Haggen has cut back on employee hours, laid off hundreds of staffers in its grocery stores in the Southwest, and is now waging a legal battle against Albertsons, a sign that the Bellingham grocer’s big expansion launched earlier this year has been a rough ride.
The chain’s store footprint ballooned ninefold and its workforce quintupled after it bought 146 stores throughout the West that were left behind by a merger between Albertsons and Safeway.
Critics warned about the high risks of diving into highly competitive markets in Southern California, Arizona and Nevada, where the brand was unknown. But the rewards were luring for Haggen, which overnight joined the ranks of the top five grocers in the western U.S.
“Our challenge is to establish and grow the brand in competitive new markets,” Haggen Pacific Southwest CEO Bill Shaner said in a statement. “To ensure we’re operating as efficiently as possible, we have made the difficult decision to temporarily cut back on staffing at our stores, with specific reductions varying by store.” Haggen declined to specify how many jobs were eliminated.
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Haggen also acquired 26 stores in Washington state. It didn’t immediately respond to comment about the status of employees at those stores.
A local union of retail workers in Los Angeles and Central California, UFCW Local 770, said that “several hundred” clerk helpers (employees who bag groceries and deal with shopping carts) had been laid off.
Kathy Finn, the local’s director of collective bargaining, research and education, said in an interview that most staffers’ hours also had been cut, leading the union to file a grievance.
Finn said Haggen’s move was a major turnabout after the company had come in promising to take care of all staffers, asking them to stay and recognizing their existing benefits and seniority.
“It’s very shocking,” Finn said.
In a message posted on its website, the union pointed to poor performance when Haggen opened its doors. Some local media reported initial mixed reviews from customers miffed at relatively high prices.
“When we met with Haggen management prior to the store conversions, they assured us that they were committed to making this takeover a success and that they would do everything possible to keep customers,” the union said. “It is now apparent that they have not followed through on those commitments, and in fact, have done nothing to assure that customers’ first impressions would be positive.”
Compounding Haggen’s woes is a $41.1 million lawsuit by Albertsons, which according to legal website Law360, alleges Haggen didn’t pay for the inventory held by some 38 Albertsons stores it acquired. The lawsuit, filed last week with a county court in Los Angeles, alleges Haggen breached its contract.
Haggen said the suit came in response to its own allegations against Albertsons of violating the purchase agreement for the transfer of the stores. Haggen said it had hoped to negotiate amicably with Albertsons, but the rival chain “has chosen to file what appears to be nothing more than a strike suit to avoid addressing its wrongful conduct.”
Haggen said it would mount a “vigorous defense.”
A spokesman for Albertsons confirmed the lawsuit against Haggen but said he wouldn’t comment on pending litigation.
Haggen’s southward expansion was an unexpected step for the 82-year-old retailer, which focuses on fresh and locally produced foods. It was a struggling company for a while; in 2011 it was bought by a private equity firm.