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Marsh Supermarkets, Inc. Business Information, Profile, and History

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9800 Crosspoint Boulevard
Indianapolis, Indiana 46256-3350
U.S.A.

Company Perspectives:

Marsh Supermarkets, Inc., strives to attain and maintain a position o f leadership and market dominance in Indiana and other outlying terri tories through a commitment to aggressive marketing of new products, service innovation, and support by a first class sales organization, support staff, and community involvement.

History of Marsh Supermarkets, Inc.

Marsh Supermarkets, Inc., is one of the largest regional supermarket chains in the United States, despite limiting its operations almost e ntirely to Indiana and western Ohio. The company has 117 supermarkets that operate under the Marsh, LoBill Foods, O'Malia's Food Markets, Arthur's Fresh Market, and Savin*$ Mercado banners. Marsh also op erates 161 Village Pantry convenience stores and several McNamara flo rists. Its Crystal Food Services subsidiary provides upscale catering , cafeteria management, and related services. Supermarket operations accounted for more than 78 percent of company revenues in fiscal 2005 .

A Depression-Era Success

The first attempt by a member of the Marsh family to enter the grocer y business came in 1922, when Wilmer Marsh left farming to buy a smal l grocery and general goods store in North Salem, Indiana, population 75. All seven of Marsh's children helped in running the store, but i t was Ermal Marsh, the second youngest at 12 years old, who took the most interest in the store's operations, taking charge of the books a nd ordering merchandise. The store did well enough; but in 1925, duri ng a holdup by a member of the Al Capone gang, Wilmer Marsh was shot in the head. Although he suffered only a flesh wound, Wilmer Marsh so ld the store and returned to farming.

Two years later, however, Wilmer Marsh bought a new store in New Pitt sburg, Indiana, population 50. That store was successful enough for M arsh to open a second store in Ridgeville, Indiana, in 1929. Ermal Ma rsh, then completing his first year of college at Ball State, left sc hool to manage the new store. Grocery stores of the era were small, a bout 2,400 square feet, and sold a variety of dry goods in addition t o foods, which the grocer would gather from the shelves for the custo mers. For the new store, Ermal Marsh joined the Independent Grocers A ssociation (IGA), which advocated new selling techniques, such as adv ertising and allowing the customer to choose their purchases for them selves. Three weeks after the Ridgeville store opened, the stock mark ets crashed, and the Depression era began. Despite the bleak economy, the new store proved successful and was operated by brother Estel, w hen Ermal Marsh returned to college.

In order to finance his education, Ermal Marsh opened his own store i n Muncie, Indiana, in 1930, borrowing $2,900 from an older brothe r. The first day's sales totaled $7. Yet the store, an IGA affili ate, proved successful enough for the newly graduated Ermal Marsh to open a second store two years later. The following year, Marsh closed that store and moved its stock to a new store located in Muncie's co mmercial district. He also incorporated his business as Marsh Food St ores, Inc., listing himself as secretary and treasurer, and his older brother as president.

Marsh sought financing to expand his company, but banks were reluctan t to lend in the early Depression years, especially to the low-margin grocery business. By 1935, however, Marsh had arranged sufficient fi nancing to open a third Muncie grocery. The next year, Marsh closed h is second store and reopened it in a new, larger location. The new st ores, both IGA affiliates, featured meat counters, fresh produce, and a sound system providing background music and in-store announcements . By the end of the decade, Marsh sought to expand again. He sold one store and opened another, larger store. Then, together with several other store owners, Marsh formed the Carload Buyers Association to pu rchase dry goods at wholesale for distribution to its member stores. The association next teamed up with another wholesaler, changing its name to Mundy Sales, Inc.

The U.S. entry into World War II barely slowed Marsh's growth. By 194 3, Ermal Marsh had added three more stores to his operations. The fol lowing year, he opened his first store outside of Muncie, in the Jay County town seat of Portland. Two more stores were added that same ye ar, in Dunkirk and Marion, and in 1946, Marsh opened a new store in M uncie, closing his original store. Marsh's biggest advancement, howev er, would occur the following year.

Postwar Growth

Marsh opened two new groceries in 1947 and planned to open a third, s omewhat larger store that year, complete with a parking lot. Unable t o get permission to break the curbstones for entrances, Marsh decided to use the parking space to expand the size of the store. The new st ore, at 6,430 square feet, became Marsh's--and Muncie's--first superm arket. Called Marsh Foodliner, the store proved profitable in its fir st week. Encouraged by the store's success, Marsh determined to conve rt his operation entirely to supermarkets. The company began to expan d its corporate staff; by then Marsh operated its own fleet of trucks to service its stores. Over the next three years the company opened four more stores--including a second Foodliner in Muncie, helping to prove the viability of the supermarket concept. Store size was reachi ng 9,000 square feet. The company started its own bakery in 1949, and then added a new sideline business, making ice cream in the basement of one of the stores. Sold in gallon containers, Marsh Ice Cream pro ved immediately popular with customers--selling five million gallons by 1957 and eventually making Marsh the country's largest distributor of gallon ice cream--beginning a long line of Marsh private-label pr oducts.

By 1951, Marsh was outgrowing its facilities. In that year, the compa ny purchased an abandoned milk condensery in Yorktown, Indiana, and b egan construction there on the Marsh Food Center, housing production, distribution and warehouse facilities, and corporate headquarters. T o finance the construction, Marsh went public, issuing 40,000 shares of nonvoting stock. The following year, Marsh restructured the compan y's various operations as a single entity under the name Marsh Foodli ners, Inc. The supermarket chain had grown to 16 stores, all in India na. That changed in 1956, when Marsh opened its first two stores in w estern Ohio. Until this time, Marsh supermarkets were found only in m id-sized towns and cities. In 1957, the company opened its first stor e in a large urban market, Indianapolis. Sales for that year reached $34 million.

Marsh stepped up its expansion in the final years of the 1950s when i t acquired the eight-store Food-Lane Stores, Inc., chain based in Sou th Carolina and Georgia. Marsh followed that acquisition with the pur chase of Bellman Markets, a five-store supermarket chain with an aver age store size of 13,000 square feet, based in Toledo, Ohio. Ermal Ma rsh's five-year plan called for even faster growth, but he did not ge t to see completion of his plan. Ermal Marsh died in 1959 when the pl ane he was piloting crashed.

Settling In: 1960s-70s

Marsh's brother Estel, then serving as executive vice-president, took over as head of the company, now renamed Marsh Supermarkets, Inc., a nd continued the pattern of growth set by Ermal Marsh. By 1960, the c hain had expanded to 62 stores, reaching annual sales of $80 mill ion. The company maintained its rapid expansion, adding 34 stores bet ween 1960 and 1963. By 1966, Marsh had topped $100 million in sal es. By then, the supermarket concept had captured the grocery market, ending the era of the small grocer. The demise of the small stores o pened a new market for the increasingly mobile American public. Conve nience stores had begun to appear in various parts of the country, bu t Indiana's restrictive laws regarding sales of beer and gasoline--th e most profitable aspects of the convenience store business--left tha t state mostly free of competitors.

Marsh opened its first Village Pantry convenience store in Muncie in 1966. That division, led by then executive vice-president Don Marsh, oldest son of Ermal Marsh, grew quickly, adding nine more Village Pan tries in two years. The company also experimented with another type o f store concept, called Family Market, which offered a no-frills conc ept. When Estel Marsh was appointed chairman in 1968, Don Marsh was n amed president of the company. Following the lead of other supermarke t chains, Marsh moved into the drugstore business, opening its first Marsh Drug Store in 1969. Under Don Marsh's leadership, the company e xited the food production business, contracting with outside companie s to supply its private-label products, in order to concentrate on it s growing retail empire. Marsh closed out the 1960s with revenues of $122 million.

Marsh continued to expand its operations at the start of the 1970s, b ut a slowdown in the economy, rising building costs, and increasing p rice competition with other supermarket chains cut deeply into the co mpany's profits. With a 49 percent drop in net income in 1971, the co mpany closed its Family Market operation, and then sold its truck fle et in a sale-leaseback arrangement. The company stepped up the growth of its Village Pantry chain, bringing the total to 30 stores by 1973 . In that year, the company acquired 15 convenience stores from Nite Owl Food Marts, Inc., and, with the addition of more Village Pantries , the convenience store division reached 62 stores by 1974. By then, however, the Arab oil embargo and the resulting surge in inflation be gan to restrict Marsh's growth.

Nevertheless, Marsh made international news in 1974 when its Troy, Oh io, supermarket became the first in the world to offer Universal Prod uct Code (UPC) scanning. The new system would greatly enhance the com pany's ability to track its customers' purchases; linked to inventory , scanning also helped streamline its ordering and delivery processes . Before long, UPC scanning became ubiquitous in the supermarket indu stry and soon spread to nearly every retail industry.

Through the second half of the 1970s, Marsh, by then topping $200 million in annual sales, continued adding to its chains, although it s growth was slowed somewhat by the economic problems of the day. To aid in its expansion, the company adopted a "last-in, first-out" acco unting method. During this time, Marsh also began moving away from le asing its Village Pantry locations to owning them outright. The advan tages of owning also led the company into acting as its own building contractor for the construction of new Village Pantries. Meanwhile, M arsh unveiled a new supermarket concept in the mid-1970s when it open ed its first integrated supermarket-drugstore site. The new prototype stores, called "Combos," were former Marsh supermarkets that had bee n expanded to an average 25,000 square feet. Two years later their su ccess led the company to developing an all-new store concept, this ti me built from the ground up, with selling area and warehouse space gr owing to more than 35,000 square feet.

Estel Marsh retired in 1978 and was replaced by Don Marsh as CEO and chairman. By the end of the 1970s, the company had grown to include, in addition to its supermarket chain (which had launched a new, expan ded prototype called Marsh Xtras) 109 Village Pantries; 15 Marsh Drug Stores; and three new ventures--the first of a chain of restaurants called Foxfires; a seven-store chain of Tote 'N' Save markets, a retu rn to the no-frills shopping concept; and the first store of another division, called Farmer's Market, specializing in produce sales. None of these new ventures would survive the coming decade, however.

Price Wars in the 1980s and 1990s

Marsh had successively competed in its Indiana market with other, nat ional supermarket chains, but a new type of grocer soon threatened th e company. The 1983 entry of Cub Foods and its warehouse concept stor es into Indiana sparked a vicious price war that would last more than two years, driving down the profits of the larger chains and forcing at least 35 independent grocers to close. Yet Marsh, which saw its n et income drop to $1.6 million on sales nearing $600 million in 1984, managed to come out of the fray intact. Better, the company actually saw an increase in its market share, capturing many of the c ustomers of the failed supermarkets. Marsh responded to the store war s by increasing its operating efficiency and cutting out luxury expen ditures, such as the company's fleet of jets. Marsh also began height ening its customer service, adding bulk food items, increasing its ra nge of fresh foods, such as cheese, and including other services such as in-store banking and video rental. By 1985, despite a meager 4 pe rcent revenue growth, to $628 million, over the previous year, Ma rsh was able to post a net profit of $4.7 million.

Not all of the Marsh empire came out unscathed. The company sold off its drugstore division to the Peoples drugstore chain. Marsh also unl oaded its restaurant division, and shut down both its Tote 'N' Save a nd Farmer's Market divisions. The company instead returned its focus to its supermarkets and Village Pantries, raising the number of Marsh supermarkets to 76 and the number of Village Pantries to nearly 170 by the end of the decade. The company also picked up CSDC to serve it s Village Pantry stores and other convenience stores in the Midwest. By 1990, sales had topped $1 billion.

The 1990s brought a new growth spurt to the company, which moved its headquarters to Indianapolis in 1991. The launching of a new supersto re concept--with stores of 60,000 to 80,000 square feet--sparked seve ral years of intensive capital investment. The company also rolled ou t its Lo Bill store concept, offering lower prices and more limited s election--and offering the company the ability to convert its older, smaller Marsh supermarkets to the new concept. The company added anot her new division, Crystal Food Services, bringing the company into th e catering and foodservice area.

In the mid-1990s, the company faced the emergence of a new competitor in its core Indiana market. Michigan-based Meijer, a chain of "hyper markets" with warehouse-style stores averaging 200,000 square feet, e ntered Indiana in 1993--with a reputation for allowing new stores to take losses until they had beaten competitors. Marsh responded by add ing warehouse-style departments to its superstores, launching more su perstores, and expanding the fresh foods departments of existing stor es, while appealing to six decades of Marsh family service to its Ind iana and Ohio customers. The strategy appeared to be working. Despite the entry of 14 direct competitors, Marsh's revenues rose to $1. 4 billion, and net income increased to $9 million.

Competition Leading to New Concepts in the Late 1990s and Beyond B>

The company spent the remaining years of the 1990s successfully fendi ng off intense competition. Marsh spent heavily on information techno logy, opened new stores, and rolled out fresh and updated store forma ts for its existing locations. It also purchased three Cox Supermarke ts in late 1999. As a result, Marsh entered the new millennium on sol id footing with sales and profits on the rise.

During this time period, the company made several moves to increase i ts share of the regional market. Marsh bolstered its holdings in 2000 with the acquisition of five Ross Supermarkets. One year later it ad ded O'Malia Food Markets to its arsenal. In order to focus on core re tailing operations, the company sold its Convenience Store Distributi ng Company (CSDC) to McLane Company Inc. in 2001.

Marsh also launched several new concepts in order to remain competiti ve in the consolidating grocery industry. The first Savin*$ Merca do, a store developed in a large Hispanic neighborhood, opened its do ors in 2002. During 2004, the company's Trios Di Tuscanos debuted in Noblesville and marked one of the first times a supermarket chain ope ned a stand-alone restaurant. The Tuscan-style eatery featured a wide variety of food, including gourmet pizzas and rotisserie chicken. Fu rther expansion in the Midwest was dependent on the success of the co ncept in the mid-2000s. Marsh also launched Arthur's Fresh Market tha t year. The 22,000-square-foot store offered fresh food, prepared mea ls, baked items, salads, sushi, and wine in upscale neighborhoods.

Another new concept in Marsh's strategy was the Lifestyle supermarket . The first Lifestyle location opened in early 2004 and featured 66,0 00 square feet of shopping space catering to customers looking for go urmet, natural, and organic foods. The store included a coffee bar wi th sofas, plasma televisions, magazines, and books; a kid's club that gave away free gifts each week; and a floral department that include d a gas fireplace. A January 2004 Supermarket News article des cribed the unique look of the new store, reporting that it was design ed in "a double-racetrack format, with an expansive produce departmen t and coffee bar occupying most of the center area of the store and v arious departments in separate 'rooms' around the perimeter." Marsh e ntered the Illinois market for the first time in 2005 when it opened a store with the Lifestyle format in Naperville.

While developing its new concepts, Marsh's revenues and net income ha d fluctuated over the past several years. The company's financial ins tability demonstrated just how volatile the grocery market had become with large competitors including Wal-Mart, Kroger, and Meijer eating away at market share. During fiscal year 2005, the company's revenue and net income rose slightly while management remained focused on se curing stronger financial results by cutting costs. By opening new st ores with the Lifestyle design and by introducing new store formats, Marsh was optimistic that it would differentiate itself from the comp etition and remain a leading regional chain for years to come.

Principal Subsidiaries: Marsh Drugs, Inc.; Marsh Village Pantr ies, Inc.; Mundy Realty, Inc.; Mar Properties, Inc.; Marlease, Inc.; Marsh Drugs, Inc.; Marsh Village Pantries, Inc.; Marsh International, Inc.; Marsh Supermarkets of Illinois, Inc.; North Marion Development Corporation; Contract Transport, Inc.; Crystal Food Services LLC; Lo Bill Foods LLC; Marsh Supermarkets LLC; Crystal Cafe Management Group LLC; Crystal Food Management Services LLC; Butterfield Foods LLC; Fl oral Fashions LLC; O'Malia Food Markets LLC; McNamara LLC.

Principal Divisions: Supermarket; LoBill Foods; O'Malia Food M arkets; Pharmacy; Village Pantry; Food Service; McNamara; Floral Fash ions.

Principal Competitors: The Kroger Company; Meijer Inc.; Wal-Ma rt Stores Inc.

Chronology

  • Key Dates:
  • 1927: Wilmer Marsh buys a grocery store in New Pittsburgh, Ind iana.
  • 1930: Ermal Marsh opens his own store in Muncie, Indiana.
  • 1933: Ermal Marsh incorporates the company as Marsh Food Store s, Inc.
  • 1947: Marsh Foodliner, a 6,430-square-foot supermarket, opens its doors in Muncie.
  • 1956: Two stores open in Ohio.
  • 1959: Ermal Marsh dies in a plane crash.
  • 1966: Marsh opens its first Village Pantry convenience store i n Muncie.
  • 1969: The first Marsh Drug Store opens.
  • 1974: The company's Troy, Ohio, supermarket becomes the first in the world to offer Universal Product Code scanning.
  • 2001: CSDC is sold to McLane Company Inc.
  • 2004: The Arthur's Fresh Market concept debuts.
  • 2005: The company opens its first store in Naperville, Illinoi s.
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