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Haggen files for Chapter 11 bankruptcy

Bellingham-based Haggen Food & Pharmacy is the largest independent grocery retailer in the Pacific Northwest, with stores throughout Washington, Oregon, southern California, Nevada and Arizona.
Bellingham-based Haggen Food & Pharmacy is the largest independent grocery retailer in the Pacific Northwest, with stores throughout Washington, Oregon, southern California, Nevada and Arizona. The Bellingham Herald

It’s been a tumultuous year for Haggen in its attempt to become a large West Coast grocer, and now it will have to go through bankruptcy reorganization to try and get back on track.

The Bellingham-based grocer filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court for the District of Delaware on Tuesday, Sept. 8. In a news release sent out late Tuesday night, Haggen said the bankruptcy filing was needed to help the company reorganize around its core profitable stores. This will give the company up to $215 million in debtor-in-possession financing options from its existing lenders in order to maintain day-to-day operations.

“After careful consideration of all alternatives, the company concluded that a reorganization through the Chapter 11 process is the best way for Haggen to preserve value for all stakeholders,” said John Clougher, CEO of Haggen, in the news release. “The action we are taking today will allow us to continue to serve our customers and communities while providing Haggen with a process to re-align our operations to be positioned for the future.”

Haggen officials did not comment beyond the news release on Wednesday, Sept. 9, except to announce that Bill Shaner, CEO of the Pacific Southwest division, had left the company and that Clougher will be leading the entire company going forward.

The struggling grocer has hired Sagent Advisors to sell some of the 137 remaining stores in the five states in which it does business. Discussions are already underway to sell many of the company’s remaining assets, according to the news release.

The grocer went from a regional business to a West Coast power virtually overnight after buying 146 stores from Albertsons in December for more than $300 million, growing to a company with 164 stores. The company has struggled in converting many of those stores to the Haggen brand. Last month Haggen announced the closure or sale of 27 stores, 26 of which were part of the acquisition from Albertsons and Safeway. The sale was originally part of the divestment process brought about by the Federal Trade Commission reviewing the Albertsons-Safeway merger. That merger was completed in January.

The moves comes about a week after Haggen announced it was suing Albertsons Cos. for $1 billion. In its Sept. 1 lawsuit, Haggen alleged Albertsons engaged in “coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states.”

Haggen is also facing an Albertsons lawsuit filed in July for fraud, saying the Bellingham-based grocer failed to pay for $41.1 million in inventory.

The recent moves by Haggen have been met with a cascade of criticism from industry analysts.

Haggen made a huge mess trying to become a big grocer, said David Livingston, owner of DJL, a supermarket location research company in Milwaukee.

“They were too small and didn’t have the expertise to become a big company,” Livingston said, adding that Haggen was having trouble even maintaining its 18 stores prior to the acquisition. “No one could believe they could pull this off.”

Livingston expects that the filing will lead to Haggen pulling back, becoming a company with just a handful of stores.

“It will be very hard to salvage this,” Livingston said.

LOCAL SUPPLIERS SURPRISED BY FILING

Several Whatcom County suppliers were shocked to hear that Haggen filed for bankruptcy. Many had no indication it was coming and didn’t have trouble getting paid for products.

Wes Herman of The Woods Coffee said he was taken by surprised by the news, given all the expansion activity Haggen was undergoing. His company, which has cafes inside two of the Haggen stores, also sells its cold brew and its roasted coffee products at Haggen. He said they haven’t had any supply payment issues and have continued to expand their partnership with the grocer.

“I’m not reading too much into this (bankruptcy filing) yet,” said Herman, adding that he’s appreciated the leadership of Clougher and expects the company to successfully reorganize.

Rob McCormack also believes Haggen will survive the restructuring process. As chief operating officer at Erin Baker’s Wholesome Baked Goods, McCormack said Haggen has been a great partner over the years and continues to be a good ally. They’ve also had no supply payment issues.

“I’m pretty confident they will come out better on the other side,” McCormack said.

Larry Stap of Twinbrook Creamery near Lynden said he hadn’t heard any rumblings from anyone having problems with Haggen. Stap’s company, which started selling its milk and cream at Haggen in 2008, has been treated well by the company through the years.

Reach Dave Gallagher at 360-715-2269 or dave.gallagher@bellinghamherald.com. Follow him on Twitter at @BhamHeraldBiz and on Facebook at BellinghamHeraldBusiness.

HAGGEN HISTORY

Here’s a look at some of the significant events in Haggen’s history:

1933: The Haggen family business gets its start in the midst of the Great Depression, when Ben Haggen and Doug Clark pool their savings of $1,100 to open a store at 1314 Bay St. in Bellingham.

1941: Haggen is the first store in the region to offer a self-service meat department.

1947: Ben and Dorothy Haggen purchase Clark’s share of the business.

1951: Haggen installs an in-store scratch bakery.

1957: Ben and Dorothy’s son Don Haggen joins the company.

1962: A second company store opens in Everett.

1967: A store is built in Lynnwood.

1970: Ben and Dorothy’s son Rick Haggen joins the company.

1977: Company grows to seven stores; Don and Rick Haggen assume control of the business.

1980: Ben Haggen dies.

1982: Haggen opens second brand: TOP Food & Drug stores.

1984 : A 71,000-square-foot Haggen store opens in Everett, making it the largest supermarket in the region at that time.

1980s-2000s : Steady expansion of stores in Washington and Oregon, eventually peaking at 33.

1996: Non-family member Dale Henley is named president and CEO of the company.

2004: Haggen buys the Fairhaven Market, making it one of the smaller-sized stores it has purchased.

2008: Dorothy Haggen dies.

2009: Dale Henley retires; Jim Donald named president and CEO.

2010: Redmond store closes.

2011 : Everett and Beaverton, Ore., stores close.

2011: The Comvest Group purchases majority ownership position in Haggen from brothers Don and Rick Haggen and their families. The Haggen family retains a significant minority ownership stake and will continue to be involved in the company.

2011: Don Haggen dies.

2013: Haggen continues to close underperforming stores, including eight in 2013, reducing the number of stores to 18.

August 2014: The company hires John Clougher as its CEO.

December 2014: Haggen acquires 146 stores as a part of the divestment process brought about by the Federal Trade Commission’s review of the Albertsons-Safeway merger. With the acquisition, Haggen expands from 18 stores and 16 pharmacies to 164 stores and 106 pharmacies across Washington, Oregon, California, Nevada and Arizona.

Early 2015: Haggen sets an ambitious goal of converting stores under its banner within a 15-week period.

July 2015: The company acknowledges layoffs and the reduction of hours for an undisclosed number of employees, mostly in the south region.

July 2015: Albertsons files a $41.1 million lawsuit accusing Haggen of fraud.

August 2015: Haggen announces the closure or sale of 27 stores, 26 of which were from the Albertsons-Safeway acquisition.

Sept. 1, 2015: Haggen sues Albertsons for more than $1 billion in damages.

Sept. 9, 2015: Haggen files for Chapter 11 bankruptcy protection.

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