The new CEO of Marsh Supermarkets Inc. has brought aboard a colleague from his former company to help the Indianapolis-based chain compete against larger rivals in a crowded grocery market.
Marsh announced this week that David C. Siegel has joined the company in the newly created position of senior vice president of merchandising and marketing strategic initiatives.
He comes to Marsh from Price Chopper, a Schenectady, N.Y.-based grocery chain with about 125 locations in six states, mostly in New York. Joseph M. Kelley, Marsh’s chairman, president and CEO, arrived in early May, also from Price Chopper. The pair worked together for about 11 years in New York.
Their goal is to help Marsh, which dominated the local grocery scene for decades, keep up with big players Kroger, Walmart, Meijer and SuperTarget.
“We’re the third player in the market, behind Kroger and Walmart,” Kelley said. “I think we have an opportunity to be close to No. 1.”
Upon arriving at Marsh, Kelley said he discovered a fractured business model needing more cohesion. Personnel from advertising, marketing and merchandising were handling various aspects of the business, including pricing, store setup and its corporate brands and private label divisions.
Most of those duties now will fall to Siegel, who left Price Chopper after a 33-year career with the company that stretched from his first job as a produce clerk while in high school to his ascension to director of corporate brands.
“By getting the best intelligence we can, we can make [customers’] shopping experience better and improve our position in the marketplace, and get Marsh back where it needs to be,” Siegel said.
Supermarket analyst David Livingston said it will be difficult for Marsh to gain much traction in an ultra-competitive grocery market. Big national players often have an advantage in pricing because they can demand lower prices from their suppliers since they buy so much merchandise.
“They’re just too outflanked by Kroger, Walmart, Meijer and Super Target,” he said. “Those stores are all going to undercut you on price.”
Marsh is competing by offering more promotions in its weekly advertisements, a move that has helped increase foot traffic and sales at its stores the past six weeks, Kelley said. He also contends that consumers rely on more than just pricing when choosing a grocery store. They also want good service, which Kelley said Marsh offers with its full-time butchers and seafood clerks, as well as its floral designers.
"If you're trying to grow market share solely on price, it would be very difficult to do," he said. "Consumers are very savvy today."
Kelley inherited the CEO title from Frank Lazaran, whom parent company Sun Capital Partners of Boca Raton, Fla., installed after acquiring Marsh and taking the then-public company private.
When Sun paid $88 million in cash and assumed $237 million in debt to buy Marsh in September 2006, the chain was losing money, flirting with default on its debt, and had just dropped to third in Indianapolis market share behind Kroger and Walmart.
With Sun in control, Marsh slashed $70 million in overhead, sold $80 million in real estate, and spun off non-grocery businesses, including a caterer, florist and a convenience-store chain.
Marsh used proceeds to pay down debt and plow $60 million into the renovation of 80 percent of its roughly 100 stores.
Kelley said Marsh is poised to invest another $20 million into more stores within the next two years.
He declined to provide current financial or market-share information for Marsh. But, in November 2009, three years after Sun’s acquisition, Marsh’s 45 Indianapolis-area stores had a market share of about 16 percent, compared to 33 percent for Walmart, 26 percent for Kroger, 10 percent for Meijer and 4 percent for SuperTarget, according to Nielsen Trade Dimensions.
Companywide, Marsh had about $1.1 billion in sales in 2009.
Meanwhile, rising food prices have been a major concern for U.S. consumers. Coupled with high gas prices, consumer spending cooled to a 2.2-percent annual pace in the first quarter of the year following a 4-percent gain in the previous three months.
To that end, Marsh plans to expand offerings available under its Marsh label to give frugal shoppers more options. Siegel will be instrumental in leading the strategy. As director of corporate brands, he grew Price Chopper's corporate brand to account for more than 29 percent of the company's total sales, much higher than Marsh's current 20-percent rate.
Marsh also has hired a director of nutrition to help grow its stock of healthy-type foods and is rolling out more high-end products at some of its stores. Stores in certain areas carry a large variety of gourmet cheeses and upscale breads, in addition to the Pier 48 seafood brand.
Overall, Marsh operates 98 stores in Indiana and Ohio, with about half in the Indianapolis area. Adding a few more stores could be possible, Kelley said.
“I can’t speak to the timeline yet,” he said. “But we are in a position now, if we find the right sites, to open up new stores as the opportunities come across my desk.”