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    Competition Stings Two Indiana Grocers

    Marsh Supermarkets and Schnuck Markets are losing share to other more relevant grocers and other retail formats.

    INDIANIAPOLIS -- Regional supermarket chains across the country are battling a combination of new competitors that undercut them on price, convenience and high-end quality, and Indiana grocers are no exception to the trend.

    In St. Louis, Schnuck Markets Inc. saw its share of the market slide to 34.9 percent in last August from 43.4 percent in 2000, according to data from Market Scope, a publication of TradeDimensions International in Wilton, Conn. During the same period, Wal-Mart's Supercenters more than doubled their market share, to 11.9 percent.

    "Competition is tough, and it¹s getting tougher," said Lori Willis, Schnucks' director of communications. "Our strategy is just simply to be the best at what we do. We know this business better than most, because we've been in it so long."

    Schnucks, founded in 1939, is similar to Indianapolis-based Marsh Supermarkets Inc. in several ways. Nearly two-thirds of Schnucks' stores are in the St. Louis area, while the financially troubled Marsh has 41 percent of its stores in and around Indianapolis. Schnucks has expanded into Memphis, Tenn. and Evansville, Ind., while Marsh, which is currently on the selling block, recently built a large, innovative store in Naperville, Ill.

    Similarly, Schnucks has built three concept stores in the St. Louis suburbs. Schnucks often is mentioned as a potential acquirer of Marsh.

    Schnucks outperforms Marsh, however, by some measures, according to the report. Its 102 stores generated $2.2 billion in sales in 2004, while Marsh produced $1.7 billion in sales from 118 supermarkets and its Village Pantry convenience store operation.

    "I don't think Marsh has been aggressive over the years at taking its prices down," said Mitchell Corwin, a stock analyst for Morningstar in Chicago. "Some of these regional operators have been very aggressive at taking their prices down and improving their merchandise quality."

    One thing Marsh doesn't offer is a broad Wal-Mart-style program of "everyday low prices." Schnucks joined that trend in January by permanently cutting the price on thousands of popular items, then promoting those permanent reductions.

    Two other factors hurting Marsh are the age of its stores and its $200 million debt.

    Although Marsh has worked to remodel some of its older stores every year, 44 percent of its stores' square footage has not been remodeled in a decade, according to the company's annual report.

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