Sunday, July 19, 2015
Haggen is Flailing and Failing in Southern California
Haggen is Losing It in California What is Haggen? That’s what Southern Californian are asking. What is Haggen? The company claims “Higher quality products at low price.” What is Haggen? It’s high prices and poor sales in California. What is Haggen? Employee layoffs and reductions in hours from full time to part time. What is Haggen? Poor employee morale What is Haggen? Haggen is a failing experiment in Southern California supermarkets in only three months. Haggen agreed to acquire 146 Albertsons, Pavilion, Safeway, and Vons Supermarkets in California, Arizona, Nevada, Washington, and Oregon. The government allowed Albertsons and Safeway, two of the three largest supermarket chains in the United States, to merge. The two dominate the West. The condition was that the companies spin off overlapping stores. The last major consolidation in Southern California was Albertsons acquiring Lucky Stores in 1998. It had to sell off 117 stores in California. A strong regional competitor in Southern California, Stater brothers, acquired 43 of them, boosting its presence in Orange, Riverside, and San Bernardino County. Stater Brothers is the dominant chain in the “inland Empire,” Riverside and San Bernardino Counties. It doubled its presence in Orange County. The divestiture to Stater Brothers was a winner for Southern California consumers. This time Albertsons had to spin off 168 overlapping stores. This time Haggen, an unknown small chain in the Pacific Northwest, rolled the dice and agreed to acquire 146 stores in Washington, Oregon, California, Nevada, and Arizona Haggen was rolling the dice and swinging for the fences Haggen had 18 stores at the time of the acquisition. It now has 164, including 83 in California. The bland, unattractive ads say “Hello Haggen Goodbye Hassle” Hassles are lacking because the stores are devoid of customers. The bland ads don’t offer specials on everyday products that will attract customers. Those who enter the stores encounter high prices. For that, customers are willing to go to Whole Foods, Sprouts, or Trader Joes. For lower prices, Stater Brothers remains the leader. Albertsons, and even Ralph’s, undercut Haggen. And then there’s Walmart, Target, and Costco. Haagen claims to be a premium grocer at low prices. It claims to offer fresh food and a large variety of organic food. It claims local sourcing, genuine service, and homemade quality. It offers high prices across the board. Haggen is not competitive in this market. It is uncompetitive at the high end. It is uncompetitive at the low end. It is uncompetitive in the middle. Haggen misjudged the market. Four decades ago a luxury department store opened its first store outside Washington and Oregon. The store was Nordstrom’s. The location was South Coast Plaza. We know it was a success. Nordstrom’s has expanded into affluent shopping centers. Haggen, aspiring to be upscale, has taken over stores generally appealing to the mass market, which it does not understand. The Albertson's and Vons customers are not used to paying Whole Food prices for mostly food staples. Haggen had even been flailing in recent years in the Pacific Northwest. The founding family sold a majority of its shares in 2011 to Comvest Group, a diversified Florida company with no experience in grocery retailing. Haggen closed almost half of its stores since the takeover: Everett, Tanasbourne, Murray Hill, Wenatchee, Tacoma, Lacey, Federal Way, Bellevue, Shoreline, Kent, Auburn, Yakima, Edmond, and Arlington. It had not entered Seattle because it felt unable to compete with Albertson's, QFC, and Safeway. Haggen acquired 146 inferior stores in California. Whenever there was an overlap resulting in the need to divest a store, Albertson's would always keep the best location for itself, looking to sales, posits, location, size, and age. Haggen acquired the hand-me-downs, some of which were excellent stores in good locations. Most, but not all, of the new Haggen stores were profitable under previous ownership. Haggen could have, should have taken the opportunity with a new start with a new name with a new owner to turn things around with these stores. They failed. The corporate successors to the Haggen Family are out of their league. Reality caught up to Haggen this past week. It is laying off workers at each store and converting others from full-time to part-time as it faces “unprecedented competition.” The company claims it is acting “to ensure we’re operating as efficiently as possible, we have made the difficult decision to temporarily cut back our staffing at our stores, with specific reductions varying by store.” The Union is livid, claiming these cuts violate the contract. He justifiably blames Haggen’s failure on a poor pricing strategy. The remaining employees are dispirited. Service is suffering. Haggen has only a short time left to turn it around.