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New grocer's arrival adds to questions about Marsh

January 18, 2014

Marsh Supermarkets Inc. has been hanging a for-sale banner for years. So if a new grocery chain were interested in coming into the market, wouldn’t it at least explore the possibility of an acquisition?

You would think so, said Mark Dietel, who ran the Mr. D’s grocery chain before it was acquired by Marsh in 2003. Building from scratch is capital-intensive, he said. Plus, an acquisition provides a customer base from which to build.

But that’s not the approach Pittsburgh-based Giant Eagle is taking as it prepares to dive into the Indianapolis market. Giant Eagle spokesman Dick Roberts said there have been no discussions with Marsh about buying stores.

IBJ reported in December that Giant Eagle wants to build a store in The Bridges development at 116th Street and Springmill Road—the first of at least six stores that brokers expect privately held Giant Eagle to open in the Indianapolis area. The chain isn’t yet commenting on its plans for the market.

One interpretation, of course, is that Marsh has lost some of its allure since Sun Capital Partners Inc. acquired it in 2006. To be sure, the chain in recent years has shed market share and failed to keep pace with heavyweights Walmart and Kroger. As of 2011, Marsh’s market share had slipped below 13 percent, according to Illinois-based Stagnito Media, publisher of Progressive Grocer.

Sun early on slashed costs and boosted financial performance, which set the stage for the private-equity firm to begin looking for a buyer in 2010. But no deal has materialized at a price Sun deems sufficient.

While observers say Sun might be reluctant to spend big on expansion at a time it would like to cast off Marsh, the grocery chain has shown more aggressiveness of late. It’s in the process of building a second downtown store, for instance. And while it announced this month it was closing eight of its 86 stores, it called that move “the first part of a three-year plan to position Marsh Supermarkets for growth and profitability. Our strategy is to remodel, rebuild and re-banner our properties.”

Through a spokeswoman, CEO Thomas O’Boyle Jr. declined an interview request. Boyle, appointed in November 2012, is the fourth person to fill that role since Sun ousted Don Marsh from the post on the day the sale closed.

“Since they were bought by Sun Capital six or seven years ago, they have been trying to figure out who they are and who they want to be,” said Frank Swiss, principal of locally based Swissco Real Estate.

A less-stinging interpretation is that Marsh stores just aren’t the right size for what Giant Eagle has in mind for this market. Marsh’s largest stores are around 75,000 square feet—far smaller than the cavernous, 125,000-square-foot location brokers say Giant Eagle plans to build in The Bridges.

Giant Eagle operates stores of that size under the upscale Market District banner. The stores offer such amenities as an antipasto bar, an oil and vinegar bar, a café, and a vast assortment of microbrews.

Regardless of how impressive the stores might be, Giant Eagle will face plenty of competition—from traditional grocers in expansion mode, including Aldi and Meijer, as well as from specialty grocers, such as Earth Fare and Fresh Thyme Farmers Market, which continue to proliferate.

Where this all leaves Marsh is unclear. The chain still has some strong locations. But so far company executives have talked a good game without showing with their spending that they’re willing to fully engage in the grocery wars.

Soon after Joseph Kelley came aboard as CEO in May 2011, he declared, “We’re the third player in the market, behind Kroger and Walmart. I think we have an opportunity to be close to No. 1.”

But a year later, Kelley left to become president of the New England division of Stop & Shop, a 375-store grocery chain owned by Dutch food giant Ahold.

Bleak black Friday for Gregg

Retailers get criticized for opening ever-earlier on Thanksgiving. But HHGregg showed what happens when you let an archrival get a jump on black Friday shoppers.

Analysts say one of the reasons the Indianapolis chain this month reported a nearly 20-percent plunge in same-store sales for the quarter ending Dec. 31 was that Best Buy opened at 6 p.m. on Thanksgiving, two hours ahead of HHGregg.

That wasn’t the sole cause, of course. It also didn’t help that rivals were willing to offer huge discounts to draw traffic, a frenzy HHGregg partly avoided in an effort to protect profit margins. One example: 32-inch TVs were selling for as little as $99 at other retailers.•

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