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MARSH TO BROADEN TARGETED DIRECT-MAIL USE

INDIANAPOLIS -- Marsh Supermarkets here plans to expand its use of targeted direct-mail promotions to frequent-shopper cardholders this year following successful testing last year, Don E. Marsh, chairman, president and chief executive officer, told shareholders in the company's annual report. are captured via the card," Marsh said in the report."Last year many customers received targeted direct-mail

INDIANAPOLIS -- Marsh Supermarkets here plans to expand its use of targeted direct-mail promotions to frequent-shopper cardholders this year following successful testing last year, Don E. Marsh, chairman, president and chief executive officer, told shareholders in the company's annual report.

are captured via the card," Marsh said in the report.

"Last year many customers received targeted direct-mail promotions, and our plans in the coming year include expanding the use of this technique."

The report also said the company is already ahead of many other operators in using the Internet to direct programs at consumers.

"Analysts predict that by the year 2007, almost 20 million households will grocery-shop on-line," the report said. "Marsh is already acting on this trend with an efficient home-delivery program and a dynamic interactive Web site -- www.marsh.net. "Customers use the Marsh Web site to order groceries for home delivery or for pickup at the store, to stay informed about community events, and to learn about their health and free medical screenings offered at Marsh stores.

"They can even e-mail us with personal comments, and each receives a prompt, personal reply."

In other highlights of the annual report:

Marsh said the company is in the process of reviewing and upgrading systems over the next two years, including the replacement of point-of-sale devices and the company's buying and warehousing systems by 2000.

The company said its gain-sharing incentive program was expanded this year to include retail department managers, store managers and corporate merchandising staff and will be implemented companywide within the next two years.

"All incentive awards are based on sharing improved financial performance," Marsh said. "[The awards] helps create a positive work environment that is obvious to customers, [and] by directly rewarding people for their own efforts, we will create a culture of loyalty and continuous financial improvement."

Marsh said the chain has implemented a weekly satellite broadcast to all stores to keep store-level personnel up to date on merchandising and operational programs. He called the TV initiative "a powerful way for us to communicate" and said it will be expanded to encompass more education and training.

Reflecting on the prior fiscal year, Marsh said the company had its highest sales and earnings ever -- $1.5 billion in sales and $9.4 million in earnings, prior to an extraordinary charge of $3.2 million related to the company's decision to refinance its longterm debt.

Marsh said the refinancing, which was accomplished through an offering of $150 million in senior subordinated debt, "was needed to free the company from covenants that limited growth and our ability to pursue needed strategies, particularly for information system improvement and new sales volume.

"The interest increase [of $4.7 million] will be a burden until new projects financed by the offering are implemented and mature."

He also said the company spent much of the year designing and fine-tuning new-generation stores for Marsh and its convenience store operation, Village Pantry.

The new Marsh format -- Marsh Fresh International Market Place -- was introduced at two remodeled stores and includes on-premise child-care facilities, a travel center, an international coffee and pastry bar, a wider selection of restaurant-quality meals to take home or eat in-store, including European-style luncheon meats, plus specialty wines, freshly baked bagels, an international produce market and a floral boutique.

The first new-generation Village Pantry opened during the first quarter of this year. According to the report, it is more than double the average industry size and features fresh items for tonight's dinner.

The report also noted that LoBill Foods, Marsh's price-impact format, had a record year during the prior fiscal year.