Penn Traffic - Phil Hawkins and PR Problems

Phil Hawkins and PR Problems

In 1997, Hirsch hired Phil Hawkins, who was credited with saving the Vons supermarket chain in California. Hawkins, forced to cut costs, fired 325 employees, including all five division heads, some with 20 years or more with Penn Traffic.

As CEO, Hawkins replaced USDA Choice meat in its butcher shops with a cheaper grade meat. In an effort to reposition its stores as focused on "value", rather than time-tested formulas within specific markets that had worked for the chains, Hawkins slashed expenses by using generic grocery bags, postponing store maintenance and reducing benefits to employees as well. In the Columbus market, prices did not uniformly drop and competitors like Kroger and Meijer regularly beat Big Bear in third-party cost comparisons. Customers noticed the changes, and unhappy with what they saw and were experiencing, stopped shopping.

Meanwhile, better-capitalized competitors like Wegmans Food Markets and Kroger cut into market share. Same-store sales fell 8.2% in fiscal 1998, while operating income declined another 6%, to $165 million. In Columbus, where Kroger and Big Bear had once been neck and neck, Big Bear's market share dropped to 20% from 25%, while Kroger's rose to 54% from 44% in 1998, according to a survey by the Columbus Dispatch. Hawkins resigned before the first bankruptcy filing, March 1, 1999.