OPPORTUNITIES AND CHALLENGES IN PATHMARK'S MARKET

David Merrefield

Pathmark, the chain of 143 stores in the New York-New Jersey metro region, has had a tough row to hoe for quite a while now. The company was freighted for many years by a huge debtload engendered by a 1987 leveraged buyout. Debt finally was jettisoned the hard way in 2000 by means of a Chapter 11 restructuring.

Not too long thereafter, Pathmark and the rest of the industry took a punch in the form of a sagging economy. What to do? In large measure, that's the theme of the treatise about Pathmark that you'll see referenced off the front page of this week's SN.

One of the key points to consider about Pathmark is the environment in which it works. "Pathmark Country," as it's known internally, is the most densely populated region in the country. Numbers help, but it's also the most demographically diverse region. So over the years, Pathmark has developed the skill to operate stores in areas as diverse as the boroughs of New York City and the distant suburbs of New Jersey. That gives Pathmark the ability to go anywhere. Another advantage of Pathmark's location is that it isolates it from the incursion of Wal-Mart supercenters, at least so far.

In sum, Pathmark has faced severe financial challenges for many years, but is also possessed of some advantages of location. That makes it instructive to take a look at how the chain's top executives -- Eileen Scott and Frank Vitrano -- are moving the company into the future, and are doing so without much room for error.

As is detailed in this week's news feature, Pathmark has taken steps both unusual and ordinary to ensure that costs are contained acceptably. For instance, in recent months headcount reductions amounting to 72 positions at the headquarters office and 130 at store level were made. At much the same time, the chain embarked on a number of projects intended to increase efficiency.

One efficiency move was to a bake-off program; another to case-ready meat. Case-ready cuts of some variety are in all stores. It's expected the program will march through the meat cases at many more locations. The program's advantages include the ability to keep cases fully stocked at all hours. Under consideration is adding service-meat counters in a couple of stores to run beside case ready. Similarly, a look is being taken at service delis and prepared food to see if those offers should be enhanced.

Another action taken at Pathmark was the installation of customer-actuated checkouts at 70 stores, or about half the chain. Shoppers' use of the checkouts is encouraged by giving store management productivity goals. That encourages store personnel to talk to shoppers about checkouts. In a year's time, 24% of customer transactions, representing 9% of store sales, have been channeled to self-checkout.

Incidentally, Pathmark is also unusual in that Eileen Scott is the chain's chief executive officer, the first woman to fill that role at Pathmark. She joined Pathmark in 1969 as a store-level worker. In terms of rising from store to CEO level, without benefit of family connections, she is unique in the industry.