Haggen facing new problems
The supermarket chain reportedly hasn’t completely paid some suppliers.
Already in disputes with labor unions and a competitor, struggling supermarket chain Haggen Inc. now has new problems on its hands.
Some food suppliers have not been completely paid by Haggen, a person familiar with the matter said. And the company acknowledged Friday that it was diligently working “to resolve any outstanding issues” related to its supply chain.
“We fully expect that [suppliers] will be paid in full,” the Bellingham, Wash. based grocer said in a statement. “Our stores are receiving shipments from suppliers, and the f low of goods has been adjusted.”
Some problems stem from Haggen’s decision this month to close 27 of its more than 160 stores just months after an ambitious West Coast expansion, another person familiar with the matter said. Sixteen of those stores were in California.
Haggen had 18 stores and 2,000 employees in December when it spent what analysts estimated was more than $1.4 billion to take over 146 grocery stores that federal regulators required Albertsons and Safeway to divest as part of their merger. The company’s workforce grew fivefold.
But the Pacific Northwest chain has struggled to attract shoppers amid what the company called unprecedented competition in the Southwest. Haggen declined to say which or how many of its grocery and product suppliers — a group that includes Minneapolis wholesaler and retailer Supervalu and Santa Monica Seafood — might have been affected by underpayments.
Luke Friedrich, a spokesman for Supervalu, said Friday that although the company doesn’t “discuss the details of our business relationships, we have continued to supply Haggen as they’ve worked through store transitions.”
Santa Monica Seafood did not respond to requests for comment.
Unified Grocers, Haggen’s “primary and preferred” grocery supplier for stores in California, Nevada and Arizona, reported in a Securities and Exchange Commission filing two weeks ago that “sales to Haggen” in the coming months “may not reach the levels originally anticipated.” Unified Grocers has cited the costs associated with its expanding business with Haggen for a reduction in its operating margins.
The cooperative, coowned by more than 300 retailers, had expected to generate $750 million in new annual sales as part of a sevenyear contract with Haggen. As recently as May, Unified Grocers projected at least $180 million in quarterly revenue by the end of the year.
A Unified Grocers spokesman did not dispute Haggen’s statement Friday but said he didn’t have “anything to add.”
Analysts had warned that breaking into California wouldn’t be as simple as changing storefront signs. Haggen’s plan was to attract shoppers with high-quality meats, seafood and organic produce, but consumers have stayed away, complaining about higher prices.
Last month, Albertsons accused Haggen in Los Angeles County Superior Court of shortchanging it at least $36 million as part of the divestiture. This month, labor unions representing Haggen workers filed a grievance that said layoffs tied to the closures and reduced hours for employees violated a collective bargaining agreement. Haggen said it plans to fight the allegations.