MONTVALE, N.J. — C&S Wholesale Grocers last week was set to begin a month-to-month contract hauling groceries to Pathmark stores from a warehouse in Harrisburg, Pa., following the closure of five Pathmark warehouse facilities in New Jersey.
C&S was the low bidder in a request for proposals to take over Pathmark distribution from Grocery Haulers Inc., Pathmark owner A&P said in bankruptcy court documents filed last week. A judge in the case last week granted A&P permission to reject its contract with GHI, which provided exclusive hauling of groceries for Pathmark.
The warehouses — Pathmark's main grocery warehouse in Woodbridge, N.J., along with four other New Jersey distribution centers referred to as the Woodbridge facilities — were expected to close, and C&S was expected to begin delivering goods to Pathmark from Pennsylvania as soon as Feb. 6.
The moves reflect the struggles of A&P — and by extension, the supplier providing around 70% of its saleable goods — as both look to more cost-effective strategies amid dwindling sales.
A&P called the GHI contract “substantially above market” and said the C&S offer would provide the retailer annual savings of $7.6 million, despite fuel costs resulting from trucks having to drive an additional 9 million miles per year. The Harrisburg facility, unlike the Woodbridge sites, is non-union.
Both Grocery Haulers, Avenel, N.J., and a Teamsters local representing GHI employees filed to deny the order to reject the contract.
According to Teamsters Local 863, C&S indicated to the union that it “would only keep the [Woodbridge facilities] open if the union met the savings that C&S said it could achieve by removing the work and transferring it to a non-union facility.”
A C&S spokesman did not comment on the closures.
The move to close the facilities and reject the contract would streamline a complex relationship between the various entities that, according to A&P, resulted in expensive and inefficient distribution.
Avenel, N.J.-based Grocery Haulers took over transportation for Pathmark in 1997, prior to Pathmark's acquisition by A&P. Although A&P and Pathmark combined their supply agreements under C&S following their merger, Pathmark's transportation business continued to be operated by GHI, creating inefficiencies, A&P said.
“For example, even though a Waldbaums-branded grocery store and a Pathmark-branded grocery store may be geographically proximate to one another, [A&P] is required to utilize and pay two different carriers to deliver merchandise from the same distribution centers to these two stores,” A&P argued in a court document.
The union said this characterization was untrue and accused C&S of being unreceptive to renegotiating its contracts.
At least one observer was wary of the move, saying disruptions brought about by the change could weaken stores where out-of-stocks are already an issue. “This is not the time to be making changes like this,” Burt P. Flickinger III of Strategic Resource Group, New York, told SN.