Supermarket shuffle at Conseco Fieldhouse

July 20, 2009

At first glance, The Kroger Co.’s recently announced deal to partner with the Indiana Pacers and Indiana Fever looks like just another sponsorship agreement.

But marketing and grocery store industry insiders said the deal is indicative of a major shift in how the city’s dominant grocers, Kroger and Marsh Supermarkets, are selling themselves to consumers.

Neither is locally owned, but since the local Marsh family sold to Florida-based Sun Capital Partners Inc. in 2006, Marsh Supermarkets is falling away from community initiatives. With the Pacers/Fever deal, Cincinnati-based Kroger is poised to fill the void.

“I think this is a genius move by Kroger,” said Danny O’Malia, former president of O’Malia Food Markets Inc., which Marsh bought in 2001. “They feel more local than they ever have, and Marsh feels less local.”

On July 1—one day after Marsh’s 10-year sponsorship deal expired—Kroger was announced in a news conference as the exclusive supermarket sponsor of the Indiana Pacers and official sponsor of the Indiana Fever. Marsh’s involvement with the Pacers was more than a decade old, extending back to the days of Market Square Arena. Pacers officials weren’t sure how far back the relationship went.

The fact that the Pacers partnership was such a prized possession of Marsh—and such a key component of its marketing efforts—during the era Don Marsh led the company makes the change striking to longtime industry observers.

“This wasn’t just another Pacers sponsorship,” said David Morton, principal of Sunrise Sports Group, a locally based sports marketing consultancy. “Marsh had a huge presence in the Fieldhouse, and the team was a pillar in Marsh’s high-profile ad campaign for years and years.”

Once the Marsh deal expired June 30, Pacers officials quickly moved to strip Marsh signs and logos from Conseco Fieldhouse, replacing them with Kroger, including high-profile signage in the main entry area and on the center court scoreboard.

Kroger officials said they plan to incorporate the Pacers into a statewide advertising and “community engagement” initiative starting this summer.

“Kroger is a perfect partner to help tell the story of the Pacers and Fever,” said Pacers Sports & Entertainment President Jim Morris. “They’re very aggressive in their marketing efforts. They’re in almost every market in the state and they’re very creative and innovative.”

O’Malia, who remained with Marsh until shortly after it was acquired by Sun Capital for $88 million in cash and the assumption of $237 million in debt, thinks the Pacers/Fever deal is a good fit for Kroger.

“The Pacers have had some bad publicity the last five years, but they appear to be turning the corner,” O’Malia said. “The Pacers are still a tremendous community asset, and as a grocery store operator, I’d step up and partner with them in a minute.”

Kroger officials said they don’t think the Pacers’ past—including the brawl in Detroit and several public fights involving players—will tarnish the grocery store’s image.

“It does matter who we stand side-by-side with,” said John Elliott, Kroger Central Division public affairs manager. “There was discussion about, did we want our Kroger name alongside the Pacers organization? And the answer was a resounding ‘yes.’ They’ve turned that organization around, and showed they are completely committed to the community.”

Morris called the Kroger deal “an important affirmation to us that we’re doing things the right way.”

Kroger scores bargain

Signing a five-year deal with the Pacers and Fever during a down economy and as the team rebuilds its image likely allowed Kroger to get in at a much lower cost than Marsh did, said Bruce Bryant, president of locally based Promotus Advertising, which formerly worked on the Pacers account.

As one of seven Conseco Fieldhouse founding sponsors, advertising industry experts estimate Marsh paid $800,000 to $1 million annually for its deal. Kroger, meanwhile, could be paying about half that, Bryant said.

“We’ve gotten some calls recently from the Pacers, and they’re in a much friendlier position to deal,” Bryant said. “Depending on the elements of the deal and how those are leveraged over the term of the deal, Kroger could get a really solid value.”

Kroger and Pacers officials declined to discuss the deal’s financial details. Morris called the Kroger deal a “very solid financial partnership.”

Morris said he didn’t have insight into why Marsh didn’t renew its sponsorship. Marsh officials declined to comment for this story.

The Pacers-Kroger deal is more than a marketing vehicle for Kroger; it’s a reflection of overlap in the charitable and community interests of the two organizations.

“The Pacers came to us, and we learned that we shared a lot of the same priorities as far as community outreach,” Kroger’s Elliott said.

Kroger Central Division President Bob Moeder and Morris work together on local charitable causes, including serving on the Gleaner’s Food Bank board.

Morris, former head of the United Nations World Food Bank, and Moeder share a deep commitment to fighting hunger locally and regionally, Elliott said. In addition, Kroger got assurance from the Pacers that the franchise is behind Kroger’s pet causes, including primary and secondary education; health, nutrition and wellness initiatives; environmental sustainability; and diversity.

Kroger officials also anticipate working with the Simon Youth Foundation, Pacers Foundation and other outreach organizations tied to the teams and their players. The Pacers and Fever are owned by Herb and Mel Simon, founders of Simon Property Group Inc., which gave birth to the Simon Youth Foundation.

The day the deal was announced, a group of Indianapolis Public Schools students from School 46 were invited to attend an Indiana Fever game and meet the players. Kroger has partnered with School 46 for more than 25 years.

“This deal was not about contract; it was about collaboration,” Elliott said. “The Pacers were clearly listening to us when we said what mattered in a relationship.”

Kroger has previously relied on more traditional forms of marketing, including print, television, radio and billboards. The grocer has been a major sponsor at O’Reilly Raceway Park, but beyond that hasn’t made much of a mark in local sports.

Marsh, which used to have a suite at Colts games and sponsor the Indianapolis Indians, is now mostly removed from the local sports scene. The company ended its Indians sponsorship shortly after Sun Capital took over, according to Indians officials.

Kroger, too, is being selective in the sponsorship deals it signs. For instance, it walked away from its title sponsorship of Indy Jazz Fest in the first quarter of this year. Marsh has since become the presenting sponsor of the event.

Difficult shoes to fill

Marsh was more than just a money-paying sponsor for the Pacers, Promotus’ Bryant said. The grocer’s ads also pumped individual Pacers personalities from Reggie Miller to Larry Bird, who often appeared alongside former Chairman Don Marsh in ads.

Marsh locations were also key drivers of ticket sales, and the grocery chain sponsored such things as family nights at Conseco Fieldhouse. Marsh also was a promotional partner in other Fieldhouse events, from the circus to concerts.

“Marsh was a great marketing vehicle for the Pacers,” Bryant said. “Marsh’s value to the Pacers went way beyond the money they paid for signage at the Fieldhouse. We’ll have to see if Kroger rises to that level.”

Marsh’s decline in market visibility extends beyond the now-expired Pacers deal, Bryant said.

“Spending across all advertising and marketing for Marsh appears to be down significantly,” he said. “It’s easy to see their visibility is trending downward.”

Retail analysts have speculated that Sun Capital is cutting all expenses at Marsh to prop up its bottom line to prepare to sell the operation.

Bryant thinks Marsh’s changed “marketing mind-set” under Sun Capital gives Kroger an unprecedented opportunity to gain awareness as the hometown brand.

Don Marsh, who declined to comment for this story due to pending litigation between him and Marsh Supermarkets, recently criticized the grocery chain for diminishing its community involvement.

“Despite the assurances from the new owners during the 2006 press conference announcing the sale, stores have been closed, longtime employees have been laid off, and community involvement has been greatly reduced,” Don Marsh said in a statement in June.

Shortly after buying Marsh, Sun Capital did agree to renew its Symphony on the Prairie sponsorship.

“That seems to be an anomaly now,” Bryant said. “You have to wonder what Marsh’s short-term and long-term motives really are, and what their next step will be.”•


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