Big Bear Stores Co.

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Big Bear Stores Co.

770 W. Goodale Boulevard
Columbus, Ohio 43212
U.S.A.
(614) 464-6500
Fax: (614) 464-6780

Wholly Owned Subsidiary of Penn Traffic Co.
Incorporated: 1933
Employees: 11,500
Sales: $1.39 billion
SIC: 5411 Grocery Stores

Big Bear Stores Co., a wholly owned subsidiary of Penn Traffic Co., is a regional grocery chain operating 65 supermarkets, principally in Ohio, but also in West Virginia. The company also operates 17 department stores and 12 Big Bear Plus stores, which are combination department/grocery stores.

Shortly after King Kullen launched the supermarket idea in New York, Wayne E. Brown founded Big Bear Stores in Columbus, Ohio. The first supermarket in the Midwest, Big Bear was located in a former skating rink. At 47,000 square feet, it was huge by contemporary standards. Shoppers liked the variety such a store could offer, with the butcher, baker and grocer located in one place. Big Bear likely pioneered the idea of one-stop shopping: its premiere store included a drugstore, restaurant, candy department and shoe repair store in addition to foodstuffs.

In the heart of the depression, homemakers welcomed the low-prices made possible by the store’s bulk purchases. Moreover, items were attractively displayed so that the customer could pick them off the shelves without the help of a clerk. Traditional store owners disparaged the supermarket concept, believing that customers would steal more than they would buy if given free access to the shelves. Although shoplifting did become a significant problem for supermarkets, the concept of do-it-yourself shopping was here to stay. Big Bear drew 200,000 people on its opening day; and the company opened up its second store in a Columbus piano factory just one year later.

From the start, Big Bear utilized print and radio advertising as well as in-store promotions. In 1936, shoppers could win $5 to $25 by mixing six words with “Big Bear” and “low prices” to create a store slogan. In 1937, Brown and other supermarket owners formed The Supermarket Institute, a professional association for supermarket operators. Through the association, the stores were able to develop and share concepts and conveniences such as motorized check out counters, wire shopping carts, automatic exit doors, fluorescent lighting, bakeries, and other in-store departments.

During the 1940s, the company went public and continued to grow by building new stores. It also bought out and merged with Miller Stores Co., in 1943. In 1948, Big Bear joined with other supermarkets to form Topeo Associates. Located in Skokie, Illinois, the corporation employed scientists and researchers to develop and acquire products for distribution.

In 1954, Big Bear purchased Harts discount stores, which operated stores in Lexington, Kentucky, and Evansville, Indiana. In addition to operating the chain, the company drew upon the Harts merchandise to increase the mix of non-grocery items in the Big Bear stores.

By 1956, Big Bear operated 21 supermarkets in Ohio cities with sales of over $50 million, and became a trend-setter in supermarket design. The chain introduced a widely imitated layout in which the perishable departments were located in the middle of the store, with low display fixtures to highlight them, while the store overall was painted in a spectrum of pastel colors. Big Bear was also the first in the nation to use the new IBM 305 Ramac accounting machine.

In 1957, Big Bear built its first stores outside of Ohio, in West Virginia. The company also operated a trading stamp subsidiary. Like most grocery stores, Big Bear awarded customers a number of stamps depending on how much money they spent; the stamps could then be redeemed for a variety of items. The popularity of the stamps declined throughout the industry, however, dropping off sharply in the late 1960s until the practice disappeared altogether by the late 1970s.

Keeping in step with the industry, Big Bear continued to grow steadily. During the 1960s, the chain increased by a few stores per year, doubling its size by the end of the decade. The company was taken private in 1973, the same year its founder Brown retired. Brown, who was ill, owned 20 percent of the company’s shares and held voting control through another class of stock. With his cooperation, the chain was purchased through a leveraged buyout by Oppenheimer Partners, New York, which then became Odyssey Partners. Approximately $50 million in equity was purchased from shareholders. A great deal of debt was assumed, but no holdings were sold to pay it off; all debt was scheduled to be repaid by 1991. The company remained intact and management was not changed. At that time, Michael Knilans, who had joined the company as a bag boy in 1942, assumed the presidency.

Larger chains such as A&P, Pick and Pay, and Fisher Foods opened in Columbus during the 1970s and early 1980s, but were driven out while Big Bear maintained its hold on 30 percent of the Columbus market. Continuing its pattern of slow and steady growth, from 1976 to 1981, Big Bear built ten Big Bear stores and one warehouse market. It opened three warehouse stores and two limited assortment outlets in existing buildings. By 1981, the chain consisted of 58 Big Bear supermarkets, four Grocery Warehouses, and two Box Stores.

By the 1980s, the chain had developed a variety of store styles suited to various communities. For scattered populations, there was the combination Harts Family Center/Big Bear Stores. Warehouse stores fared better in small cities, while middle-income areas still required conventional supermarkets. The conventional stores ranged from 32,000 to 42,000 feet and included scratch bakeries and complete delis, with stock varying according to the needs of the community where the unit was located; this size unit continued to make up the majority of Big Bear stores built since the 1980s.

In 1981, in response to the growing white collar suburbs north of Columbus, the company introduced the more cosmopolitan Great Big Bear. At 42,000 feet, it carried almost 20,000 items and was aimed at the upper-middle-class consumer, offering such specialty products as fresh scallops, imported cheeses and a natural food boutique. The first unit’s opening day—featuring a Miss America runner up, a talking robot, and 110 year-old lobster—attracted 5,000 people. The store quickly became one of the highest-volume markets in the Columbus area, reaching $300,000 a week in sales, and cutting into the sales of area natural food stores.

With 63 stores and 27 Harts discount department stores, the company had earned $8.6 million in fiscal year 1982 on sales of $652 million. In 1983, the company went public for the second time. In order to fund expansion and the remodeling of older units, Big Bear offered 1.75 million common shares, with the current holders offering about 25 percent of their stock for sale.

In 1985, Big Bear had sales of $650 million and Forbes ranked it number one among 27 regional supermarkets chains in return on equity and important factor in profitability. The next year, Cub Foods entered the Columbus market. That store had pushed under competitors in other markets with its low prices and warehouse style. Instead of trying to beat Cub at its own game, Big Bear capitalized on its competitor’s weaknesses. The company stepped up customer services at the store which would compete with the Cub unit, doubling employees there to 155. The newly remodeled store was able to maintain its sales, and Big Bear maintained its hold on one-third of the Columbus grocery market with its 27 area stores. The chain also operated 35 stores outside the Columbus area, including seven in West Virginia and over 30 discount department stores. In fiscal 1988, the company had a net income of $16.3 million on sales of $930 million.

With no national competitors in their market areas, Big Bear was fiscally healthy and well-managed when Penn Traffic Co., which already operated several regional grocery chains, moved in on it. In December 1988, Penn had acquired a 14.5 percent stake in the coming, for about $45 million through a privately negotiated transaction with Value Equity Associates I L.P. of New York. With the financial backing of Salomon Brothers, Penn offered to purchase the remaining shares at $35 a share, or about $296 million altogether. Big Bear rejected the offer and adopted a shareholder rights plan in an effort to deter the unwanted take over, which could cause loss to the company’s current stockholders. The company retained Goldman, Sachs & Co. as a financial adviser, in order to buy time to review the situation and develop alternatives. Despite the company’s efforts, Penn was able to purchase the chain in 1989. However, the price was raised to $38.60 a share, or a total of $290 million. At that time, Knilans retired and John E. Josephson, formerly senior vice-president of finance and CFO of Penn Traffic, stepped into the presidency.

Heading into the 1990s, Big Bear continued its time-tested strategy of slow expansion through stores tailored to the surrounding community. The newest trend was toward larger stores with even more mixture between general merchandise and traditional supermarket fare. In 1992, there were 11 Big Bear Plus stores, a format created by tearing down the wall in complexes where a Harts and Big Bear had operated side by side.

In 1993, Big Bear built a store in Grove City, Ohio, which was their largest to date at 52,000 square feet of selling floor. Yet the company planned to build a store twice that size, around 120,000 square feet. The new design clustered perishable goods in the front of the store, hoping to tempt shoppers as soon as they entered. This “power aisle” included a service deli, bakery, and produce, seafood and meat departments. The new bakery included a $20,000 machine which scanned photographs and reproduced them on cake with food coloring. The rest of the perimeter included dairy, soft drinks, a walk-through beer cooler, frozen food, a full service band and a flower shop.

As for the rest of the store, groceries and the pharmacy were located in the center, along with a huge variety of non-food items, including clothing, stationary, craft items and picture frames, calculators, cameras, compact discs, sporting goods, toys and appliances such as coffee makers, toasters and handheld vacuums. The non-food items were integrated with food items. For instance, toys were possibly placed next to cold cereal. Altogether, the new store offered 80,000 different items.

In 1993, after 30 stores participated in a year-long Nielsen study on the effectiveness of the system, Big Bear decided to extend the Vision Value Network to all 71 of its stores. The network provided a touch-sensitive screen offering instant discounts, and terminals were placed at the check-writing stand of checkout counters. The machine also produced paper coupons and handled credit and debit card transactions. Big Bear planned to use the system to promote its private label goods and in-store departments, as well as promote the major brands which were already hooked into the network.

In 1993, Big Bear Stores, along with P&C Food Markets of Syracuse were merged into Penn Traffic’s other retail division, RDQ. The move was made in order to give the parent flexibility; at that time, loans could be made for a single entity instead of for three separate ones and legal and accounting functions were consolidated. Big Bear continued its slow but steady expansion strategy and maintained its strong regional standing heading into the late 1990s.