Marsh Marches On

Four years after taking the helm of Marsh Supermarkets, Frank Lazaran provides an overview of the company's impressive turnaround in an exclusive interview with Progressive Grocer.

What a difference four years makes. When Indianapolis-based Marsh Supermarkets was acquired by private equity firm Sun Capital Partners in 2006, the regional retailer was significantly underperforming and in dire straits.

Fast-forward to the present, and you'll see a significantly transformed company, whose balance sheet — and locally focused reputation — has been dramatically restored within its core marketing territory, thanks to the dedicated efforts of its 8,000 associates and the hands-on leadership of its chairman, CEO and president, Frank Lazaran.

To be sure, during his four years at the helm of one of the Hoosier State's most familiar retail brands, Lazaran presided over a period of great change and profound upheaval. The former publicly traded company had been steadily losing money and market share at the hands of its former family-run management team — the majority of whom are long since out of the picture — in the years leading up to the Sun acquisition.

"The company was struggling financially when it was acquired by Sun Capital," Lazaran relates to Progressive Grocer in an exclusive interview, "and through the hard work of management and our associates, we were able to turn the company around and position ourselves for growth. As a result of this financial stability, we are actively pursuing new site and replacement locations as well as any potential acquisitions contiguous to our marketing areas."

It goes without saying, of course, that the turnaround effort wasn't accomplished without some tough choices. Under Sun's ownership and Lazaran's watch, Marsh shuttered a dozen stores, reduced its headquarters staff by more 30 percent, and rebranded many of its stores with a keen focus on tailoring the right format for specific locations. In addition to cutting inventories and divesting all but a few real estate parcels in favor of leasing, Marsh also pared its overhead by shifting from a signature private label line to Topco's Food Club brand while pulling the plug on a costly alliance with the NBA's Indiana Pacers in favor of more meaningful, locally focused, community-based initiatives.

"From our company's inception, community involvement has been a cornerstone of our mission to support and improve the communities where we live and work," says Lazaran. "In the past few years, we have transitioned to more grassroots community involvement, with special focus on the arts, education and our youth."

Consequently, he continues: "Our merchandising, marketing and community outreach programs are all designed to reinforce our commitment to the communities, from local fairs, to Boys and Girls Clubs support, all the way to much larger programs like 'Fresh Ideas for Education.' In tough economic times, the easiest thing to do would be to lessen our commitment to such programs, but in fact, we have recently expanded our investment in Fresh Ideas for Education, and expanded the number of local programs we support. We think that is the right thing to do and is what being 'Homegrown' is all about."

Indeed, while Marsh's Homegrown, 80-year-old Indiana heritage inherently lends itself to strong corporate name recognition in the communities that it serves, Lazaran is acutely aware that "longevity alone would not have made this possible. Much of our strength comes from the experienced, dedicated and customer-focused associates we are fortunate to have working for us."

Lazaran's pride in the company's front-line workforce reflects his conviction that "they have been instrumental in maintaining the reputation that Marsh has worked so hard to achieve of providing an exceptional shopping experience for our customers." Nevertheless, Marsh at presstime was hit with a suit by a local labor union, alleging that management has thwarted attempts to organize associates at a store in suburban Indianapolis, which the company denies alongside a pledge to "vigorously defend ourselves against these unfounded allegations."

In addition to the company's front-line associates, Lazaran also takes great pride in Marsh's fresh food expertise, particularly its meat, seafood, produce, deli and bakery departments, which he says "receive high marks from our customers. We know that along with great service and competitive prices, our customers want quality products."

When asked to identify what he considers to be the company's single biggest accomplishment in recent years, Lazaran pinpoints a $60 million-plus capital investment purse applied to updating stores, many of which he admits had been neglected over the years. "Our customers and our associates deserve a great facility in which to work and shop," he says, "and we have remodeled nearly 90 percent of the store base to date."

Speaking of things he is most proud of, Lazaran equates Marsh's still-solid market standing with "our people and our stores, which have served generations of Indiana and western Ohio families. We have actually grown up with the customers we serve." With this in mind, he adds, the company moved to reposition its brand with the tagline "Marsh ... Your Homegrown Grocer."

"While much of the benefit from having such a long-lasting relationship with our customers is difficult to measure monetarily," Lazaran says, he believes deeply "that our shoppers appreciate all the things we do to support their schools and local events." While most of Lazaran's labors throughout the past four years have revolved around restoring the company's balance sheet and reputation, the lingering effects of the continued economic downturn have added another layer of challenges "with a very significant shift in consumer shopping behaviors. Trading down and shopping an increasing number of outlets each week has become the norm for a large percentage of consumers," he notes.

In turn, a key challenge before Marsh, says Lazaran, "is to continue to build on our core strengths while at the same time looking for creative ways to attract the ever-increasing number of value-oriented customers. One of the key initiatives we have recently undertaken is the development of single-day, multiple events to create excitement and attract new shoppers. Our merchandising and marketing teams are branching out into social media and are continually working to design interesting and appealing offers for our customers."

Much like all U.S. grocers large and small, Marsh is also immersed in a battle to preserve, if not grow, market share amid a marketing territory rife with deep-pocketed competitors. "We clearly understand in this economy that alternative format operators offer our customers other choices to save money," Lazaran acknowledges. "However, we believe our strengths of exceptional service, convenient locations, 'shoppable' facilities, variety and top-quality perishable products — along with long-tenured associates who know the business and their customers — will continue to provide Marsh with the competitive advantage needed in today's ever-changing retail landscape."

In terms of the company's core competency in fresh food, Lazaran says: "We have seen growth in produce, meat and seafood sales, although recent cost inflation within the meat category" has caused some consumer resistance in purchasing throughout the past year. "It is important for us to be able to demonstrate growth in perishables as we see those departments — meat, produce, deli, bakery and seafood — as significant points of differentiation."

In addition, Marsh's private label product penetration has grown dramatically through ad activity, display emphasis and the addition of a significant number of new SKUs, all of which Lazaran and his team view as "a critical path to add to our value proposition in these difficult economic times."

When asked about the greatest opportunities for Marsh's suppliers, Lazaran believes "consolidation within the industry has created challenges for our suppliers in providing the local representation, which we as a regional chain view as extremely important. In particular, as the 'Homegrown Grocer,' we pride ourselves on selling locally grown or manufactured products, and without that direct contact from our suppliers, there could be missed opportunities."

Harkening the company's pioneering role as the first regional supermarket chain to be tapped for a test pilot of electronic scanning, Lazaran believes Marsh's regional, Midwestern composite "provides an ideal opportunity for our vendors to test-market new products and services. I feel very strongly about our ability to execute them at retail."

Looking ahead, Marsh's entrenched knowledge of the local market, coupled with its longstanding connections with its local communities, offers solid opportunities on which it can build, affirms Lazaran. "We enjoy an excellent reputation for quality and service as well as overall shopping experience. Our organization will continue to bring creative and innovative merchandising to our stores to meet our customers' changing needs and expectations, while our merchandising and operations teams will further refine our promotional activities to offer competitively priced merchandise, quality perishables and exceptional service to reinforce our value proposition.

"Enhancing and expanding our product offerings," he adds, " as well as increasing private label penetration, will give our shoppers greater value. Remodeling and continually updating our store base remains a priority for us, along with our desire to open new locations."

Come what may, Lazaran concludes, "We will always keep a keen focus on continuous improvement of our overall operations."

Marsh's Makeup

Marsh has migrated from a single store that opened in Muncie, Ind., in 1931 to a full-service regional supermarket chain with 101 stores throughout Indiana and Ohio, including 41 in-store pharmacies. Bearing the distinction of being the first grocery store in the world to use electronic scanners, Marsh employs nearly 8,000 associates in stores ranging from 15,000 square feet to 81,000 square feet.

While all of its stores are branded under its eponymous umbrella, many also carry the dual designation of either "The Marketplace" or "Marsh Hometown Market," the latter of which is flown on 38 stores. Thirty-four of its stores are bannered "Marsh The Marketplace," while its four upscale, fresh-focused O'Malia stores also carry "The Marketplace" tagline. Marsh's traditional focus on customer service is accentuated in the Marketplace stores, providing full-service perishable departments and carryout services.

Marsh Hometown Market is the banner carried by the remaining 63 stores, which are typically smaller locations in more rural communities, in addition to a handful of metropolitan locations. Hometown Market stores provide their shoppers with a full complement of departments and variety to fulfill all of their shopping needs, with an emphasis on providing new ways to save both time and money. Many of the value-oriented merchandising programs that were popular with Marsh's former Lo-Bill division have been combined with enhanced quality, and the variety of perishables and services expected in a traditional Marsh store.

While each of the formats offers unique differences, the majority of offerings in all Marsh and O'Malia locations are common to all stores. As such, the resulting economies of scale comprise a productive distribution network that enables the regional retailer to procure and merchandise products both efficiently and cost-effectively.