CEO of the year: all smiles at Marsh.
A buoyant Marsh Supermarkets television spot sings, "Gonna make you smile, smile, smile." The people at Marsh will do it, too. It'll start with Don Ermal Marsh himself. He'll smile at you and you'll smile back. Everybody in the whole organization smiles.
Don Marsh smiled through our interview in his office on the fourth floor at the northeastern corner of the new headquarters building in Fishers. So what's not to smile about when at age 55 your company did $1.2 billion in sales in '92 and expects to match that in '93? You've earned the right to flash a grin if you run one of the most successful grocery chains in the country -- it is ranked 25th in size -- and can claim to be the dominant marketer in an area where you control nearly a third of the grocery sales.
As he beams, Marsh says, "I look to have a good year." And topping his company's success, he has personally gained a distinguished role as a statesman in the international supermarket community.
So it is fitting that he be honored as the Indiana Business Magazine CEO of the Year. In his years at the helm of Marsh, he's certainly earned the respect of customers, competitors and those who follow the industry.
"Don has led this company into being a billion-dollar entity, with a 28 percent to 30 percent market share in Central Indiana," says Raymond H. Diggle Jr., vice president for research in the Indianapolis office of Robert W. Baird & Co. The competitive marketplace has taken a bit of a toll on the company's earnings, Diggle notes, but the company is planning for the future with a major construction and remodeling program. His new stores promise to set the supermarket standards in their communities.
Diggle says Marsh has helped his company earn a strong reputation for superior quality that has served it well in recent grocery wars, and he and his company have led the way in community service as well. "Marsh's Computers for Education program as well as its involvement in many community and charitable activities has set an outstanding example for other local companies."
He's also been setting examples for companies around the world. Marsh served as president of CIES, the International Centre for Food Trade and Industry, which is headquartered in Paris with offices in Washington and Tokyo.
The organization does research, education and training, studies marketing, information systems and warehousing, Marsh explains. "It serves as a catalyst between retailers and manufacturers and looks for trends on a global basis. What starts in Europe ends up here and vice versa," he says. "To be real honest with you, we in the United States do not have an edge in supermarket development. I can take you to Hong Kong and show you supermarkets that are more outstanding than ours. I was in South Africa and saw one store with 50 checkout counters. You can go to Japan and see very sophisticated carry-out food systems. Different countries have different specialization."
Marsh has taken ideas found around the globe and put them into its own operations, the CEO says. "Our 'fresh-food concept' came out of England. Today one-third of a Marsh store is actually fresh--carry-out foods, deli, baked goods, floral items, fruit and vegetables, sit-down eating, cheese, meat and seafood. That's what the consumer wants."
Don Marsh is sure about what the customer wants because of research. He really believes in it. During his three-year term as president of CIES he helped create what he describes as "the largest, most comprehensive study ever attempted for the food industry." Titled "The Marsh Super Study," the results changed the industry's direction in terms of merchandising (see story on page 13). "The last time we had a full study was before scanning. It was done with electromechanical cash registers and it was only in the grocery area. That was 30 years ago," he says. "This one includes everything. We measured perishables for almost an 18-month period. That had never been done before. It is truly a piece of work, a major undertaking."
The study was done with financial support from leading manufacturers including Coca-Cola International, Pillsbury, Kraft, Unilever, Nestle, Georgia Pacific, R.J. Reynolds, Fort Wayne-based Perfection Bakeries and others. "Some put in about $250,000 apiece. You just don't give $250,000 unless you think there's something to it," Marsh says. "They use the findings. We use the findings. It has continuous value."
The organization presented Don Marsh one of the highest honors ever given to a retailer, the Henri Toulouse Award. "I'm very proud of that," he says. The award was named for the founder of CIES, who managed a notable grocery chain in France. It has been presented to Marsh, the first American to receive it, and two other international recipients to recognize vision and leadership in the industry. Marsh also represented the food industry and addressed the world summit on the environment in Rio de Janeiro.
In his world travel he's even found business opportunities. "There are 900 million people in India," Marsh says, "so we've started a partnership there. We opened a supermarket with some Germans and are getting ready to open our second store in New Delhi. This came out of a CIES contact."
Marsh knows his company is in good hands while he's on the other side of the globe because of heavy family participation. How heavy? Marsh smiles, "We don't really talk about the family's ownership position." There are rumors in the trade that they vote about a quarter of the shares.
The founder's widow, Garnet Marsh, and the three sons hold seats on the nine-member board. The boys also have three of the top five executive positions in the company, with Don as president and CEO since 1978 and chairman since 1991. Alan Marsh is vice chairman of the board and senior vice president of corporate development. Bill Marsh is vice president and general manager of property management. Don's son Arthur Marsh is director of grocery merchandising. Son David Marsh is director of operations for LoBill Foods, and Don Marsh Jr. is a category buyer. Daughter Anne Marsh Heerens is an artist in the advertising department. A lot of Marshes mind the store.
"I am fortunate to have brothers and children who are very capable," Don Marsh beams. "A lot of family companies don't have that. Another advantage is that we are basically pretty harmonious."
We asked our host to look back over the years. He was born in Muncie of English-Danish heritage. His family moved to Eaton, 10 miles north, and he lived on a farm for his first 10 grades. They returned to Muncie, where he attended high school at Burris School.
"In 1931 my dad started his neighborhood store downtown on South Walnut Street," he says. "At the time it was personal service, not self-service, so customers got a lot of attention. A lot of interaction. A lot of smiles."
Marsh went to Michigan State University and married Marilyn Lois Faust in his junior year. Shortly afterward his father was killed in a plane crash. Don dropped out to help his mother settle the estate, but was able to return to school and graduated in 1961. He majored, appropriately, in food distribution.
Draw a circle around Indianapolis with a 150-mile radius and you're looking at the Marsh distribution domain. Within this zone of influence the firm operates in a number of separate market segments.
Marsh operates 86 supermarkets, 76 in Central Indiana and 12 in Western Ohio. They account for nearly three quarters of gross sales. Twenty of the units contain drugstores and 35 include banks. Sixty-two are open 24 hours a day.
"Our supermarkets are divided into two types," Don Marsh explains. "The larger, newer structures of 50,000 to 80,000 square feet are 'fresh stores.' They may stock as many as 30,000 items, including 400 fresh foods from over 50 countries. And we also have our older, smaller-sized, conventional supermarkets. Some are being expanded and refurbished now."
Then there is LoBill, a pure price-cut, mini-supermarket that is a new, but growing, segment of the business. It offers bargains on a limited selection of items, some of them Marsh private-label products, in stores that typically are about 25,000 square feet. The five-unit chain is predicted to expand to 30 over the next few years.
There are 177 Village Pantry convenience stores. They provide 13 percent of gross income. All of these stores and many more franchise units are supplied by another Marsh subsidiary, the Convenience Store Distribution Co., with offices and a giant warehouse in Richmond.
Don Marsh waves one hand toward his office window and points across the meadows to a new Village Pantry. "We're into the largest capital spending program in the history of the company. We spent $26 million last year, and this year we'll spend $63 million. That's a 142 percent, or a $37 million, annual increase. We worked in Bloomington and Noblesville, we built in Indianapolis on Kentucky Avenue and out at Eagle Creek, we have some Village Pantry stores under construction and a LoBill in Cincinnati. We've built in Kokomo and Wabash, Geist, Fishers, Bloomington, Cincinnati, on and on."
There's a lot of talk about an out-of-state competitor that is about to hop into the Indianapolis market. "Meijer from Grand Rapids," Don confirms casually. "I've known them for a long time. They are good operators of warehouse-type stores. They'll arrive in May or June. We always prepare for competition but, really, their customer profile is not the same as ours. They'll take some shoppers but what happens is, the market just churns. The last time we had a major entry in the market our share increased from pre-entry to post-entry by 8 percentage points. Once the market starts to settle down and share of market starts to solidify, we come out ahead."
That last major entry was Cub Foods in the mid-1980s. Cub put a major dent in some other retailers, but Marsh came out shining. Observers don't underestimate Meijer, but note Marsh's track record. "We think Marsh can exploit its 62 years of community service, strong marketshare position and loyalty from middle- and upper-income demographic segments to maintain its dominant position," Diggle of Robert W. Baird predicts.
Marsh Supermarkets has a reputation for being people-oriented. It is gung-ho for employees, customers and the whole community. Everybody knows the company has an active social conscience. Don says, "There is a problem with that in our area today. So many companies have been taken over by out-of-state firms there are not too many local guys left out there to help the community. The pressure becomes more intense on the few companies still around. In the last two or three years I'd say our presence has been the heaviest presence of anybody's," he says.
"People are the name of our game," Marsh continues. "We have 12,000 employees and will add a thousand more with the expansion program. We have some who have been with us 45 years. If we didn't take care of them, they'd want to belong to a union."
Marsh is heavily into incentive plans to motivate its people, the CEO says. "They are what built this company. I have a philosophy, 'Find out what it is this person wants that will get him to accomplish something for the company.'"
The interview ends here, and you realize that Don Marsh is pressured to get back to his business. But he doesn't show it. He is cordial and genial, a gentle man with unswerving eyes and a quiet voice.
Leaving a while later he lifts his hand, waves and chuckles. You beam back and hear the echo of that television song, "Gonna make you smile, smile, smile." His grin warms you all the way down the elevator and clear out the front door.
Marsh Super Study
Nearly 2.5 billion pieces of information
How super was the Marsh Super Study? Super enough that the trade magazine Progressive Grocer devoted an entire issue to reporting some of the results.
For the Super Study, Marsh put five of its stores under the microscope for 65 weeks. A major data source was the electronic scanning system at the checkout--scanners logged information about some 62 million items worth $98 million sold at the five stores during the survey period. Additional information was gathered by following 1,600 shoppers around the stores during a three-week period, detailing their every move and purchase in order to learn how they respond to the way products are displayed. And 18,000 specials and promotional events were recorded as well.
In all, Marsh plugged 2.48 billion pieces of information into its computers to analyze for the Super Study. The results showed how much of any given product Marsh sells, how much profit it earns on each product, and how different specials and promotions affect not only the item on sale but also related and competing items.
Among the millions of facts the study uncovered:
* More than three-quarters of Marsh shoppers are women. Female shoppers spend an average of $37.51 per trip, while male shoppers shell out $27.01. A third of female shoppers use a shopping list, compared with a fifth of male customers.
* More than 40 percent of the customers are classified as "fill-in" shoppers, those dropping by to pick up 10 items or less. "Stock-up" shoppers, those grabbing 36 or more items, comprise just 16 percent of the total. Stock-up shoppers spend an average of $85.30 per trip, while fill-in customers spend $12.51. The rest of the shoppers, known as "routine" shoppers, spend an average of $39.40.
* Fill-in shoppers are more likely than other types of shoppers to buy milk, bread and cigarettes, but much less likely to grab canned vegetables.
* Self-service meat is Marsh's leading category in terms of dollar sales, followed by the deli and fresh vegetables. In terms of unit sales, the leaders were fresh vegetables, fresh fruit and bakery items.
* Selling pasta on a buy-one-get-one-free promotion generates sales gains in profitable, related products such as spaghetti sauce, ground beef, Parmesan cheese and Italian salad dressing. To capitalize on this phenomenon, Marsh often displays these items together.
* Marsh loses more money stocking frozen turkeys in the 10 days leading up to Thanksgiving than it can possibly make up on turkeys the rest of the year. The chain has found no way to avoid that loss, but knows it can't afford not to stock turkeys for Turkey Day.