PATHMARK 2000

David Merrefield

Pathmark Stores is back in action and is investing much of its resources and energy into an unfolding Pathmark 2000 program.

Pathmark is the regional operator based in Woodbridge, N.J., with 140 supermarkets, plus 36 drug stores, in a five-state area. After a long period of relative quiescence that really dates to its leveraged buyout of 1987, Pathmark is rising to its feet and seems poised to make its mark on retailing.

A front-page news feature based on an interview of Pathmark executives, conducted by SN reporter Elliot Zwiebach, shows Pathmark pins its hopes on Pathmark 2000.

So what is the Pathmark 2000 program all about?

It's Pathmark's bid to address the challenges facing all food retailers -- how to clearly differentiate oneself from competitors, how to foster customer retention and how to improve one's image.

Pathmark and others are discovering that an inventive perishables presentation offers the best chance to differentiate and improve the store's image. They also find that improved service yields an improved image.

So, Pathmark is developing stores that bring a little theater into the shopping trip. The new Pathmark 2000 format does this in several ways. The produce preparation area has migrated onto the selling floor and the meat departments have moved into a rear-store alcove to make browsing more convenient. Service touches include a manager's office in a glassed-in area at store front, and a separate video checkout counter.

The design is intended to accomplish what supermarket operators must accomplish: to convince shoppers that food shopping can be convenient and fun, not time-consuming drudgery.

Pathmark is enjoying increased sales at the 27 stores in the new format; there are plans for 50 Pathmark 2000 outlets by the end of the year.

Those are the basic facts of Pathmark's plans, but it's probably just as important to consider what changed at Pathmark to make this format strategy a reality.

Jack Futterman, Pathmark's chairman and chief executive officer, told SN that the upturn in store development was made possible by a recapitalization plan that went into effect more than a year ago.

Pathmark pruned branches of the business that stood in the way of higher profit potential -- the Purity Supreme chain and the Rickle Home Centers operation. These sales, plus an improving cash-flow picture, provided a cash infusion that was used to reduce debt. Pathmark spun off its distribution and transportation business into a separate entity, which may position Pathmark to become a player on the wholesale side in the future.

Then, in a seemingly minor -- but telling -- move, Pathmark last fall introduced an upscale private-label line under the "Pathmark Preferred" name. The label apparently was developed to put Pathmark on a par with other Northeastern chains, such as A&P and Grand Union Co., which have their own upscale lines. Earlier, the upscale territory had been left open for Pathmark competitors to fill.

The leveraging binge that dominated the industry a few years back had a dark side, one that became all too evident as the 1980s drew to a close. The lesson learned in the aftermath was that heavy debt could strip a company of its entrepreneurial zeal and transform it into a slow-motion enterprise fighting to keep its footing on a slippery cash-flow treadmill.

Pathmark is now in the final stages of recovery from its leveraging of several years ago.

The same challenge, to maintain an ability to act strategically despite heaped-on debt, again faces companies that are growing by acquisition.