It is likely to be one of the most interesting scripts coming out of the supermarket industry this summer, or even this year.
Pathmark, which emerged from bankruptcy just nine months ago, is back with a vengeance showing what one analyst calls "breakthrough turnaround results" featuring strong comp sales against a somewhat weakened competitive field.
The comeback is a long way from being completed, and of course the story could fall flat in the end. But the chain's chairman, president and chief executive officer, Jim Donald, has developed a vision that seems to be well suited for the retailer's circumstances. He sat down with a couple of SN editors this month at the chain's headquarters on the the day of Pathmark's annual meeting (See story that begins on Page 16).
Donald, who came to Pathmark four and a half years ago after holding positions at Albertson's, Wal-Mart and Safeway, recognizes that differentiation is the key to success for market share growth -- especially in a market as dense as New York.
"This business is so alike it's scary in terms of offerings and pricing," he said. Donald has launched programs to build the fresh-foods side, including innovative campaigns aimed at produce and chicken. His "Turtle Awards" have generated millions of dollars in incremental revenues by encouraging associates to take merchandising risks that build incremental sales. Donald's efforts, including his "next-level initiatives," are intended to keep the operator on track by stressing service, raising margins, highlighting food safety, and recognizing and incenting associates throughout the chain, whom he repeatedly credits as the major drivers of the turnaround.
But Donald's leadership involves more than just launching programs. He has instilled a great deal of confidence in Pathmark's rebound efforts and employed a consistent strategy.
His confidence in the brand is based partly on the notion that it has retained a viable franchise despite years of neglect resulting from a debt-ridden balance sheet. As he put it, the brand had developed "a little dust on it, and a little rust," but could return to being the brand of choice after a "polishing up and dusting off." It remains to be seen if that prediction comes true, but that kind of belief in brand equity is a necessary prerequisite for successfully executing this turnaround.
The consistency of Donald's strategic plan dates from his arrival at Pathmark four and a half years ago, when he outlined five key priorities for the chain: right management team, concentrate on core business, spend capital wisely, implement smart service and reduce operating expenses. Those are exactly the same five priorities that Donald outlined last month in a speech to investors. That kind of longevity of message is notable in this turbulent business climate.
Finally, Donald makes clear his confidence in the chain's competitive abilities. It's notable that as the New York marketplace takes unpredictable turns Donald no longer sees the competition as Pathmark's biggest threat. "The biggest obstacle or hurdle to potentially get in the way is us ourselves," he said, "because we're marching to a pretty good plan right now and, as long as we can continue to execute the plan, we feel we can sustain this momentum."