Marsh Puts Out ‘For Sale’ Sign
By George Anderson
Marsh Supermarkets announced yesterday it has hired Merrill Lynch to pursue strategic alternatives, including a possible sale, for the company.
Don Marsh, chairman and CEO of the chain, said in a released statement: “During the past several months, management has been working diligently to reduce costs during a time of increasing competition, and while we believe our initiatives will improve profitability, our responsibility is to consider the best interests of our employees, the communities we serve and, above all, our shareholders. One of the strategic alternatives that we believe should be considered would be the possible sale of the company to the right party. For this reason, we have authorized Merrill Lynch to investigate the potential of such a transaction as an integral part of our considerations.”
As to likely buyers, Bill Bishop, president of Willard Bishop Consulting and RetailWire BrainTrust panelist, told the Indianapolis Star, “Most of the big players in Indiana (Meijer, Kroger and Wal-Mart) are ruled out.”
More likely candidates, said Mr. Bishop, would be regional players such as Schnucks or Giant Eagle that are looking to expand.
Moderator’s Comment: Why has Marsh’s performance been off? What will a buyer need to do to turn the business around?
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George Anderson – Moderator
Interesting. I’ve never heard a single – not one – negative thing ever mentioned about Marsh on this site. News comes out of a loss and an investment in ‘alternatives’ and out come the naysayers.
Sorry folks, but Marsh may be one of, if not, the finest regional in the country. They certainly hold that in the Midwest. Of any regional in the Midwest, they are the only one venturing out into the world of innovation. But, where they live is tough. In fact, it’s very tough. It’s also very difficult to determine the marketplace in their region.
I personally think the key word to remember in the statement is ‘alternatives.’ A sale may be an alternative. I’ll be very surprised if it is ‘the’ alternative.
This is one fine company. I have confidence that they will figure things out, right the ship and lead others through innovation in the future.
And one other short note – innovation is for the customer and isn’t necessarily tied to an IT budget. If that were the case, much could likely be said about someone like Publix. They are fairly average when it comes to the frills or technology. Or at least, they follow rather than lead. Or lead rather carefully. The attempts at consumer innovation to date by Marsh (even if unsuccessful) are at least more customer driven. IT spending should be directly related to its ability to improve the consumer experience. I like their efforts in doing so.
Best regards to a great company.
I thought Marsh ran good stores but that doesn’t mean much when you are competing against Wal-Mart and Meijer in the same market. Plus Kroger is no pushover. Just to compound the situation, Trader Joe’s, Whole Foods, Fresh Markets, and Super Target have entered the Indy market as well.
I have been studying the Indianapolis market regularly for the past 20 years. Marsh is what we site analysts call an “80 Image” store. What that means is that their sales per sq. ft. is consistently about 20% below the region average. I really don’t see any chain having a serious interest in Marsh unless they are able to get the chain for pennies on the dollar. Nobody wants to come in cold and take on Wal-Mart, Meijer, Kroger, Whole Foods, etc. – especially, when you have stores just barely above Winn Dixie-esque levels. Marsh is just falling by the wayside the same as Big Bear, Winn-Dixie, Delchamps, Farmer Jack, etc.
A few years ago in the 1980s, Cub Foods came to Indy and ran everyone out of town. A few years later, Cub had their head handed to them on a platter by Wal-Mart and Meijer and was forced to close all their stores. I am surprised Marsh has lasted this long.
We knew things were in dire straits at Marsh when they started making bold, desperate moves such as opening in Chicago, handing out bonuses and raises to execs, while at the same time they were getting killed in their home market.
The big gamble with Chicago and opening the Arthur’s Fresh Markets failed. Now it’s time for the buzzards to pick the bones.
Very sad. Gene Hoffman and Mark Lilien summed up my thoughts. I don’t have any of my retirement assets tied to supermarket stocks. What rational person would? The return on equity has to be about equal to slot machine payouts. I’d love to see Marsh make it, but over the long haul, we’re overstored and something has to give. I can’t say what will happen, but in a market guided by intelligence, a private equity investor would turn the real estate into something else and get a better return. (Why does it hurt so much to say that?)
Sorry for all the technicals on the phone system stuff, but I hope it got my point across how Marsh is lacking in IT and how it effects the customer experience!
A potentially really, really good chain in Northwest Indiana named Strack and Van Til, supplied by Co-op Centrella Foods in Chicago, might be a really good investor….their new stores are very similar to Marsh and they already have about 25 stores in NW Indiana in the form of upscale Stracks and warehouse style Ultra Foods. Their logistics would work out nice. Indy is a two-three hour drive south on I-65 from NW Indiana….they know Indiana consumers and legal policies and they would preserve Marsh with some Chicago type fresh ideas….especially along the lines of IT and consumer price cuts.
Marsh is THE grocery store of central Indiana, and I can’t see it being eliminated….they are too strong of a household name in Indy.
One by one, many formerly dominate (food chain) shining apples in the marketplace’s orchard have fallen off the tree or lost their juiciness and put themselves up for sale. Marsh has apparently become part of that passing parade as the changing marketplace and different consumer demands have come in conflict with relentless pressures from Wall Street and the continuing imbalance in cohesive strategies among management and labor. Meanwhile, Wal-Mart charges forward intimidating the industry with its leading-edge technology and lower prices.
To return to the line-up as a franchise player, Marsh will have to become a new brand, a new type of food store. And who will likely take on that challenge in the stores now bearing the Marsh logo? … Probably an investors’ group who will see value in things other than just competing successfully against Kroger, Meijer and Wal-Mart for the hearts and wallets of consumers.
The demise of Marsh is punishment for their bold move of being the first chain to install UPC scanners back in 1974. If they hadn’t made that first step, retailers might still be using manual cash registers and they wouldn’t be held so accountable by their shareholders and upstream channel partners for their actions. Alas, the bleeding edge of technology….
Not to rule out a purchase by American chains, I continue to believe that potentially strong regionals like Marsh will attract foreign investment. Maybe Tesco, if the Meijer deal doesn’t work out.
But you shouldn’t rule out Ahold, which is trying to rebuild.
Both of them should be able to reduce the massive debt load that Marsh has acquired. This is basically a strong, innovative company that got sucked under by debt. They’re not the first and won’t be the last.
The new Marsh opened here in Chicago in Naperville this past August 22nd. The store is their new lifestyle concept designed in a radial fashion. The store was very, very impressive, but their technology lacked to the highest degree.
Let’s talk technology at Marsh:
Case in point…While most retailers such as Safeway, Kroger, Albertsons and Walgreens, and many smaller independents such as Centrella’s Strack and Van Til and Ultra Foods here in Chicago, have invested highly in advanced voice communications and VOIP telephone technology in their stores….Marsh is at least 20 years behind in their telephones.
The new Marsh has a great Nortel phone system, but a separate non connected internal Aiphone intercom system used for internal paging and communication….it’s very outdated….Most retailers used Aiphone intercom/paging systems in the late 1970’s and 1980’s and got rid of this two separate system intercoms around 1987 when Nortel came out with the Norstar system and AT&T came out with Partner. These systems combined external voice calls with internal voice extensions such as 221-produce, 222-manager….you guys get my point?
Since I am partly responsible for phone systems at my company and even have a switch at home, I walked into that store and the first thing I checked was the phone system and I was shocked! The customer service lady at the Marsh service desk was juggling two telephones, holding an external call on one and paging someone on the other intercom handset?
This type of inefficiency makes me wonder about the rest of their IT setups. At Meijer, a customer can call the store director directly through the phone system and it goes right to the Store Director’s wireless handset. The Store Director can also page and call internally on their wireless.
They are ripe for a suitor….someone who can get their technology up to the speed of the leaders such as Borders, Walgreens and Safeway.
As far ahead of the game Marsh thought they were when they entered Chicago, they really only had decor that was ahead of the competition….their technology is decades behind….esp. in voice communications. I would have expected the best, from the company that scanned the first pack of gum in ’74.
The Marsh family’s share of the company’s $3.4 million second quarter loss was 20% – their share of the publicly-traded company – or a fat $680,000. That would start anybody thinking about selling. But, don’t count Marsh out. Their successful predatory pricing lawsuit against Kroger in the 80s when that chain decided to invade Indianapolis showed that they are made of tough stuff.
I have this vision of a school dance for teens. In the corner, there is the shy kid waiting to be asked to dance.
Sounds to me like Marsh is tired of waiting for the Ahold Gulfstream G5 to land in Indianapolis and decided to stand up and say, “Ahold, I want to dance.”
The supermarket business has too many square feet. In most industries, almost all players suffer when capacity is excessive. A smart buyer for Marsh will buy the company for very little and turn the real estate into something else. Since not all buyers are smart, the company might go to another supermarket operator or a new owner that thinks they can operate more profitably. The Big Trend, with very few exceptions, in market after market, is: get out of the supermarket business.
Having worked at the executive levels at Marsh for a number of years, the news of their likely sale was not as much a surprise as it was discouraging. Although I left Marsh to pursue other interests seven years ago, I remained a huge fan of their approach to business, their focus on community, and their commitment to FMI, CIES, and the industry in general. Their people are special and the Marsh family treated me like family as they do their employees today.
I am not surprised by their woes, as the supermarket channel does not reward the aforementioned virtues, just financial performance. The formula for success today leaves little margin for error for a quality/service provider like Marsh. New formats and the focus on “price” has “commoditized” the business to the point the Marsh was a chain without a viable marketing niche. Panelist Dave Livingston’s comments about Marsh’s financial performance are absolutely correct. Marsh was never about driving sales at the expense of service or amenities.
It appears that their formula has finally run its viable course. My contention for years has been that Marsh had upscaled itself beyond the means that its current marketplace could support. It’s a shame they did not have more time and resources to make a run in larger markets, like Chicago, where there are adequate numbers of upscale demographics to generate sales and profits.
The Marsh banner stands for many positive things, but the people of Indiana, and particularly of Indianapolis, where Marsh is so much a part of the landscape, are losing one their best community partners and supermarkets.
Yuciapa is on the prowl again. Marsh brings marketing and
discipline needs (that are absent in the supermarket industry, generally speaking), and would bring more value to a national
chain (Albertsons, etc.) that Yuciapa may buy!!!!