Penn Traffic

The Penn Traffic Company

File:Penntraffic1.png
Company type	Public
Industry	Retail
Founded	1854
Defunct	2010
Fate	Assets acquired by Tops Markets
Headquarters	Syracuse, New York, U.S.
Products	Bakery, dairy, deli, frozen foods, meat, pharmacy, produce, seafood, snacks

The Penn Traffic Company originated in 1854 as a food service enterprise based in Johnstown, Pennsylvania.

Over time, it transitioned into a general merchandise department store. By the early 1960s, the company re-entered the food retail sector through acquiring Super Value Corporation, which operated the Riverside supermarket chain with 10 locations.

In 1982, Penn Traffic divested its department store operations to focus exclusively on the grocery and supermarket industry. Financial difficulties culminated in a Chapter 11 bankruptcy filing in November 2009. Subsequently, its assets were purchased by Tops Markets in early 2010.

At the point of acquisition, Penn Traffic served as the parent company for 79 retail supermarkets primarily situated in the Northeastern United States, with a concentration in Central New York. The company’s headquarters were located in Syracuse, New York. Previously, Penn Traffic managed supermarkets across Pennsylvania, Vermont, and New Hampshire under various banners including Insalaco's, Bi-Lo/Riverside/U-Save, P&C, and Quality. Additionally, it operated a wholesale food distribution segment that was sold to C&S Wholesale Grocers in 2008; this division supported roughly 121 independent grocers.

19th century

The origins of Penn Traffic date back to the 1850s when it began as a trading post in Johnstown, Pennsylvania. Throughout its history, it evolved from a general merchandise department store into a significant player in both retail and wholesale supermarket sectors.

20th century

In 1922, Penn Traffic launched Johnstown’s inaugural radio station, WTAC, which remained licensed until early 1926. The Riverside chain, founded in Brookville, Pennsylvania in 1928, was incorporated into Penn Traffic’s portfolio in 1962. During the 1980s, Riverside developed the Bi-Lo format—distinct from the Mid-Atlantic’s similarly named BI-LO chain. Penn Traffic operated 43 Bi-Lo supermarkets throughout Pennsylvania and supplied food products to 51 franchised and independent stores via its distribution center in DuBois, Pennsylvania. Quality Markets, established in Jamestown, New York in 1913, became part of Penn Traffic in 1979; the company ran 34 stores under this banner across southwestern New York and northwestern Pennsylvania.

Following economic downturns exacerbated by the 1977 flood, Penn Traffic’s flagship department store in Johnstown permanently closed. In an effort to concentrate on grocery retailing, the firm sold six department stores along with two women’s specialty store leases to Crown American Corporation—owner of the Hess's department store chain—in 1982.

In 1986, Miller, Tabak, Hirsch & Company—a New York City investment group—initiated a takeover attempt of Penn Traffic. Although initially resisted by management, by 1987 an affiliate of this group successfully took the company private through a $131 million acquisition (~$Template:Format price adjusted for inflation).

Under chairman Gary Hirsch’s leadership beginning in 1988, Penn Traffic embarked on an expansion strategy. Hirsch took the company public again to raise $25 million and subsequently acquired Syracuse-based P&C Food Markets for $219 million.

The following year saw Penn Traffic purchase Ohio’s Big Bear Stores for $341 million (~$Template:Format price inflation-adjusted).

P&C Foods

File:P&C Skytop.jpg

P&C Foods location in Syracuse, New York, formerly known as Peters and later Tops.

Established in 1944 as the Producers and Consumers food cooperative in Ithaca, New York, P&C Foods was created to help farmers from upstate New York efficiently bring their goods to market. Up until 2010, Penn Traffic managed 70 P&C supermarkets across the Syracuse metropolitan area and additional regions in upstate New York, Vermont, New Hampshire, and Pennsylvania. Besides retail, P&C was a significant wholesaler in upstate New York; operating from its Syracuse distribution center, it supplied 99 independent grocery stores throughout central New York, most of which continue to operate under the Big M franchise banner.

In 1997, the new home stadium for the Syracuse Chiefs baseball team was named P&C Stadium under a naming rights agreement held by Penn Traffic for nine seasons.

The final grocery store bearing the P&C Foods brand ceased operations on January 21, 2012, located in Bath, New York. The property was sold to Moran Foods, the parent company of Save-A-Lot, following a directive from the FTC. Today, the P&C brand continues to exist under new ownership in Cortland and Ithaca.

Big Bear

The inaugural Big Bear store launched in 1933, pioneering self-service supermarket concepts in the Midwest. It was the first supermarket nationwide to implement cashier-operated motorized conveyor belts and utilize an IBM mainframe computer. During the 1980s, Big Bear Plus locations combined traditional grocery offerings with general merchandise. Penn Traffic operated a total of 70 Big Bear and Big Bear Plus stores across Ohio and West Virginia until early 2004. Following Penn Traffic’s bankruptcy filing in 2003, these stores were either shuttered or sold to other retailers such as grocery chain Giant Eagle, while some properties remained vacant. The Big Bear warehouses in Columbus, Ohio were also abandoned and eventually demolished for redevelopment.

Throughout the early to mid-1990s, Penn Traffic expanded by acquiring and constructing supermarkets within its core markets. This period saw its entrance into the Buffalo, New York and Erie, Pennsylvania markets under the Quality brand name. The company invested heavily to improve its store portfolio and distribution infrastructure while maintaining consistent growth in profitability and cash flow.

In 1997, Hirsch appointed Phil Hawkins as CEO; Hawkins had previously been credited with rescuing the Vons supermarket chain in California. Hawkins implemented cost-cutting measures including terminating 325 employees—among them all five division heads some with two decades or more tenure. Under his leadership, USDA Choice meat was replaced with lower-grade meat in butcher sections. To reposition stores as value-oriented outlets, Hawkins reduced expenses by switching to generic grocery bags, deferring maintenance projects, and cutting employee benefits. However, prices did not consistently decrease across all Columbus locations where competitors like Kroger and Meijer frequently outperformed Big Bear in independent price comparisons.

Meanwhile, better-financed rivals such as Wegmans and Kroger eroded Big Bear’s market share. Fiscal year 1998 saw same-store sales drop by 8.2%, with operating income falling an additional 6% to $165 million ($Template:Format price adjusted for inflation). In Columbus specifically, Big Bear’s market share declined from 25% to 20%, while Kroger’s increased from 44% to 54%, according to The Columbus Dispatch. Hawkins resigned shortly before Penn Traffic’s initial bankruptcy filing on March 1, 1999.

Toward the end of the 1990s, Penn Traffic faced significant profit decreases due to merchandising and operational shifts that adversely affected its business performance. By late 1998, despite possessing strong consumer loyalty, the company recognized it was burdened by unsustainable debt levels. To address this issue, early in 1999 Penn Traffic reached an agreement with bondholders to restructure over $1.1 billion of bond debt.

In that same year (1998), Penn Traffic divested its dairy operation—Sani-Dairy located in Johnstown, Pennsylvania—selling it to Dean Foods. This dairy supplied fluid milk products including sour cream, ice cream novelties, and cottage cheese both to Penn Traffic stores and private label customers.

By June 1999, Penn Traffic completed its financial restructuring process successfully retiring more than three-quarters of its outstanding debt.

In 2003, another bankruptcy filing led to the loss of Big Bear—a major division of Penn Traffic. Fischer resigned just one month into this second Chapter 11 proceeding and was succeeded by turnaround expert Steven G. Panagos. Panagos proceeded to sell off Big Bear assets, close underperforming stores, reduce overhead costs, and transferred responsibility for an underfunded pension plan back to the PBGC. Following the filing, Robert Chapman took over as CEO of Penn Traffic. Despite being included on the S&P 500 list in March 2003, a scandal later that year negatively impacted Fischer’s diligence reputation.

In 2007 two former executives from Penn Traffic faced indictments on fraud allegations.

Early in 2008 Penn Traffic shuttered its private bakery operation Penny Curtiss after losing a contract with local competitor Aldi in August 2007; this bakery had contributed less than four percent of overall annual revenue.

By December 2008 Penn Traffic finalized an agreement to sell its wholesale division to C&S Wholesale Grocers Inc.

On November 18, 2009 Penn Traffic filed for Chapter 11 bankruptcy protection after reporting a second-quarter loss of $7 million—the largest loss ever recorded by the company—along with missed loan payments and delayed supplier shipments. Initially planning to liquidate all assets by year-end and finalize transactions by early January 2010,

As of January 9, 2010 Penn Traffic considered three bids: $54 million from Price Chopper for acquisition of 22 P&C Foods locations; a private offer of $36.5 million from professional liquidators seeking all assets; and an $85 million bid from Tops Markets for ownership of all stores.

Sale to Tops Markets

Further information: Tops Markets

On January 25, 2010, a federal judge in U.S. Bankruptcy Court approved Tops Markets' acquisition bid for all 79 Penn Traffic stores. The transaction was finalized on January 29, 2010. The purchase price slightly exceeded the earlier agreed figure of $85 million in cash, along with the assumption of roughly $70 million in Penn Traffic's outstanding debt.

While the BiLo and Riverside brand names continue to operate in Pennsylvania, three former locations have transitioned to the Tops banner. The P&C brand (P&C Fresh) was revived by three former Penn Traffic executives at stores located in Cortland, New York, Ithaca, New York, and Sayre, Pennsylvania; however, the Sayre location was subsequently sold to Tops.

See also

• Tops Markets
• Kroger
• Giant Eagle
• Meijer
• Save-A-Lot
• Aldi

External links

• Penn Traffic at Bloomberg L.P.
• "CEO of Big Bear parent firm meets the troops", Columbus Business Journal, June 9, 1997
• "Former P&C locations", NY Retail Roundup, March 10, 2010