Penn Traffic Turns Buying Over to C&S
The definition of what constitutes a self-distributing chain may need some tweaking as the relationship between Penn Traffic and C&S Wholesale Grocers illustrates.
Last year, C&S began buying general merchandise and health and beauty care products that Penn Traffic distributes to stores through its own distribution centers.
Beginning next month, C&S will begin buying an expanded number of product categories including bakery, candy, dairy, deli, floral, fresh and frozen meat, frozen bakery, frozen (mainline), frozen seafood, grocery, ice, ice cream, spices, store supplies and other merchandise as part of an eight-year deal between the parties. Distribution to stores will continue to go through Penn Traffic warehouses.
“We believe that this move will free up cash that would otherwise be tied up in inventory and trade receivables, improving our ability to reinvest in our stores and enhancing the service and value the company delivers to all customers,” said Gregory Young, president and chief executive officer of Penn Traffic, in a press release. “C&S’s expanded services will not change the way Penn Traffic and our associates select, merchandise, inspect, warehouse and deliver product on our trucks to retail stores and wholesale customers.”
Penn Traffic expects it can improve its profitability through the purchasing power of C&S. It also expects to see cash flow improvement through better inventory and trade receivables management.
“This new procurement agreement is right in line with our strategy for rebuilding Penn Traffic, restoring profitability and positioning the company for long-term success, which we began implementing last year,” said Mr. Young. “We plan to continue executing our strategy, which includes focusing on our highest-potential and most-profitable stores, lowering expenses and optimizing our wholesale business.”
C&S, the nation’s second largest grocery wholesaler, distributes food to over 5,000 stores in the U.S. including Ahold (Giant-Carlisle, Giant Food and Stop & Shop), A&P, Bi-Lo, BJ’s, Big Y, Bruno’s, Pathmark, Safeway, Shaw’s and Target.
Discussion Questions: Is the deal between Penn Traffic and C&S Wholesale Grocers the way of the future for regional supermarket chains? What do you see as the benefits and drawbacks of the relationship C&S has with Penn Traffic and other regional and local chains?
- Penn Traffic to Further Increase Focus on Its Customers and Stores by Expanding Procurement Agreement with C&S Wholesale Grocers – The Penn Traffic Company/Business Wire/American Digital Networks