After closing 8 stores, Haggen ready for next stage

Grocery chain to introduce new features in coming months

THE BELLINGHAM HERALDOctober 23, 2013 

Haggen

Sehome Haggen grocery store bakery manager Flay Putman makes French bread dough using Sheperd's Grain flour, Wednesday morning, Oct. 23, 2013, in Bellingham. Haggen just started using the flour made from wheat that is grown with sustainable farming methods.

PHILIP A. DWYER — THE BELLINGHAM HERALD Buy Photo

BELLINGHAM - Clement Stevens said Haggen Inc. is ready to move past the ugly portion of its long-term transformation plan and focus on the things he said the company does well.

Last week the grocery store company said it would close three of its TOP Food & Drug stores, making it eight store-closure announcements in 2013. That reduces Haggen's overall store total to 20, a level Stevens said won't change in the near-term.

"This gets us to the point where we feel we can compete better," said Stevens, co-president and senior vice president of merchandising for the company. He expects the remaining TOP Food stores will eventually be converted to the Haggen Northwest Fresh brand name.

While the recent celebration of the company's 80th anniversary offered a bit of respite from the bad news, Stevens admitted it has been a difficult year because of the closures, including the unsuccessful conversion of Bellevue and Shoreline stores from TOP to Haggen Northwest Fresh.

It's also been an important year from a strategic standpoint.

"We're excited about the position we are now in; we contend that we can't be everything, but we have to be who we are," Stevens said.

What Haggen is, according to Stevens, is a quality grocery store company that is not the low-price leader. It has chosen to focus on premium, local products and genuine customer service. The company can capture the high-end shopper, but needs to draw more of the mid-level "swing" customer, the one who tends to shop at four or five different stores based on what they need at reasonable prices.

"Quality service, that's how we are going to win," Stevens said. "Our people make the difference."

With the closures out of the way, the company will turn its attention to rolling out a variety of new programs and products in the coming months, including bringing back the School Bucks program and bringing in a new regional vendor for its bakery ingredients. They also will work on ways to introduce more gluten-free and organic products.

CHANGE A PART OF THE INDUSTRY

Significant change has taken place recently in the grocery store industry, both on the national and local levels. Consolidation has been the theme this year with several big deals, including Kroger buying a big chain called Harris Teeter, which has stores in the in the Southeast, and Cerberus Capital Management buying several chains, including Albertsons.

According to the U.S. Department of Agriculture, the market share of the top 20 grocery store companies has steadily increased from around 40 percent in 1992 to more than 60 percent in 2011, although the study noted that market share was flat during the economic downturn between 2007 and 2011.

Whatcom County has seen some significant changes this year, too, with the arrival of WinCo and the closure of the Meridian and Sunset Cost Cutter stores. Safeway has expressed interest in entering the Bellingham market, but hasn't announced an official decision yet.

Stevens said the grocery store industry is known for its change and that Haggen is adjusting by focusing even more on local products. Although a private investment firm bought a majority stake in Haggen in 2011, the Haggen family remains involved and company headquarters remain in Bellingham.

"The consolidation of the grocery store business has gone on as long as I remember," Stevens said. "Our deal has been that we are local and spend time talking to local vendors."

The introduction of Shepherd's Grain in its bakeries is an example of its Northwest focus. The group consists of 43 regional farmers who grow wheat in a sustainable manner. The group uses direct seeding, instead of the till method of breaking up the soil. Direct seeding provides a protective cover of the previous season's crop, preventing erosion. The crops also won't have genetically modified organisms and the farmers are Food Alliance-certified.

"It's another way to differentiate ourselves from the competition," Stevens said.

SCHOOL BUCKS PROGRAM IS BACK

As a way of getting back to its roots, Haggen has tinkered with its School Bucks program so Haggen CARD members can now choose to support a specific participating school.

Customers can go to the Haggen.com website and choose the school to which they want donations to go. Every time the shopper buys a product labeled as a School Bucks item, Haggen will donate money directly to the designated school. Donations can be used to buy educational equipment and materials based on the individual school's needs.

Haggen was a part of the School Bucks program before discontinuing it in 2009. It discontinued the program because several companies pulled out of the program, making it too expensive for Haggen to continue. During the 11 years of the program, more than $900,000 was raised.

Reach Business Editor Dave Gallagher at 360-715-2269 or dave.gallagher@bellinghamherald.com. Read his Business Blog at bellinghamherald.com/business-blog or follow him on Twitter at @bhamheraldbiz.

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