against a company.

Simply put, Wal-Mart cannot do anything right in the eyes of these groups. When Wal-Mart lowers prescription drug costs, it "needlessly exaggerated" the scope of the plan. New environmental policies? "A publicity stunt." Even CEO Lee Scott's vacation raised "serious questions."

Wake Up Wal-Mart and another union-backed group, Wal-Mart Watch, spend just a few million dollars a year in contrast to Wal-Mart's $1.6 billion advertising budget. But thanks to the explosion of news outlets and modern Internet campaigning, the opportunities to point out the retailer's misdeeds - often through internally leaked documents - are limitless. (Imagine if Standard Oil muckraker Ida Tarbell had had a blog.)

Kofinis and Blank are liberals - but say they aren't radicals out to destroy Wal-Mart. Kofinis, 37, who grew up outside Toronto and recently became an American citizen, was a political science professor at Cal State Northridge before he was drafted to help run General Clark's campaign.

And Blank, a New Jersey native who began his political career at 12 as a volunteer for Senator Bill Bradley, graduated from Exeter and Duke, then went to work in politics, most recently as the political director for Howard Dean's campaign.

It's difficult to gauge what effect their efforts have had on Wal-Mart's bottom line. "Our customers see these attacks as part of a tired and failing campaign," says Wal-Mart spokeswoman Sarah Clark. "We have 127 million customers who visit our stores each week. We think that in itself tells the whole story."

That's true - and those customers have saved billions. Still, Wal-Mart's stock is down 30 percent since 2000. Same-store sales growth has slowed to 1.5 percent in the third quarter, compared with 4.6 percent at Target (Charts). And opposition to stores in urban areas is as high as ever. With all that going on, the PR offensive, which was spurred by a 2004 grocery workers strike in California that the unions blamed on Wal-Mart, certainly can't be helping.

But what does Wake Up Wal-Mart want, exactly? It depends on whom you ask. Kofinis and Blank say their aim is to drum up enough public awareness about the company's practices, so it's forced to treat workers better, which will in turn make smaller companies follow suit. (Target is much smaller than Wal-Mart and doesn't sell nearly as many groceries, which explains why they aren't, well, a target.)

Wal-Mart "made $11.2 billion in profits last year," says Kofinis. "If they took even a few billion of that and used it to pay better wages and provide more affordable health care, they could change their public image overnight. They would be a model employer."

But ask the union leaders - the people who pay the bills - the same question, and additional motives emerge. "Success would be if Wal-Mart would bring their working standards up to what we consider decent," says Joseph Hansen, president of the United Food and Commercial Workers International Union, who founded Wake Up Wal-Mart. "We just don't think they are going to do that without a union."

"The average Wal-Mart worker will have to work 1,000 years to make what Lee Scott made last year," Kofinis bellows in front of 27 people holding small mechanical dials. It's a rainy Sunday evening in Bedford, N.H., and Kofinis is "live-dialing" a focus group to pinpoint the messages that resonate most with voters. He's got a winner - the focus group attendees are twisting their knobs furiously, registering an 80 percent approval rating for his message, something most politicians would kill for.

Then Republican strategist Frank Luntz (famous for helping Newt Gingrich forge his Contract With America) takes a turn. He's been brought in to analyze the focus group, and when he tests classic Wal-Mart rebuttals, including how much the company saves consumers, he bombs, scoring a Dukakis-like 30 percent.

The guys are elated: they'll use this research to help convince politicians on both sides of the aisle to make Wal-Mart an issue on the campaign trail. Luntz's takeaway: "Everyone in that room thinks Wal-Mart is a legitimate issue in '08."

That's the whole idea, says the UFCW's Hansen, a former meat cutter who took over the union in 2004. That year the UFCW barely survived the crippling grocery strike in California, which came about after Wal-Mart announced it was moving its grocery-carrying "Supercenters" into the state. Traditional chains used that threat to play hardball with their unions, slashing benefits and precipitating the strike.

The UFCW had already spent more than a decade trying to unionize Wal-Mart with no success. (When they signed up meat cutters in Texas, for example, the company centralized all meatpacking for that region; when they organized one Canadian store, Wal-Mart simply shut it down.) Now it was war.

In January 2005, Hansen approached Howard Dean's former political director, the then 29-year-old Blank. The question was simple: Could he replicate the populist groundswell that the Dean campaign embodied against a single corporation? "I thought about it for a little while," Blank says. "Then it hit me: This was a once-in-a-lifetime opportunity to change America through one company."

Around the same time, Andy Stern, the chief of the Service Employees International Union, hatched a similar plan. He called it Wal-Mart Watch and designed it more as a watchdog research organization than a take-it-to-the-streets campaign. Run by Democratic operative Andrew Grossman, its $4.6 million budget comes primarily from Stern's union, with help from groups like the Sierra Club.

Blank's group, which receives all its money from the UFCW, modeled itself after the Dean and Clark campaigns. One of the first things it did was to set up a snappy Web site where supporters could enter their zip code to find nearby Wal-Marts and then get involved in pickets, informational house parties or letter-writing blitzes.

With campaigns like "Love Mom, Not Wal-Mart," and "All I Want for Christmas Is Health Care for Mommy," the group says it has signed up more than 287,000 supporters.

Last summer they took their message on the road. With an old bus painted red, white and blue, they held rallies, press conferences and town hall meetings in 35 cities in 35 days. The eight staffers slept on the bus; there were few showers and far too many meals at Denny's. "By the middle of the tour, the bus wasn't smelling so good," says Kofinis.

Not that their office is deluxe either. The quarters are cramped, the carpet is green, and workdays can go as late as midnight working the phones, lobbying Capitol Hill and talking with Wal-Mart employees.

Staffers have become experts at leaking Wal-Mart documents to the press. Recently they exposed an unpublicized salary cap that was part of a much-publicized Wal-Mart pay raise.

Rival Wal-Mart Watch found the single most embarrassing document: a leaked memo from Wal-Mart's VP of benefits that recommended, among other things, discouraging unhealthy people from working at Wal-Mart.

Lately several A-list politicians have spoken out for the cause. Wake-Up Wal-Mart's holiday-campaign kickoff conference call featured Senators John Edwards and Barack Obama. "Wal-Mart is making enormous profits, and yet it has chosen to go with low wages and diminished benefits," Obama told listeners.

Wal-Mart isn't the first American company to face such withering attacks. Standard Oil's dominance provoked widespread public outcry around the turn of the 20th century. Henry Ford's labor practices came under intense criticism in the late 1930s. In recent years Nike (Charts) and Gap (Charts) faced scrutiny for what critics said were sweatshop conditions at its overseas factories.

Each company eventually yielded, says Nelson Lichtenstein, a labor historian at University of California at Santa Barbara and editor of "Wal-Mart: The Face of 21st-Century Capitalism." Standard Oil fell to new antitrust laws. Ford (Charts) unionized, and Nike and Gap opened their factories to inspection. "If history is any guide, Wal-Mart will eventually have to do the same," he says. "No company can withstand this kind of criticism forever."

Clark, Wal-Mart's spokeswoman, says that although the company recently changed its environmental policies with the help of various activist groups, it doesn't plan to meet with any union-backed groups.

"Wal-Mart creates tens of thousands of jobs every year, we offer associates health plans for as little as $23 a month, and we're good stewards of the environment," says Clark. "Americans view Wal-Mart as a good neighbor, a good place to work, and a good place to shop."

Still, a confidential 2004 report prepared by McKinsey & Co. for Wal-Mart, and made public by Wal-Mart Watch, found that 2 to 8 percent of Wal-Mart consumers surveyed have ceased shopping at the chain because of "negative press they have heard."

And Wal-Mart hasn't taken the attacks lying down. Last year the company, which has historically had a tiny PR department, hired Edelman, one of the world's largest public relations firms. After setting up a "war room" in Bentonville, one of Edelman's first projects was to help organize a pro-Wal-Mart grass-roots organization called Working Families for Wal-Mart. But its leader, Andrew Young, the first African-American U.S. ambassador to the UN, was quickly forced to resign after making anti-Semitic and anti-Korean comments.

Then, in October, Wal-Mart Watch exposed another independent-looking site, Wal-Marting Across America, a travelogue by "Jim and Laura," as being company-funded. (Edelman referred all questions to Wal-Mart.)

With both sides locked in a standoff, will the activists ever get the retailer to make concessions? Live to see Wal-Mart workers unionized? Nobody knows. But the longer Wal-Mart stonewalls, the more time the unions have to influence public opinion. "I can't let it end until somehow Lee Scott and Joe Hansen figure out a way to end it," says the UFCW's Hansen. "I don't see that happening anytime soon."

Kofinis agrees. "Wal-Mart could easily change. They just don't want to," he says. "That's what gives this campaign power." It's also what keeps Kofinis's phone ringing off the hook. Back in his office, feet up on his desk, he's taking call after call, his voice becoming louder with each successive point.

It's CNN: "Don't think I can do it today unless you send a camera crew over." The Associated Press: "Did those workers I sent you pan out?" But he has the best response for the Wall Street Journal, which wants a comment on Wal-Mart's new high-powered head of corporate affairs and government relations, Leslie Dach: "Last time I checked, he wouldn't have a job if it weren't for our campaign."

He stops, turns my way, and chuckles: "That's pretty good, right?"

________________________

Religious group calls off Wal-Mart boycott

Wal-Mart extends $4 generic drug program