Like many mid-sized supermarket chains, Carteret, N.J.-based Pathmark found itself struggling to compete against the natural advantages of large national chains and the flexibility of smaller independents. In and out of bankruptcy earlier in the decade, Pathmark posted losses for several years, including an overall annual sales loss of 0.1 percent to $998.5 million in 2006. Despite its struggles, Pathmark officials were upbeat about the company's turn around strategy and even narrowed quarterly losses at one point. The company's in-store bakery program, in particular, benefited from the company's notable new direction.
As part of its strategy for financial relief, Pathmark set its vision on its fresh departments. In May 2006, Pathmark reported that fresh food generated about 42 percent of sales for the company, compared to industry wide estimates of 50 percent. Company officials, led by C.E.O. John Standley, mapped out an improvement strategy that included a new store prototype it called “Go Fresh, Go Local.”
The first new unit, which features a larger in-store bakery with an expanded product line, opened in Kinnelon, N.J. in January last year. Just as Pathmark began rolling out its “Go Fresh, Go Local” prototype, the company agreed to merge with its biggest rival, the Great Atlantic & Pacific Tea Co.
Modern Baking visited Kinnelon and other Pathmark stores and spoke with industry sources to gain a better perspective of Pathmark's bakery overhaul and its future with A&P. Pathmark and A&P officials declined to participate in the article.
Pathmark invested heavily in store remodels to help boost the image of its fresh departments. The full remodels cost between $3 million and $3.5 million each, and the smaller revamps cost about $1.2 million, according to Pathmark published reports. The company expected sales increases between 5 percent and 12 percent in the overhauled locations. To date, Pathmark has remodeled less than ten of its 141 stores with the new prototype banner.
A&P, which has had its own financial struggles, also has been focusing efforts on a fresh concept, called A&P Fresh. Its newest store opened in Park Ridge, N.J. last fall, and it reportedly, “reinvents the food shopping experience for customers by marrying the best elements of innovative American and traditional European food-selling approaches,” according to A&P published statements. In-store bakeries in the stores are touted for their artisan breads baked in an “old world brick oven.”
“They [A&P] started about four years ago with this format. They are nice stores, but their bakeries are all cookie cutter with all the same packaged stuff,” says an in-store bakery consultant familiar with East Coast supermarkets.
The merger between A&P and Pathmark forms a chain of about 450 stores with $9.4 billion in annual sales and leading market share in the New York metropolitan area. It also significantly increases market share for A&P in greater Philadelphia and Baltimore. With A&P its former competitor, Pathmark's main in-store bakery competition falls to Foodarama's ShopRite, Food Circus, Inserra Supermarkets and Kings Super Markets.
Even with the acquisition, sources say Pathmark is continuing to roll out its “Go Fresh, Go Local” prototype. The stores feature branded fresh departments based on area landmarks, such as Chesapeake Seafood, 59th St. N.Y. Deli and Chelsea Bakery.
Pathmark's Chelsea Bakery is a full-line in-store bakery with a clear emphasis on gourmet cakes and broad selection of crusty breads. The Kinnelon location also a houses self-serve coffee station within the in-store bakery. Large mural photographs of artisan breads and fruit tarts hang above the bakery area, along with a Chelsea Bakery sign and awning. A sign with the bakery manager's name and photo is positioned above the bakery, enhancing the bakery's personal appeal for customers.
“The product mix is beautiful, and the bakeries have people in them,” an East Coast bakery supplier says. During Modern Baking's visit on a weekday afternoon, three employees staffed the bakery decorating cakes, baking-off breads, serving customers and stocking displays.
A sleek black refrigerated service showcase brings the Chelsea Bakery cake line front and center. A variety of mousse cakes, pies and decorated brownie desserts filled the showcase in an attractive display. “Gourmet Brownies,” large 8-sq.-in. brownies topped with peanut butter and chocolate icing or drizzled with chocolate coating and M&Ms™, merchandised well next to more upscale mousse cakes.
The bakery also offers an extensive variety of breads and rolls. Rye bread varieties, for example, include rye, pumpernickel, Russian rye, seeded rye and onion rye. Artisan breads and rolls, including Chelsea Bakery and other branded breads, occupy about 30 sq. ft. of wall display.
The Chelsea Bakery prototype offers an appealing balance of product in an open-production setting. Pathmark is continuing to roll out its Chelsea Bakery concept, even tweaking the format for different locations. It opened a Go Fresh, Go Local store in Jersey City, N.J., this month with gelato prepared and sold through the in-store bakery.
“The gelato that seems to be doing well in that store,” the industry consultant says.
The future remains uncertain for Pathmark and its Chelsea Bakeries. Sources say A&P had planned to sell off about 30 Pathmark stores, particularly those located in close proximity to A&P stores in city neighborhoods. But, no notice for store closings or converting any Pathmark stores to the A&P banner has been released.
A&P, however, is closing Pathmark's central office in Cateret, N.J. in April, and most buying decisions have moved to A&P management, sources note. Pathmark's in-store bakery program, too, is in a state of limbo under the A&P regime with some of A&P's brands moving into Pathmark stores.
“At one point, all Pathmark in-stores were to be converted to the Chelsea Bakery concept, but I'm not sure what the plan is with A&P,” the supplier says. “Both companies have good people working for them, but everything always seems up in the air with A&P.”
Both A&P and Pathmark recognize the importance of their fresh departments in their improvement strategies and new designs. The two sides could join forces with the best of both new concepts and realize the full potential of a top-notch in-store bakery program, but that scenario seems unlikely.
Headquarters: Carteret, N.J.
Market served: New Jersey, New York and Philadelphia and Baltimore metro areas
Parent company: Great Atlantic & Pacific Tea Co., Montvale, N.J.
Other banners under the A&P brand: Farmer Jack, Food Emporium, Super Fresh, Wauldbaum's
Number of stores/bakeries: 143/131
Annual sales: nearly $1 billion for Pathmark; $9.4 billion with the A&P merger
Management: John Standley, C.E.O.; Ernie Koenig, senior vice president merchandising, perishables; Ken Liebel, director of bakery
Product line: full line, including specialty breads and rolls, decorated cakes, gourmet cakes, cookies, bagels, muffins, brownies and breakfast pastries
Primary production method: frozen bake-off
Web site: www.pathmark.com
Plans: Close Cateret, N.J. headquarters this spring and move to A&P's Montvale, N.J. offices; maintain Pathmark and Chelsea Bakery brands; continue to move forward with the new Go Fresh, Go Local remodels and store concept at least until A&P plans for the company are announced
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