WOODBRIDGE, N.J. -- Pathmark Stores here has become the latest supermarket retailer to outsource its distribution services, completing the sale of its warehouse complex here and two other New Jersey distribution centers to C&S Wholesale Grocers, Brattleboro, Vt.
C&S, which paid $60 million for the facilities' fixtures and equipment, will now distribute substantially all of Pathmark's grocery and perishables merchandise, as per a previously announced supply agreement, executives said. "This provides a way to efficiently distribute merchandise to our stores so that we can provide better customer values," said Harvey Gutman, Pathmark's senior vice president of retail development.
Pathmark will continue to handle distribution of nonfood items, he added.
The complex here includes a 475,000-square-foot dry grocery warehouse and a 255,000-square-foot perishables facility. The other properties involved in the sale are a 425,000-square-foot dry grocery distribution center in North Brunswick and a 112,000-square-foot frozen-food warehouse in Dayton.
The company said it will use some of the funds from the sale to pay down debt, estimated to be in excess of $1.4 billion. Industry observers noted the sale will give the chain's retail operations a much-needed infusion of cash.
"It gives them more flexibility and working capital, which they need, because they're a highly leveraged company," said Gary Giblen, managing director of Salomon Smith Barney, New York. "They would rather spend money on new stores or remodels [than on distribution]."
C&S already supplies Grand Union Co., Safeway's Eastern division, Edwards Super Food Stores, BJ's warehouse clubs, Giant Food, all East Coast Wal-Mart Supercenters, A&P, Big Y and several independents in New Jersey and Pennsylvania. "C&S is a super-efficient wholesaler," said Giblen.
Kim Keyes, director of corporate communications at C&S, said the wholesaler's high volume levels will bring Pathmark operational savings through economies of scale.
"The larger we've gotten, the more opportunities that presents," she said, adding that C&S now carries 53,000 different grocery items. "Customers have access to a wider variety of product."
Keyes said C&S expects the distribution agreement with Pathmark to yield about $1.6 billion in annual revenues, which would make Pathmark its largest account and would elevate C&S to the No. 3 position among wholesalers, with $5.3 billion in sales. (Supervalu, Minneapolis, ranks first with $16.9 billion in estimated sales, followed by Fleming Cos., Oklahoma City, with an estimated $15.4 billion.)
Pathmark has also reached an agreement with the United Food and Commercial Workers Local 56 on a new 30-month contract affecting 1,000 Pathmark employees in 29 New Jersey, Pennsylvania and Delaware locations.
The contract calls for two across-the-board pay raises of 30 cents an hour, extended health benefits for full- and part-time workers and a 50% increase in pension benefits for all retirees who left Pathmark before 1986, according to the UFCW.
The contract is "a good agreement and one that shows the successes that can be achieved through collective bargaining in a cooperative atmosphere," Jerry Campbell, Pathmark's vice president of labor relations, said in a statement.