A Bright Spot In The Haggen Saga
Banner will still fly at half of chain’s core stores being purchased by Albertsons
by Kristen Cloud/web editor
Despite the tumultuous past couple of years Haggenhas had, there’s a bright spot for the Bellingham, Washington-based grocery chain: the Haggen name will remain on more than a half-dozen stores in the Evergreen State.
A bankruptcy judge approved the sale of the remaining Haggen stores in Washington and Oregon to Boise, Idaho-based Albertsons on March 29. The transaction is expected to close in the next several weeks. The approval for Albertsons to buy these Haggen “legacy” stores for $106 million was expected, after Albertsons said in mid-March that it had reached an agreement to do so. The supermarket giant intends to maintain Haggen’s “Northwest Fresh” merchandising stance.
Albertsons Chairman and CEO Bob Miller said in an internal memo then, “This move not only adds a premier brand to our Northwest stores, it also saves jobs and positions our company to have an even stronger, more competitive offering for customers in that market than ever before. Haggen shares our commitment to offering the best in fresh, and they have been a prominent leader in our industry for developing some of the best processes to utilize local vendors. I couldn’t be more proud to be welcoming them to our team.
“We’ve consistently pursued acquisitions when they made clear strategic sense, and this is no exception. This is another step forward in solidifying our presence as a competitive, national grocer that sets the standard for legendary customer service and fresh products,” Miller added.
The deal for the 29 stores extends offers of employment to essentially all Haggen workers at the stores being acquired.
“The Haggen brand has been a pillar of various Northwest communities for generations,” Scott Moses, managing director of Sagent Advisors and head of food, drug and specialty retail investment banking for the firm, tells The Shelby Report. “We are so proud to have been able to help the Haggen team find new homes for nearly 120 stores, which saved thousands of jobs and will continue to make dozens of communities better places for families to shop for great food.”
Sagent Advisors has acted as Haggen’s exclusive M&A advisor on the pending sale transaction involving the 29 stores. Sagent also advised the grocer on the sale of 90 non-stores in Southern California, Arizona and Nevada in a series of transaction to various food retailers, including Albertsons, Smart & Final, Gelson’s Markets, Stater Bros. Markets, Bristol Farms and 99 Ranch Market.
Haggen, a one-time family-owned grocer that in 2011 came under control of Florida-based private equity firm Comvest, saw an opportunity for expansion in 2014 when Albertsons decided to merge with Safeway. Through an FTC-backed store divestiture agreement, the regional grocery chain, practically overnight, went from 18 stores to 164—most of which were located Southern California, Arizona and Nevada. Following an unsuccessful entry into that market, Haggen filed for Chapter 11 bankruptcy in 2015.
Jan Gee, president and CEO of the Washington Food Industry Association, tells The Shelby Report the drama surrounding Haggen has been difficult to watch.
“Haggen has been a valued member of ours for many years, as has the Haggen family,” she says. “They’re a piece of the heart of this state and to see all this happen in this past year, year and a half, it’s been very difficult for our state and for the family who remains that’s watching.”
Gee’s optimistic the Haggen name will stay alive in the Bellingham area—and not just for the short term.
“The markets know them up there,” she adds. “Haggen is a cherished label in that area of the state.”
Washington stores that will be operated as Haggen are located at 2814 Meridian, Bellingham; 757 Haggen Drive, Burlington; 1406 Lake Tapps Parkway, Auburn; 1401 12th Street, Bellingham; 1313 Cooper Point Road SW, Olympia; 210 36th Street, Bellingham; 2900 Woburn Street, Bellingham; 26603 72nd Avenue NW, Stanwood; 1301 Avenue D, Snohomish; 1815 Main Street, Ferndale; 17641 Garden Way NE, Woodinville; 2601 E. Division, Mount Vernon; 8915 Market Place NE, Lake Stevens; 3711 88th Street NE, Marysville; and 31565 SR 20 No. 1, Oak Harbor.
“We are excited about the opportunity to have the backing of Albertsons and look forward to be part of the Albertsons grocery family. Haggen has been a part of the Pacific Northwest and the Bellingham community for more than eight decades, and we will continue the traditions of operating great Haggen stores focused on community involvement, fresh northwest products and great service,” Haggen CEO John Clougher said in a statement. “Our customers can be assured that the Haggen focus on sustainably sourced and locally produced products will not change. Haggen has operated as a partner to the communities it has so proudly served and will continue to do so. We thank our dedicated stores’ crews, loyal customers, vendors, partners and others that have supported us. We are looking ahead to a promising future.”
Stores that will be rebranded as Albertsons in Washington and Oregon are located at 8611 Steilacoom Boulevard SW, Tacoma, Washington; 1128 N. Miller, Wenatchee, Washington; 450 N. Wilbur Avenue, Walla Walla, Washington; 17171 Bothell Way NE, Seattle, Washington; 3520 Pacific Avenue SE, Olympia, Washington; 3925 236th Avenue NE, Redmond, Washington; 17520 SR 9 Southeast, Snohomish, Washington; 1800 NE Third Street, Bend, Oregon; 1675 W. 18th Avenue, Eugene, Oregon; 16199 Boones Ferry Road, Lake Oswego, Oregon; 1690 Allen Creek Road, Grants Pass, Oregon; 61155 State Highway 97, Bend, Oregon; 14300 SW Barrows Road, Tigard, Oregon; and 3075 Hilyard Street, Eugene, Oregon.
Blame placed mostly on FTC
Industry insiders and experts place the blame for Haggen’s failure primarily on the Federal Trade Commission, which, by most all accounts, should never have allowed Haggen to purchase the 146 stores through the Albertsons/Safeway divestiture.
Gee notes the deep financial impact that Haggen’s unsuccessful expansion had on local communities and, particularly, vendors.
“Everybody’s just kind of shaking their head and asking why did the FTC say, ‘No, Albertsons, you can’t keep that many stores,’ and then, ‘Yes, Albertsons, you can have all those stores back.’ And it’s our tax dollars that is paying for the FTC to do these analyses that really, quite frankly, screwed the market up. What in the world were these people thinking?”
A key issue: the FTC’s anachronistic definition of a “supermarket.”
The food retail marketplace includes thousands of supercenters, club stores, discounters (Save-A-Lot, Aldi and, soon, Lidl), thousands upon thousands of dollar and drug stores, as well as natural, organic and specialty retailers like Whole Foods Market, Sprouts Farmers Market and Natural Grocers; and that’s not to mention online grocers, including big names like Walmart and Amazon. However, the FTC does not include Costco, Whole Foods, Sprouts or Aldi in its grocery “market” definition, nor does it include various well-capitalized online operators, which have become increasingly popular among consumers, especially younger generations.
The FTC has argued that these “other types of retailers…are not in the relevant product market because they do not have a supermarket’s full complement of products and services.” Industry experts agree that the FTC does not seem to account for the fact that most consumers shop for food and consumables in three to five places per week and rarely narrow those shopping trips to traditional grocery stores.
“Regional grocery store chains around the country, many of which are family-owned, are generations-old pillars of their local communities,” Moses tells The Shelby Report. “They provide hundreds of thousands of jobs and are usually exceptional local corporate citizens, meaning they help make our country the special place it is. Unfortunately, while the FTC’s charge to protect consumers from anti-competitive behavior is critically important, it continues to define the traditional grocery store ‘market’ in a fairly narrow manner that is somewhat inconsistent with the realities of the current marketplace. This complicates, if not prevents, combinations that would really help regional grocers continue to thrive for generations to come, whether through mergers with larger, better-capitalized consolidators or with contiguous, regional peers with whom there may be a moderate footprint overlap, but where they still compete with the large traditional grocers, supercenters, club stores, dollar stores, drug stores, hard discounters and huge internet operators Walmart.com, Target.com, Amazon.com and Drugstore.com (owned by Walgreens).
Moses continued, “Costco and Whole Foods may not have offered a ‘full shop’ 10 or 15 years ago, but they clearly do now. The average Costco generates roughly $120 million in revenue. Over 70 percent of that revenue is the same food and consumables you see in grocery stores. That’s $84 million of food and consumables, or over $1.6 million in weekly sales, which is twice as much volume as an exceptional grocery store, but three to four times the average.
“It has never been more difficult for food retailers to raise prices without being widely discovered by consumers on smartphones and Twitter, investment research analysts and other competitors. It is also wholly inconsistent with the stated strategy of sector leaders Kroger and Albertsons, who have a clear record of continuous price investments for their customers, including those of companies they acquire.”
