Penn Traffic
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The Penn Traffic Company (Pink Sheets: PTFC) is the parent company for 103 retail grocery supermarkets in the Northeastern United States, concentrating mostly in Central New York. Its headquarters are in Syracuse, New York. Penn Traffic currently has supermarkets also in Pennsylvania, Vermont and New Hampshire under the BiLo, P&C and Quality trade names. Penn Traffic operates a wholesale food distribution business serving approximately 121 independent operators.
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[edit] Origins
Penn Traffic traces its origins back to the 1850s, when it was a trading post in Johnstown, Pennsylvania. Over the years, Penn Traffic evolved into a large retail and wholesale supermarket company. Riverside, founded in Brookville, Pennsylvania in 1928, became part of the Penn Traffic family in 1962, and began developing the Bi-Lo format in the 1980s. Penn Traffic operates 43 supermarkets under the Bi-Lo trade name across Pennsylvania, and also distributes food to 51 franchise and independent supermarkets from its DuBois, Pennsylvania distribution facility. Quality Markets[1], founded in Jamestown, New York in 1913, joined the Penn Traffic family in 1979. Penn Traffic operates a total of 34 supermarkets under the Quality trade name in southwestern New York and northwestern Pennsylvania.
[edit] Acquisition
In 1988, Penn Traffic, under then-chairman Gary Hirsch, began an acquisition program. Hirsch, an accountant by training, spent eight years at Price Waterhouse before leaving in 1981. He formed Penn Traffic by combining three strong regional food distributors. In 1987 Hirsch took the company private for $131 million through his investment firm, Miller Tabak Hirsch & Co. In 1988 Hirsch took Penn Traffic public, raising $25 million, and then added Syracuse- based P&C Food Markets for $219 million. In 1989 Penn Traffic acquired Ohio chain Big Bear for $341 million. [2]
[edit] P&C Foods
P&C Foods began in 1944 as the Producers and Consumers food cooperative in Ithaca, New York as a way for farmers in upstate New York to get their products to market efficiently. Today, Penn Traffic operates 70 P&C supermarkets serving the Syracuse metropolitan area as well as many other communities in upstate New York, Vermont, New Hampshire and Pennsylvania. P&C is also a major wholesaler in upstate New York; from its Syracuse warehouse, the company serves 99 independent supermarkets in central New York, the majority of which operate under the Big M franchise trade name.
[edit] Big Bear
When the first Big Bear opened in 1934, it marked the beginning of self-service supermarketing in the Midwest. Big Bear was the first supermarket in the country to use cashier-operated motorized conveyor belts and the first to use an IBM mainframe computer. Big Bear has also been a pioneer in establishing supermarket service departments, developing a strong reputation for its high quality produce, meat, deli and bakery departments. Its Big Bear Plus stores were among the first superstores combining a supermarket with a general merchandise store. Penn Traffic operated 70 Big Bear and Big Bear Plus stores in Ohio and West Virginia until early 2004, when Penn Traffic declared bankruptcy. Many of the former Big Bear properties were sold to other companies, such as grocery retailer Giant Eagle, while other properties were left vacant and still remain vacant.
[edit] Keeping Up
In the early and middle 1990s Penn Traffic continued to grow as it acquired and built other supermarkets in and near its primary markets. During this time, Penn Traffic entered the Buffalo and Erie markets with the Quality trade name and made substantial investments to enhance its store base and distribution network, while maintaining steady growth in cash flow and profitability.
[edit] Phil Hawkins and PR Problems
In 1997, Hirsh hired Phil Hawkins, who was credited with saving the Vons supermarket chain in California. Hawkins, forced to cut costs, fired 325 employees, including all five division heads, some with 20 years or more with Penn Traffic.
As CEO, Hawkins replaced USDA Choice meat in its butcher shops with a cheaper grade. Customers stopped coming. Meanwhile, better-capitalized competitors like Wegmans Food Markets and Kroger cut into market share. Same-store sales fell 8.2% in fiscal 1998, while operating income declined another 6%, to $165 million. In Columbus, where Kroger and Big Bear had once been neck and neck, Big Bear's market share dropped to 20% from 25%, while Kroger's rose to 54% from 44% in 1998, according to a survey by the Columbus Dispatch. Hawkins resigned before the first bankruptcy filing, March 1, 1999.[3]
[edit] Profit Loss
In the late 1990s, Penn Traffic experienced a significant reduction in its profitability because of several merchandising and operational changes that had a negative impact on its business. By late 1998, the company realized that while it had strong consumer franchises, it was working under an untenable debt burden. To address this challenge, in early 1999 Penn Traffic negotiated an agreement with bondholders to restructure more than $1.1 billion in bond debt.
Penn Traffic completed its financial restructuring in June 1999 with more than 75% of its debt retired. In 2003 the company filed for bankruptcy again, this time resulting in the loss of Big Bear, one of their largest and most important grocery chains. The move came as a surprise to many, since most people perceived Big Bear as Penn Traffic's "crown jewel" and the chain was more profitable compared to its P&C Stores family members.
In 2007, two former Penn Traffic executives were indicted on fraud charges.
In early 2008, Penn Traffic closed its private bakery, Penny Curtiss. The bakery provided bread products for its own stores as well as to other supermarket chains. Penn Traffic cited the loss of the local Aldi stores contract in August 2007 as the primary reason for the bakery's closing. The company also said the bakery was contributing less than 4 percent of Penn Traffic's total annual revenue. [4]
