Under New CEO, Marsh Back in Growth Mode

JON SPRINGER

INDIANAPOLIS — There's a point at which the turnaround under way at Marsh Supermarkets becomes clear. Let's place that point at about 5 feet 9 inches from the ground.

“We're big on lines-of-sight here, but I'm vertically challenged,” confessed Frank Lazaran, the chairman and chief executive officer of Marsh, standing in the bountiful but low-slung produce department of the newly refurbished and rechristened Marsh the Marketplace store in downtown Indianapolis. Just steps from a newly located entrance, the spot provides vistas across the historic location.

“We joke that this is the ‘Frank line of sight,’” said Lazaran. “I have to be able to see over it and get a good feel for the whole store.”

Improved sight lines are only part of Lazaran's vision for Marsh. Since taking the reins following a private-equity buyout 16 months ago, Lazaran has been focused on seeing the embattled regional chain out of a spiral of declining sales while repairing a damaged image among shoppers and employees. Buoyed by newly designed stores and a fresh image campaign, Marsh is back into growth mode, Lazaran said in an exclusive interview with SN.

“We've gone from a stabilize-this-company mode to a grow-this-company mode in the last 15 months, thanks to a lot of great work from our associates and support from the parent company,” Lazaran said. “And we're here to stay.”

Lazaran, a former chief executive at Winn-Dixie and Randalls Supermarkets, was named chairman and CEO at Marsh following the company's acquisition by an affiliate of Sun Capital Partners, a private equity group known for turnarounds, in late 2006.

Marsh at that time was in the throes of a dreadful stretch in which comparable-store sales were tumbling in excess of 5% and the economic outlook was bleak. New competitors had encroached upon its home base in Indianapolis, but its forays into new territories and new formats were failing, while existing stores hungered for attention. The longtime family ownership sought strategic alternatives amid allegations of scandal and misspent fortunes in the ranks.

“The Marsh brand was a very good brand, known for innovation in stores and great customer service, but that brand got tarnished along the way,” Lazaran said. “When we first arrived there was a lot of uncertainty. The associates had been through a lot of turmoil.”

That sense of uncertainty didn't dissipate immediately upon Lazaran's arrival, as one of his first orders of business was to close 12 stores and reduce headquarters staff in cost-saving measures. Included in the closures were both locations of the fledgling Arthur's Fresh Market concept. Marsh also simplified its business by selling its floral and commissary businesses to the executives who ran them, and aligning the Village Pantry convenience store and Crystal catering divisions as separate businesses under Sun Capital.

“Those are decisions that you cannot take lightly, because I understand people's livelihoods are at stake and customers are impacted,” Lazaran said. “But I also know that I have a responsibility to look after the other 10,000 associates in the organization. You have to keep it all in perspective.”

Reducing costs was among five key objectives at Marsh since he took over, Lazaran explained. The others were deciding on merchandising, pricing and promotion at stores; remodeling those facilities; optimizing cash flow through better warehouse efficiency; and designing processes to maintain standards in every area of the business.

In a more general sense, Lazaran had to convince shoppers and associates that Marsh could make a comeback at all. That message, he said, found an enthusiastic audience.

“One thing we were really blessed with was a great group of associates who wanted Marsh to win,” Lazaran said. “The fact is, a lot of those associates had seen when Marsh was on the top. They understood what that meant, and they wanted to get there again. The customers also wanted to shop us. It's just that we hadn't been giving them the experience they deserved.”

Guided by customer research and funded by proceeds generated by streamlining the business, Marsh has invested more than $15 million back into stores over the past year. Much has been devoted to refurbishing conventional stores under the Marsh or Lo-Bill Foods names; all of the latter stores and some of the former are being rebranded Marsh Hometown Markets.

The company was scheduled to have completed the last Lo-Bill conversion last week.

“The Lo-Bill format was developed in the early 1990s as a price-driven format. It was the right format at the time, but once there were a fair number of Wal-Marts and Meijers in the marketplace, it was past its prime,” Lazaran said. “We knew that Marsh was the brand and Lo-Bill was a name on a building. And through research, the one thing that came up again and again with our customers was the idea of ‘hometown.’ So we put that into the name.”

Lazaran described Marsh Hometown Markets — a banner he estimated will eventually appear on 69 of the company's 103 stores — as a “good conventional grocery store.” The stores do not strive to be the price leader but carve out a value niche through dollar sections, pallet drops known as “Direct Deals” and end displays known as “Power Buys.” Produce and deli-bakery sections have been expanded, and an emphasis has been put on executing programs consistently from store to store, Lazaran said.

“Sometimes being the hometown player can be an advantage,” he said, “but we plan to differentiate ourselves from the competition through execution.”

Marsh's larger stores, including the upscale-leaning O'Malia's store brand, are being converted to the service-oriented Marsh the Marketplace concept (though certain O'Malia's stores will keep their name). The downtown Indianapolis store, which completed a conversion from the O'Malia's banner in December, showcases the possibilities for the new format, Lazaran said.

Set in a 1921 building that formerly housed a Sears department store, the 40,000-square-foot store utilizes a new layout to help focus shoppers on fresh departments, including service seafood and meat, as well as prepared foods. An expanded wine department faces the city streets on the west side of the building, while relocated check-stands and exits lead shoppers to an outdoor seating area to be unveiled this spring. Pharmacy and wellness sections are highlighted in new lighting, and service is emphasized through food sampling.

The quirkiness of the downtown location notwithstanding, Marsh the Marketplace draws more heavily on Marsh's reputation for service than for design. Lazaran said the company will not continue to build stores with the circular racetrack layout for which Marsh's “lifestyle” stores were known.

“It's a unique concept, though unless you're used to it, it can be difficult to shop,” Lazaran said. He said a new store prototype currently in the works at Marsh aims to “simplify the shop.”

Though heavy competition in Indianapolis, a market that's often described as “over-stored,” has made growth difficult, the company is hunting for new store sites and acquisition opportunities, Lazaran said. “Sun Capital is very clear about wanting to grow this business, and if you perform, if you prove yourself, there's more capital available. So we're actively looking now to see if there are potential acquisitions where we can get synergies. And if there's a vacant building that could be an opportunity for us, we're looking at that as well.”

The conversion from a company pulling itself up off the ground to a retailer looking to grow again is also reflected in Marsh's television advertisements, which recently shifted from a campaign featuring a shopper testimonial to a stylish series of image ads illustrating products by color. The current “white” campaign shows images of white foods — cauliflower, angel food cake, eggs, milk, sugar, marshmallows, scallops and other items. “Green” commercials ran in December, and “red” is next on the list.

“That spot highlights the variety and the quality that's available at Marsh,” Lazaran said. “We began with a campaign that had a Marsh shopper as a spokesman. She was great; she helped position the focus that we were here to stay and getting back on track. Now, we're shifting to more of an image campaign.”