Haggen, the newest cowboy in the Wild West grocery frontier, should ride into Orange County by April.
The 82-year-old grocer based in Washington state will convert 11 Albertsons, Vons and Pavilions stores here between March and May. The first conversion will be the Albertsons on South Pacific Coast Highway in Laguna Beach.
Haggen, which acquired 146 stores in the Albertsons-Safeway merger, also will base its new Pacific Southwest headquarters in Irvine.
The grocer – described as Whole Foods meets Safeway – is known for its local and sustainable sourcing – such as using Washington-based farmers, fisheries and products. It’s also well-regarded for its food but unlike upscale grocers, also has mainstream center-store products like name brand sodas and detergents. The grocer plans to do the same local sourcing in Southern California, the company said.
The acquisition is a monumental move for Haggen, which will grow its market share roughly ninefold – from 18 stores to 164 – and quintuple its employees to 10,000 from 2,000.
The company is privately held by majority owner Comvest Partners, a private investment firm, and the Haggen family, which started the company in 1933.
The expansion, not including real estate, is valued at roughly $1 billion, according to industry consulting firm Strategic Resource Group. The newly acquired stores could produce anywhere from $55 million to $70 million a year in operating income but will likely experience a transition period its first year, the firm said.
“It’s a really big deal,” said Bill Shaner, Haggen’s new chief executive for the Pacific Southwest division. “From 20,000 feet up, 18 to 164 stores seems daunting at the minimum – but it’s not.”
Shaner said Comvest’s financial backing and strategy along with the company’s relationships with suppliers have all contributed to the small grocer’s big move.
The acquisition is quite a turnaround for the once-struggling family company. In 2011, Haggen sold a majority of the company to Comvest, which shuttered a dozen low-performing stores and cut the company’s payroll by a third, according to the Seattle Times.
NEW STORES, FAST
The Haggen store conversions will happen fast – taking between 36 to 54 hours – during which about 100 employees will paint walls, clean cases, and convert scanning systems and merchandise. The company’s 83 California stores will convert between March and May.
Haggen hired Pitch – a top ad agency that’s worked with Pepsi and Burger King – to get the word out about the company most Californians never heard of.
“That’s a huge challenge and opportunity for us – to let customers know exactly what Haggen is,” Shaner said.
Southern California is a competitive food market, with dozens of grocery brands to choose from, including Whole Foods and Sprouts at the high end and discount and bulk retailers such as Costco and Food 4 Less at the other.
Haggen should have no problem luring shoppers with its high quality produce, seafood, meat and prepared foods, according to Burt P. Flickinger III, Strategic Resource Group managing director and food industry professor at Cornell University.
“Where it’s going to be challenging for Haggen is in the grocery, dairy and frozen food departments – where the competition is unforgiving,” Flickinger said.
Haggen’s CEO Shaner said the company can find its niche.
“Our research has told us very clearly – particularly in Southern California – almost all (consumers) shop multiple stores to complete their food shopping,” he said, adding that Haggen aims to be a one-stop shop.
Joe Schwallie, an Orange resident, shops at the Vons in Tustin’s Pinewood Plaza, which will be converting to Haggen. The talk of organics and sustainable had him worried about one thing: the pocketbook.
“Depends how they’re priced – Whole Foods and Sprouts can get expensive,” he said during a trip to the store on Thursday.
Shaner assures “we’re not a gourmet shop” and said pricing will be in line with Albertsons and Safeway.
Renee Cisneros, who lives near the Tustin store, said she’d welcome a company that values organics and local sourcing – two things she looks for while shopping.
She likes when a grocer “knows what farm they got their fish from.”
“As long as it’s an upgrade, I like it,” she said.
Source: O.C. Register