Haggen to get big in a hurry

Discussion
Jan 06, 2015

One of the biggest retail stories to come out of the past holiday season was the announcement that Haggen, an 18-unit grocery chain with stores in Oregon and Washington, planned to acquire 146 stores from Albertsons and Safeway in Arizona, California and Nevada.

The deal was made possible because the Federal Trade Commission required Albertsons LLC and Safeway to sell off stores to approve a merger of the two large supermarket operators.

"With this pivotal acquisition, we will have the opportunity to introduce many more customers to the Haggen experience," said John Caple, chairman of the Haggen board and partner at Comvest Partners, a private investment firm that purchased a majority stake in the grocery store operator in 2011, in a statement. "We will continue our focus on sourcing and investing locally even with this exciting expansion."

The deal, which is expected to close early this year, will put Haggen on a whole new playing field. In recognition of the task ahead, current Haggen CEO John Clougher, formerly the CEO of Andronico’s Community Markets, will run the company’s business in Oregon and Washington, while Bill Shaner, a former president and CEO of Save-a-Lot, will lead Haggen’s business in its new markets.

Haggen plans to convert all of the newly acquired stores to its own banner during the first half of the year. The company has said it wants employees of the stores to remain after the sale is completed.

"The stores are well run and very successful, thanks to the dedicated store teams," Mr. Clougher said last month. "We want to retain these existing teams while allowing our growing company to build on their past successes. We plan to adopt the best practices of our new stores to offer a superior shopping experience for our valued customers in all our stores."

Haggen stores in Arizona, California and Nevada will be supplied by Unified Grocers while Supervalu will handle distribution at its 64 locations in Oregon and Washington.

Editor’s note: Back in the early 1990s when I first visited stores in Washington operated by the Haggen family, a couple of things stood out. The first, because I had never seen it anywhere before, was the long line that seemed to be in place all day long at the Starbucks located at the front entrance to the store. The other was the chain’s ties to its Pacific Northwest roots and its commitment to local communities. Today, from reports I’ve gotten, it’s clear the company is even more committed to local suppliers and communities. It will be interesting to see how that plays out as Haggen moves into new markets as a decidedly larger entity.

What challenges do you see for Haggen as it goes from an 18-store chain in two states to 164 locations in five states? What are the keys to success?

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15 Comments on "Haggen to get big in a hurry"


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Dave Wendland
Guest
7 years 4 months ago

This was a BIG story indeed. The biggest challenges facing this incredible chain that has just grown more than nine times are, at a minimum, twofold: 1. can the Haggen “experience” be successfully scaled to deliver customers the unique feeling they have while shopping and 2. operationally, is the chain ready for the merchandising, marketing and supply chain challenges it will now face. With 18 stores, the chain can run as a small operation. With 164 stores it requires a much more finely-honed infrastructure.

My advice? They should establish wise partnerships with experts in their respective fields and should not try to build it all themselves.

Frank Riso
Guest
7 years 4 months ago

I have spoken to many retailers who have made the transition and it is not easy. With only 18 stores it is easier within a week or even two to visit every store to make sure everything is as it should be for their customers. But with all the new stores that cannot happen. It appears that the management team is making one good move, and that is not changing store- or middle-management staff. I would recommend not making many changes at least for the first year. Let those who run the stores have a chance at keeping things going and making any changes needed gradually. The staff cannot handle too many changes too soon and it is the same for their customers. “Slow but sure is better than fast and furious” is the motto for success.

Richard J. George, Ph.D.
Guest
7 years 4 months ago

Obviously the greatest challenge is the integration of cultures between the focused retailer and the much larger acquisition. In addition, the challenge of integrating Haggen’s strategy of sourcing and investing locally into 164 new stores is formidable.

The keys to success are focus, concentration and mobility. Focus on the attributes that have made Haggen successful. Concentrate resources in those areas that will ease the transition. As one or more of of the three Cs change (conditions, competition, customer), be ready to adjust strategy and/or tactics as necessary.

Ian Percy
Guest
7 years 4 months ago

As much as I admire any successful entrepreneurial venture, I have to admit to a groan about yet another grocery store brand here in Arizona. Sure they’re primarily renaming existing stores but this means yet another flyer in the mail and yet another marketing voice bleating what all other brands bleat about being local, friendly, etc. And honestly, I don’t know a grocery store that doesn’t have a Starbucks in it.

But maybe they have a secret sauce because I’ve never heard of Haggen. So I read the article about “7 things to know about Haggen” and nope, no secret sauce. Still, I wish them well, they’re certainly being very brave. Here in north Scottsdale we’re all waiting for the new Sprouts to open.

David Livingston
Guest
7 years 4 months ago

To me it looks like Albertsons was looking for an overzealous buyer for the excess stores that will most likely fail. It’s like Albertsons was able to hand pick their competitor. No way were they going to choose Kroger or Walmart Neighborhood Market. Those companies have money and success. Haggen was in a state of decline and is basically starting over from scratch with private equity money. We might see them sprint out of the gate but in my opinion, they will quickly fade to the rear.

Max Goldberg
Guest
7 years 4 months ago

It’s not going to be easy for Haggen to enter the competitive Southern California grocery market. The 2003-2004 grocery strike badly hurt traditional supermarkets, as shoppers turned to Trader Joe’s, Costco, Walmart and other outlets. Since then Sprout’s, Whole Foods and others have increased their presence. Tesco’s Fresh & Easy was a flop. Haggen needs a significant point of differentiation to win the hearts and wallets of consumers.

Mark Heckman
Guest
7 years 4 months ago
Like panelist David Livingston, I would be concerned about the quality and the locations of the stores that Haggen is absorbing. I’m sure there are challenges to overcome in this area. I cannot recall a smaller chain expanding so quickly in all my years in this industry. The deck is stacked against their success. Haggen’s leadership will be challenged with capital expense allocation, personnel, logistics and marketing issues in the near-term that could be overwhelming. As with any monumental initiative, priorities will need to be established in terms of banner conversions, re-sets, organizational changes and a host of issues that will emerge from each of the new markets they are entering. Further, I would recommend conducting market research in those new markets very quickly to understand the optimal positioning for Haggen in each new marketplace. Consequently I would prepare to approach this expansion NOT as “one size fits all” as Safeway and others have done in the past with sub-optimal success, but rather have the flexibility to promote and prioritize according to the opportunities in… Read more »
J. Peter Deeb
Guest
7 years 4 months ago

This is a BIG transition both culturally and from a management perspective for Haggen. The first hurdle will be getting stores that were typically understaffed and task-oriented to a customer-friendly service-first approach to the business. The next will be finding the right management team to make such a transition. This one will bear watching over the next two years.

Mike Blackburn
Guest
7 years 4 months ago

From a strategic standpoint, Haggen was struggling with its store base dwindling to just 18 stores, so it’s doubtful they will be able to manage this new growth. However, it could be an excellent real estate play—depending on the price they paid.

Ed Rosenbaum
Guest
7 years 4 months ago

We will have to wait and see how prepared they are as they go from a basically localized market area to a much larger geographic picture. It is never as easy as we would like it to be. This is a difficult market to remain profitable in, no matter where it is located.

Martin Mehalchin
Guest
Martin Mehalchin
7 years 4 months ago

I live in a current Haggen market. Haggen before the acquisition was a great little company. Their stores, although not quite in the same league, reminded me of Wegmans.

It will be interesting to see what they do with this acquisition. Will they spread the Haggen approach and level of service to the new markets or will the massive increase in scale water down what has made them different/better up to now?

Hy Louis
Guest
7 years 4 months ago

I agree with storewanderer. Haggen’s closed stores because they can’t compete well. Now with mostly “don’t wanters” locations, we have a failing retailer taking over failing locations, with an inexperienced, in my opinion, management staff. Their demise will come quickly. Mr. Heckman suggested they do market research. If they do, it will most likely fall on deaf ears—like Fresh & Easy.

Daryle Hier
Guest
Daryle Hier
7 years 4 months ago

As one of these stores will be almost in my backyard, I will be able to observe first-hand how they do. Our town lost a like-minded market a couple years ago, not because of making money or being successful, but because of the over-regulation and taxes encumbering retailers in California.

Any care taken to bringing local farmers in will be a big plus as the giant supermarkets blur over the wants and needs of customers. So, I like the acquisition but will be concerned with their ability to operate a business nearly ten times as big as they are now.

If they stick to their ideals, they can do this … If.

Christina Ellwood
Guest
Christina Ellwood
7 years 4 months ago

Cultural integration is the number one challenge. Brand fidelity is number two. Back-end integration is number three.

Christina Ellwood
Guest
Christina Ellwood
7 years 4 months ago

Cultural integration is #1 challenge. Brand fidelity #2. Backend integration #3.

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