Marsh Inks Supply Deal With C&S

MARK HAMSTRA

INDIANAPOLIS — Marsh Supermarkets here will abandon self-distribution and outsource its logistics operations to C&S Wholesale Grocers, Keene, N.H., in a move that gives C&S a new beachhead in the Midwest and could create some returns for Marsh's owners.

Terms of the agreement, described as a “long-term” pact, were not disclosed.

C&S will manage purchasing, inventory management and distribution to all 97 Marsh locations, which operate under three different banners in Indiana and Ohio.

A Marsh spokeswoman said the company would retain the leases on the three distribution centers — two in Indianapolis and one in Yorktown, Ind. — which measure a combined 658,000 square feet.

“We are confident that with this change in the direction of our business, Marsh will be better positioned to offer enhanced shopping experiences for our customers,” said Joe Kelley, chairman, president and chief executive officer. “We can now focus our full attention and resources on upgrading our current fleet of Marsh stores as well as expanding into new locations by opening new stores or acquiring other supermarkets.”

He said C&S would hire 250 former Marsh workers as it takes over distribution and logistics for the chain.

Michael Newbold, executive vice president of corporate development at C&S, said the wholesaler is “very excited about its further expansion into the Midwest and its ability to service new and existing customers from the Indianapolis distribution centers.”

C&S' 28 distribution centers are currently concentrated along the East Coast, plus three in California and one in Hawaii. It also operates two locations in the Southeast — one each in South Carolina and Alabama.

The new beachhead in central Indiana could enable it to “build a stronger bridge” to Minneapolis-based Target Corp., according to Burt P. Flickinger III, managing partner, Strategic Resource Group, New York.

“C&S could have some built-in business growth as Target converts its discount stores to discount supermarkets within its four walls, and as C&S has the lion's share of the Target business,” he said. “Even though Target is not well developed in the Indiana market, it is well developed in the surrounding states.”

The addition of a large chunk of new business — Marsh generated sales of about $1.2 billion in the most recent fiscal year, according to SN's Top 75 listing — is also significant for C&S as the fate of A&P, one of its largest customers, remains unknown.

“For the short to intermediate term, it's a very good move for C&S,” Flickinger said. “It provides an additional buffer during the A&P bankruptcy, which is a jump ball that could go either way.”

C&S has a history of taking over distribution to large regional chains, from A&P and Tops in the Northeast to Bi-Lo and Bruno's in the Southeast.

C&S could not be reached for further comment last week.

In the meantime, Flickinger said he believes Marsh remains for sale by its owner, Boca Raton, Fla.-based Sun Capital Partners, which acquired the chain in 2006 for $325 million.

Unloading the distribution business was “a Pyrrhic victory for Sun Capital,” which has been seeking to sell Marsh for more than a year.

Marsh, Flickinger explained, has been less and less attractive to potential buyers as it lost market share to such rivals as Kroger, Wal-Mart and Meijer.

According to Metro Market Studies, Tucson, Ariz., Marsh saw its share slip to 16.7% in Indianapolis in the past year, from 17.3% a year ago. Kroger Co., meanwhile, with No. 1 share and approximately the same number of stores, boosted its share to 25.4% in that time, from 25.0% a year ago.