Five years ago, Wal-Mart had about a 2-percent share of the grocery market, according to Morningstar Inc. Today, the $31-billion-in-sales behemoth has 23 percent.
Grocery-industry observers say fierce competition from the Arkansas-based company played a big part in the financial decline of Marsh Supermarkets Inc., which announced Nov. 29 that it was considering a sale.
They said the onslaught was tough to absorb in a region that already had too many grocery stores for its population.
“What went wrong?” asked Joseph A. Lackey, president of the Indiana Grocery and Convenience Store Association. “I’m not sure anything’s wrong. [Indianapolis is] simply over-stored.”
Grant Monahan, president of the Indiana Retail Council, echoed the thought.
So did Marsh CEO Don Marsh. In the videotaped broadcast to employees, he cited the “fiercely competitive” market as the company’s Achilles’ heel.
Analysts, however, weren’t so quick to give executives a free pass.
The company might have overex
tended itself aggressively opening stores and moving into new markets. Most recently, in August, it opened its first Illinois store in the Chicago suburb of Naperville. The 75,000-squarefoot location was the chain’s fourth “lifestyle” store focusing on upscale products.
In January 2004, Marsh opened a lifestyle store in Fort Wayne, its first grocery in the area since the early 1970s. The company opened an additional store in Pendleton and an Arthur’s Fresh Market in New Palestine this year.
In an SEC filing last week, Marsh acknowledged that stores opened in the past five years had not performed up to expectations.
The Chicago store may have been the company’s biggest misstep, said Mitchell Corwin, an analyst with Chicago-based Morningstar.
“They don’t have a foothold in Naperville and they were distributing from pretty far away,” he said. “There are no economies of scale. It appears that hurt them.”