Marsh Supermarkets, Inc. History

Address:

9800 Crosspoint Boulevard
Indianapolis, Indiana 46256-3350
U.S.A.

Telephone: (317) 594-2705
Fax: (317) 594-2705

Public Company
Incorporated: 1933 as Marsh Food Stores, Inc.
Employees: 12,400
Sales: $1.39 billion (FY ended March 30, 1996)
Stock Exchanges: NASDAQ
SICs: 5411 Grocery Stores; 5912 Drug Stores & Proprietary Stores

Company Perspectives:

Marsh Supermarkets, Inc. strives to attain and maintain a position of leadership and market dominance in Indiana and other outlying territories. It is the company's intention to accomplish this through aggressive marketing of new products, accompanied by service innovation with the support of a first class sales organization, support staff and community involvement. As the company progresses, it will improve profits through efficient management. Above all, providing excellence to the customers we serve, remains our first priority.

Company History:

Marsh Supermarkets, Inc. is one of the top 50 supermarket chains in the United States, despite limiting its operations almost entirely to Indiana and western Ohio. Many of the 78 Marsh Supermarkets feature a superstore concept, which, with an average 60,000 to 80,000 square feet, house various departments emphasizing fresh, perishable, and takeout foods, as well as video rental, pharmacy, and other services. The company also operates the 12-store chain of Lo Bill Foods, a smaller concept store focused on low prices and located primarily in urban markets. Marsh's chain of Village Pantry convenience stores has grown to 181 stores, 70 percent of which sell gasoline, making Village Pantry the largest distributor of gasoline in Indiana. Marsh's Convenience Store Distributing Company (CSDC) supplies Village Pantry and more than 1,300 unrelated stores in a nine-state area. The company's Crystal Food Service is Indiana's largest catering and food service operation. The company also operates eight stores in New Delhi, India. Marsh is led by chairman, president, and CEO Don Marsh, son of company founder Ermal Marsh. In the fiscal year ended March 30, 1996, Marsh recorded sales of nearly $1.4 billion.

A Depression-Era Success

The first attempt by a member of the Marsh family to enter the grocery business came in 1922, when Wilmer Marsh left farming to buy a small grocery and general goods store in North Salem, Indiana, population 75. All seven of Marsh's children helped in running the store, but it was Ermal Marsh, the second youngest at 12-years-old, who took the most interest in the store's operations, taking charge of the books and ordering merchandise. The store did well enough; but in 1925, during a holdup by a member of the Al Capone gang, Wilmer Marsh was shot in the head. Although he suffered only a flesh wound, Wilmer Marsh sold the store and returned to farming.

Two years later, however, Wilmer Marsh bought a new store in New Pittsburg, Indiana, population 50. That store was successful enough for Marsh to open a second store in Ridgeville, Indiana in 1929. Ermal Marsh, then completing his first year of college at Ball State, left school to manage the new store. Grocery stores of the era were small, about 2,400 square feet, and sold a variety of dry goods in addition to foods, which the grocer would gather from the shelves for the customers. For the new store, Ermal Marsh joined the Independent Grocers Association (IGA), which advocated new selling techniques, such as advertising and allowing the customer to choose their purchases for themselves. Three weeks after the Ridgeville store opened, the stock markets crashed, and the Depression era began. Despite the bleak economy, the new store proved successful and was operated by brother Estel, when Ermal Marsh returned to college.

In order to finance his education, Ermal Marsh opened his own store in Muncie, Indiana, in 1930, borrowing $2,900 from an older brother. The first day's sales totaled $7 dollars. Yet the store, an IGA affiliate, proved successful enough for the newly graduated Ermal Marsh to open a second store two years later. The following year, Marsh closed that store and moved its stock to a new store located in Muncie's commercial district. He also incorporated his business as Marsh Food Stores, Inc., listing himself as secretary and treasurer, and his older brother as president.

Marsh sought financing to expand his company, but banks were reluctant to lend in the early Depression years, especially to the low-margin grocery business. By 1935, however, Marsh had arranged sufficient financing to open a third Muncie grocery. The next year, Marsh closed his second store and reopened it in a new, larger location. The new stores, both IGA affiliates, featured meat counters, fresh produce, and a sound system providing background music and in-store announcements. By the end of the decade, Marsh sought to expand again. He sold one store and opened another, larger store. Then, together with several other store owners, Marsh formed the Carload Buyers Association to purchase dry goods at wholesale for distribution to its member stores. The association next teamed up with another wholesaler, changing its name to Mundy Sales, Inc.

The U.S. entry into the Second World War barely slowed Marsh's growth. By 1943, Ermal Marsh had added three more stores to his operations. The following year, he opened his first store outside of Muncie, in the Jay County seat town of Portland. Two more stores were added that same year, in Dunkirk and Marion, and in 1946, Marsh opened a new store in Muncie, closing his original store. However, Marsh's biggest advancement would occur the following year.

Post-World War II Growth

Marsh opened two new groceries in 1947 and planned to open a third, somewhat larger store that year, complete with a parking lot. Unable to get permission to break the curbstones for entrances, Marsh decided to use the parking space to expand the size of the store. The new store, at 6,430 square feet, became Marsh's--and Muncie's--first supermarket. Called Marsh Foodliner, the store proved profitable in its first week. Encouraged by the store's success, Marsh determined to convert his operation entirely to supermarkets. The company began to expand its corporate staff; by then, too, Marsh operated its own fleet of trucks to service its stores. Over the next three years the company opened four more stores--including a second Foodliner in Muncie, helping to prove the viability of the supermarket concept. Store size was reaching 9,000 square feet in size. The company started up its own bakery in 1949, and then added a new sideline business, making ice cream in the basement of one of the stores. Sold in gallon containers, Marsh Ice Cream proved immediately popular with customers--selling five million gallons by 1957 and eventually making Marsh the country's largest distributor of gallon ice cream--beginning a long line of Marsh private label products.

By 1951, Marsh was outgrowing its facilities. In that year, the company purchased an abandoned milk condensery in Yorktown, Indiana, and began construction there on the Marsh Food Center--housing production, distribution and warehouse facilities, and corporate headquarters. In order to finance the construction, Marsh went public, issuing 40,000 shares of non-voting stock. The following year, Marsh restructured the company's various operations as a single entity under the name Marsh Foodliners, Inc. The supermarket chain had grown to sixteen stores, all in Indiana. That changed in 1956, when Marsh opened its first two stores in western Ohio. Until this time, Marsh supermarkets were found only in mid-sized towns and cities. In 1957, the company opened its first store in a large urban market, Indianapolis. Sales for that year reached $34 million.

Marsh stepped up its expansion in the final years of the 1950s when it acquired the eight-store Food-Lane Stores, Inc. chain based in South Carolina and Georgia. Marsh followed that acquisition with the purchase of Bellman Markets, a five-store supermarket chain with an average store size of 13,000 square feet, based in Toledo, Ohio. Ermal Marsh's five-year plan called for even faster growth, but he did not get to see completion of his plan. Ermal Marsh died in 1959 when the plane he was piloting crashed.

Settling in--the 1960s and 1970s

Marsh's brother Estel, then serving as executive vice-president, took over as head of the company, now renamed Marsh Supermarkets, Inc., and continued the pattern of growth set by Ermal Marsh. By 1960, the chain had expanded to sixty-two stores, reaching annual sales of $80 million. The company maintained its rapid expansion, adding thirty-four stores between 1960 and 1963. By 1966, Marsh had topped $100 million in sales. By then, the supermarket concept had captured the grocery market, ending the era of the small grocer. The demise of the small stores opened a new market for the increasingly mobile American public. Convenience stores had begun to appear in various parts of the country, but Indiana's restrictive laws regarding sales of beer and gasoline--the most profitable aspects of the convenience store business--left that state largely free of competitors.

Marsh opened its first Village Pantry convenience store in Muncie in 1966. That division, led by then executive vice-president Don Marsh, oldest son of Ermal Marsh, grew quickly, adding nine more Village Pantries in two years. The company also experimented with another type of store concept, called Family Market, which offered a no-frills concept. When Estel Marsh was appointed chairman in 1968, Don Marsh was named president of the company. Following the lead of other supermarket chains, Marsh moved into the drug store business, opening its first Marsh Drug Store in 1969. Under Don Marsh's leadership, the company exited the food production business, contracting with outside companies to supply its private label products, in order to concentrate on its growing retail empire. Marsh closed out the 1960s with revenues of $122 million.

Marsh continued to expand its operations at the start of the 1970s, but a slowdown in the economy, rising building costs, and increasing price competition with other supermarket chains cut deeply into the company's profits. With a 49 percent drop in net income in 1971, the company closed its Family Market operation, then sold its truck fleet in a sale-leaseback arrangement. The company stepped up the growth of its Village Pantry chain, bringing the total to 30 stores by 1973. In that year, the company acquired 15 convenience stores from Nite Owl Food Marts, Inc., and, with the addition of more Village Pantries, the convenience store division reached 62 stores by 1974. However, by then the Arab oil embargo and the resulting surge in inflation began to restrict Marsh's growth.

Nevertheless, Marsh made international news in 1974 when its Troy, Ohio, supermarket became the first in the world to offer Universal Product Code scanning. The new system would greatly enhance the company's ability to track its customers' purchases; linked to inventory, scanning also helped streamline its ordering and delivery processes. Before long, UPC scanning became ubiquitous in the supermarket industry and soon spread to nearly every retail industry.

Through the second half of the 1970s, Marsh, by then topping $200 million in annual sales, continued adding to its chains, although its growth was slowed somewhat by the economic problems of the day. To aid in its expansion, the company adopted a "last-in, first-out" accounting method. During this time, Marsh also began moving away from leasing its Village Pantry locations to owning them outright. The advantages of owning also led the company into acting as its own building contractor for the construction of new Village Pantries. Meanwhile, Marsh unveiled a new supermarket concept in the mid-1970s when it opened its first integrated supermarket-drug store site. The new prototype stores, called "Combos," were former Marsh supermarkets that had been expanded to an average 25,000 square feet. Two years later their success led the company to developing an all-new store concept, this time built from the ground up, with selling area and warehouse space growing to more than 35,000 square feet.

Estel Marsh retired in 1978 and was replaced by Don Marsh as CEO and chairman. By the end of the 1970s, the company had grown to include, in addition to its supermarket chain--which had launched a new, expanded prototype called Marsh Xtras--109 Village Pantries, fifteen Marsh Drug Stores, and three new ventures: the first of a chain of restaurants called Foxfires; a seven-store chain of Tote 'N' Save markets, a return to the no-frills shopping concept, and the first store of another division, called Farmer's Market, specializing in produce sales. None of these new ventures would survive the coming decade, however.

Price Wars in the 1980s and Beyond

Marsh had successively competed in its Indiana market with other, national supermarket chains, but a new type of grocer soon threatened the company. The 1983 entry of Cub Foods and its warehouse concept stores into Indiana sparked a vicious price war that would last more than two years, driving down the profits of the larger chains and forcing at least 35 independent grocers to close. Yet Marsh, which saw its net income drop to $1.6 million on sales nearing $600 million in 1984, managed to come out of the fray intact. Better, the company actually saw an increase in its market share, capturing many of the customers of the failed supermarkets. Marsh responded to the store wars by increasing its operating efficiency and cutting out luxury expenditures, such as the company's fleet of jets. Marsh also began heightening its customer service, adding bulk food items, increasing its range of fresh foods, such as cheese, and including other services such as in-store banking and video rental. By 1985, despite a meager four percent revenue growth, to $628 million, over the previous year, Marsh was able to post a net profit of $4.7 million.

Not all of the Marsh empire came out unscathed. The company sold off its drug store division to the Peoples drug store chain. Marsh also unloaded its restaurant division, and shut down both its Tote 'N' Save and Farmer's Market divisions. The company instead returned its focus to its supermarkets and Village Pantries, raising the number of Marsh supermarkets to 76 and the number of Village Pantries to nearly 170 by the end of the decade. The company also picked up CSDC to serve its Village Pantry stores and other convenience stores in the Midwest. By 1990, sales had topped $1 billion.

The 1990s brought a new growth spurt to the company, which moved its headquarters to Indianapolis in 1991. The launching of a new superstore concept--with stores of 60,000 to 80,000 square feet--sparked several years of intensive capital investment. The company also rolled out its Lo Bill store concept, offering lower prices and more limited selection--and offering the company the ability to convert its older, smaller Marsh supermarkets to the new concept. The company added another new division, Crystal Food Services, bringing the company into the catering and food service area.

In the mid-1990s, the company faced the emergence of a new competitor in its core Indiana market. Michigan-based Meijer, a chain of "hypermarkets" with warehouse-style stores averaging 200,000 square feet, entered Indiana in 1993--with a reputation for allowing new stores to take losses until they had beaten competitors. Marsh responded by adding warehouse-style departments to its superstores, launching more superstores and expanding the fresh foods departments of existing stores, while appealing to six-decades of Marsh family service to its Indiana and Ohio customers. The strategy appeared to be working: despite the entry of 14 direct competitors, Marsh's revenues rose to $1.4 billion, and net income increased to $9 million.

Principal Divisions: Marsh Supermarkets; Village Pantry; Lo Bill Foods; Convenience Store Distributing Company; Crystal Food Services.

Marsh Supermarkets, Inc. History

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