P&C Foods Inc.

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P&C Foods Inc.

P.O. Box 4965
Syracuse, New York 13221
U.S.A.
(315) 457-9460
Fax: (315) 453-0353

Wholly Owned Subsidiary of Penn Traffic Co.
Incorporated: 1941 as Cooperative P&C Markets Inc.
Employees: 7,800
Sales: $1.1 billion
SICs: 5411 Grocery Stores

P&C Foods Inc. is a northeastern grocery store chain with 88 P&C Stores and 71 Big M stores. A subsidiary of Penn Traffic Co. of Johnstown, Pennsylvania, it earned more than one billion dollars in 1992. P&C’s history began in 1941 when the Grange League Federation (G.L.F.), a farmers’ purchasing and marketing cooperative, had a difficult time marketing its products to consumers. The G.L.F. founder, H. E. Babcock, suggested a solution: the missing piece in the G.L.F., which already had farmers and processing facilities (such as flour mills, canneries, and egg auctions), was a retail store.

The Cooperative P&C Markets Inc. had its first board of directors meeting August 29, 1941, in the upstate New York city of Ithaca. The P&C stood for “producers and consumers.” Less than six months later, in January, 1942, the first P&C Market opened in nearby Batavia, New York. The opening stirred a lot of local interest since it was the first self-service market in the area. This new concept in marketing offered a complete line of self-service meats, fresh vegetables, and other groceries. Consumers could also rent freezer or cold storage space. Each locker was about six cubic feet. The store offered to hang and age meat for farmers who produced their own meat and then to cut it, wrap it, label it, and deliver it to the individual freezer lockers rented by each farmer. The 24,000-square-foot building rented by the first P&C Market for $125 a month featured a first floor for shopping and a second floor for parking. The store advertised the convenience of being able to drive right in from one of two entrances. The first week of business at P&C brought in $6,000 in sales.

A little more than a year later, a second P&C supermarket was opened in Auburn, New York. That store pulled in $7,500 its first week of business, with consumers spending $2,500 for meat and $1,000 for fresh vegetables and fruits. In response to its success, P&C formed a new cooperative corporation. Farmers and members of other co-ops became members of its board of directors.

P&C expanded quickly in the 1940s. By the end of the decade it had opened 20 more stores and moved its headquarters to the city of Syracuse. During this time, P&C bought Commander Foods’ five stores and its warehouse. P&C also marketed canned goods with its own P&C label.

The 1950s brought a shift of population from the cities to the suburbs and P&C responded to this change by building stores in shopping centers in the suburbs. In 1951, P&C’s warehouse was destroyed by fire, but service was not interrupted, as suppliers delivered to the individual markets instead of to the warehouse until a store could be closed for use as a warehouse. A year after the fire a new warehouse was completed. The company bought the Netti wholesale division and Big M, a franchise division, as the 1950s came to a close.

For the first decade and a half of its existence, P&C operated as a cooperative with profits returned to the cooperatives. Customers were paid a percentage of the total amount of their cash register receipts for the year. In 1957, P&C ended its cooperative operations by selling shares of stock to the public. To attract and maintain its customer base, P&C offered trading stamps with which customers could purchase merchandise.

During the 1960s, P&C expanded out of New York state, building stores in West Virginia and Pennsylvania. Business was so good that the company had to build a 68,000-square-foot addition to the 150,000-square-foot warehouse it had completed in 1957. The expansion of the warehouse allowed P&C to double its space for frozen foods and become the largest food distributor in the area. P&C sold canned goods and other processed foods, such as coffee, ice cream, flour, dried fruits, and salt, under its own private labels of Sunny Square, Party Club, Country Manor, Penny Curtiss, and Exel. By 1969, P&C had 47 supermarkets, 50 Big M franchises, and eight discount stores. Its sales revenue was more than $100 million.

In 1970, P&C was purchased by an unlikely company, Pneumo Dynamics Corporation, a Boston-based company that manufactured aerospace and defense products. As a subsidiary of Pneumo, P&C continued to expand. In 1971 and 1972 it bought 18 stores in New York, and a chain of 24 stores in New England. In 1979, P&C bought 10 Loblaw grocery stores. By this time, P&C had more than $500 million in sales. It owned 99 P&C supermarkets and 53 Big M stores. P&C also now marketed more than 750 items under its own labels and developed its own advertising department to handle all print and broadcast ads for itself and for clients. It also installed a consumer affairs department.

Supermarkets were becoming bigger, with the average store measuring about 13,000 square feet. The largest store, however, was close to 30,000 square feet. Technology was changing the operations of grocery stores and their warehouses. Computers took the place of cash registers at P&C and other supermarket chains. P&C also installed a state-of-the-art mechanization system in its warehouse, enabling 200 people to handle more than 600,000 cases of food and other products every week.

P&C’s parent company, Pneumo, was purchased by Illinois Central Industries (IC) in 1984. This was the first of many changes in P&C’s ownership over the next five years. IC had bought Pneumo for its aerospace operations. Although IC also owned Pet Foods and Old El Paso, its strategic plan was to focus on specialty foods, consumer products and services, and aerospace; a grocery store chain did not fit its corporate mission. In 1985, P&C managers, backed by Riordan Freeman & Spogli, a west coast banking firm, and other institutional investors, bought P&C from IC for a reported $125 million. Under the agreement, P&C managers would own 20 percent of the chain. The deal was structured as a leveraged buyout in which a group of investors borrows most of the purchase price and repays that loan with the company’s profits or sale of assets.

Within a year, P&C once again sold stock, offering to the public 1.8 million shares valued at between $12 and $14 a share. However, public ownership was short-lived. In 1988, Penn Traffic of Johnstown, Pennsylvania, bought a 90 percent interest in the grocery store chain. Penn Traffic was a food retailer that owned supermarket chains, dairy products stores, and bakeries. Its retail stores included Big Bear, Riverside Markets, Quality Markets, San-Dairy, large dairy processing and ice cream manufacturing operations, bakery operations, Hart Department Stores, and wholesale operations. Penn employed about 25,000 people.

The next year, Penn Traffic had plans to sell P&C to the Grand Union Company, another partially owned subsidiary of Penn Traffic. Grand Union was ready to buy the P&C chain for $89 million, and P&C was to have become a wholly owned subsidiary of Grand Union, of which Penn owned 24 percent. Under the plan, Penn’s share of Grand Union would have increased to 40 percent when the sale of P&C was finalized. Penn had decided to sell P&C because Vermont and federal officials found that Penn’s ownership of both a Grand Union and a P&C store in some towns violated antitrust laws by reducing competition. The Federal Trade Commission, however, did approve the plans for the Grand Union to buy P&C. Under this buyout plan, P&C would continue to run the upstate New York stores as P&Cs, but its 26 stores in New Hampshire and Vermont and its five in New York would be taken over by Grand Union. The relationship between Grand Union and P&C would have allowed both to purchase goods at reduced prices. The deal did not take place, however. Grand Union was unable to obtain financing because of a decline in the junk bond market. (Junk bonds were high-risk, high-yield investments; they were used heavily during the 1980s to finance corporate takeovers.) Addressing the anti-trust issue, Grand Union and P&C agreed to close a total of 13 grocery stores between them in order to comply with government regulations.

P&C remained a Penn Traffic subsidiary, and the two formed a new kind of bond when Claude Incaudo, president and chief executive officer of P&C, took over as president and CEO of Penn Traffic as well in 1990. The next year, Penn Traffic bought the remaining 10 percent of P&C Markets, giving Penn total ownership. Incaudo ensured that Grand Union and P&C could still work together to secure greater purchasing power.

In 1989 sales for P&C went over the $1 billion dollar mark. Besides 88 stores and 71 Big M’s, it had more than 160 wholesale accounts. In the 1990s, P&C faced growing competition from wholesale food clubs and other grocery stores. The average size of its stores grew to between 40,000 and 50,000 feet to accommodate seafood, floral, and bakery departments, larger produce departments, and salad bars. In 1991, P&C opened a pharmacy in one of its stores and planned to introduce pharmacies in other stores as well in order to provide “one-stop shopping.”

Wholesale operations were strong, and P&C decided to consolidate its many private label brands into just one label, Sunny Square. P&C also expected to increase its private label items to 1,100 by the end of 1993. Health and beauty products were expected to show the most growth with the addition of toothpastes, vitamins, shampoos, and mouthwashes. P&C was responding to the popularity of private labels with retailers because of their higher profit margin.

P&C also built a new warehouse for perishables in 1992. The facility cost $18 million dollars for 262,000 square feet of refrigerated space for perishable foods such as fruits, vegetables, meats, dairy products, and dry goods. The construction of this warehouse consolidated the company’s perishables operations and eliminated transport costs involved in storing goods in separate warehouses.

P&C had a history of keeping pace with new technology. One instance of this was its installation of coupon-scanning devices. P&C stores were the first supermarkets to test The Instant Coupon Machine, an electronic device attached to the grocery shelf to dispense manufacturers’ coupons for an item. P&C also experimented with electronic security to scan for shoplifting. Penn Traffic tested video screens at a P&C checkout to display information on coupons while the products were scanned for price. The machine would also be able to dispense manufacturers coupons to match products purchased, thus eliminating the customer’s need to clip coupons from the newspaper. Behind the scenes, P&C also utilized state-of-the-art technology with SPACEMAN, a computer-assisted merchandising program to control inventory and help ensure that the right products went to the right stores, thus preventing out-of-stock situations.

P&C markets also put a high value on employee training. Emphasizing the role of teamwork and promoting team building and conflict resolution, P&C’s goal was to prevent high and costly employee turnover found throughout the industry. Close to 90 percent of promotions at P&C were within the company, so P&C considered training for entry level jobs to be crucial for its long-term success. About 20 employees a year were selected for management training. Training director James Horton told Progressive Grocer that management training cost about $6,000 per employee, but it was money well spent because people who had attended the program tended to stay at P&C. P&C’s turnover dropped from about 80 percent in 1988 to only 55 percent in 1991, according to the same article. Management training also included ways to maintain flexible scheduling of employees, since P&C had many employees over the age of 60 and under age 18. P&C began recruiting older workers because of concern about a labor shortage since the teenage population was shrinking and more women were taking full-time jobs.

P&C Foods Inc. celebrated its 50th anniversary in 1992. Having undergone great expansion in its early years and frequent changes of ownership in more recent years, its everyday operations remained quite unaffected and P&C kept its identity. Looking ahead, P&C anticipated that it would continue to adapt to the quickly changing needs and demands of the consumer and the marketplace.