Dive Brief:
- Kroger and Findlay, Ohio-based grocery company Fresh Encounter have bid to purchase 26 of 44 locations belonging to bankrupt Indiana grocer Marsh Supermarkets, according to the Indianapolis Star.
- These acquisitions, which are subject to approval from a Delaware bankruptcy court judge, target some of Marsh's best locations, reports said. Eleven of the stores would go to Kroger subsidiary Topvalco for $16 million, while 15 would go to Fresh Encounter affiliate Generative Growth for $8 million.
- The Indianapolis Star said these acquisitions would make Kroger the largest grocer in Indiana's capital city. Fresh Encounter is a much smaller chain that currently has about 20 stores under the Community Markets, Great Scot, Sack 'N Save and Chief brands
Dive Insight:
After the long-struggling Marsh Supermarkets filed for Chapter 11 bankruptcy last month, officials with the company were optimistic the 44 remaining stores would find buyers. At the time, Kroger was rumored to be interested, though Fresh Encounter, a relatively new player in the market, wasn't discussed.
It's no surprise that Kroger has swooped in. According to the Indianapolis Star article, the nation's largest traditional grocery chain has been working behind the scenes in the local grocery business in recent months. It scrambled to hire Marsh employees as the company's finances floundered, and it quickly snagged Marsh's former sponsorship of the summer Symphony on the Prairie concert series near Indianapolis.
Kroger has spent the last few years investing in the Indianapolis market by adding four new stores and completing 17 major remodels since 2014. The near-$500-million improvement plan was part of a comprehensive strategy to gain market share in several areas in Indiana.
Scott Gray, a vice president for commercial real estate firm CBRE Group, told The Indianapolis Star these investments may have contributed to Marsh's financial downfall. "If you look at what Kroger's done in the past three or four years, I think they just put the nail in the coffin," he said.
Fresh Encounter, which has some Indiana locations, is a new player in the Indianapolis grocery market. The company specializes in small town grocery stores. It got its start with the 1995 purchase of CWC Companies, a small grocery chain founded in 1964. The company has slowly been expanding its footprint by acquiring other small chains.
It's been a big year so far for Fresh Encounter. In February, the company bought Remke Markets, a struggling family-owned chain with 10 stores in greater Cincinnati and Northern Kentucky. Terms of that deal were not disclosed. It will be interesting to see if Fresh Encounter becomes a bigger player in the Midwest grocery business — and learns some secrets to success at a time where many small chains are struggling.
If the bankruptcy court approves these sales, the saga of Marsh Supermarkets is not over. There will still be 18 locations up for grabs. The company has said it will close unsold locations in July, meaning there's still a month and a half for more transactions. While the "prime" locations may be gone, it will be worth tracking the level of interest that's still out there and what changes may still take place. One of the Marsh locations Kroger bought is less than two miles down the street from a currently operating store, leading analysts to conclude the chain may have just wanted to keep another competitor from moving in.
