PATHMARK LAUNCHES CAMPAIGN TO REGAIN LOW-PRICE POSITION

RICHARD TURCSIK

WOODBRIDGE, N.J. -- Pathmark Stores here has instituted a new "Pathmark Smart Price" campaign that has cut prices on more than 5,000 items throughout the store, including many Center Store grocery and frozen-food products.

The new Smart Price campaign is running in addition to Pathmark's existing Big Deals club packs, Deep Cut Prices extended-period low prices, and clipless Smart Coupons, which are offered instead of a frequent-shopper card.

Officials at Pathmark declined to comment about Smart Price, but local observers and others familiar with the chain told SN Pathmark is using Smart Price as a way to re-establish itself as a low-price leader in the metropolitan New York and New Jersey market.

"Pathmark's current plan is an attempt to bring in everyday low pricing to the marketplace in the hope that the consumer will be able to re-recognize the 'old' Pathmark, which was known to have the same fantastic retails and great buys as ShopRite," said one observer.

Smart Price began at 7 a.m. Sunday, April 6, when Pathmark reopened its doors after closing the normally 24-hour operation overnight Saturday to adjust pricing and install new "Pathmark Smart Price" shelf tags by the new items. Large yellow and black signs in the store windows also herald the new campaign.

"On Sunday afternoon the store was more crowded than usual, but part of that may have been because they were closed Saturday night," said one local observer.

Pathmark is also supporting Smart Price with extensive television advertising.

Among the products featured with a Pathmark Smart Price in the company's April 7 circular were Edy's ice cream, $1.99 a half-gallon ($1.49 with a 50-cent manufacturer coupon); a 24-roll package of Charmin toilet tissue for $4.88; a 48-ounce bottle of Wesson oil for $1.99; and five 5.5-ounce cans of 9 Lives cat food for $1.

Frozen Smart Price items included Pathmark bagels, half-price at 59 cents a bag; Swanson's Kid's TV dinners, two for $3; Ellio's 1-pound round pizza, half-price at $1.49; and Healthy Choice ice cream, $1.99 a pint.

The local observer said the campaign should be successful at helping Pathmark hold onto its existing customers and encourage others to take a new look at the chain.

"There is a certain consumer that likes Pathmark. They have been a little hesitant and confused, but they still like Pathmark. If Pathmark can deliver on price these customers will absolutely like it," he said.

He noted that because of its leveraged buyout several years ago, Pathmark has lost some of the edge it used to have on ShopRite and the other players in the market.

"Smart Price should have a dramatic impact on Pathmark. Over 20 years ago Pathmark was one of the leaders in the country in moving more groceries per square foot," he said. "Pathmark is the Harvard case study of how when financial Wall Street players enter the grocery business they can turn one of the country's leading grocery marketers close to financial failure by bleeding them dry."

Howard Goldberg, high yield analyst at Smith Barney, New York, expects Smart Price to work in Pathmark's advantage as the retailer looks to "return to its roots" as a low-price leader.

"Anything that gets them more in the minds of consumers as a low-price leader and stimulates sales without giving away a tremendous amount of margin is probably the direction they are looking for, and it sounds like they ought to have some success with what they are rolling out here," he said.

But Goldberg cautioned that Pathmark's action is likely to set off a price war in the region.

"A price campaign of this magnitude won't go unnoticed by Pathmark's competitors. They will feel a need to respond, and I'm sure Pathmark has prepared for that," he said.

Indications that a price war is on the horizon have already been seen. The Sunday Pathmark's campaign broke, ShopRite ran a double-truck ad proclaiming that it has always been the true low-price leader, while Edwards Super Food Stores ran a full page and devoted the cover of its weekly circular to the slogan "Over 30,000 true low prices every day!" Officials at both chains could not be reached for comment.