Who to blame for the crash-and-burn of the beloved independent chain? Some suspects are easy to identify. The causes and effects are worth pondering.
It’s a sad finale for Bellingham’s hometown grocer, which embarked on an ambitious expansion into Southern California, only to fail after six months and seek protection in bankruptcy court.
Meanwhile, Albertsons, whose acquisition of Safeway triggered the forced divestment of 146 stores to Haggen, emerges bigger than ever.
Regulators were not wrong to try — indeed, they identified specific locations where the mega-merger would hurt competition and attempted to rectify it. One big problem is they were years, if not decades too late.
Most Read Stories
- Look back at our live coverage of the solar eclipse WATCH
- Your guide to enjoying the eclipse from Seattle
- 3 surprising Seattle restaurant closures — plus 11 more
- Watch: Alaska Airlines flight offers dramatic view of solar eclipse WATCH
- Friends honor artist’s last wishes with water ballet in a Seattle kiddie pool WATCH
Major grocers had been acquiring smaller regional chains without any antitrust resistance in the neoliberal era. The giants that emerged could not be stopped by handing a few crumbs to a small grocer from the Northwest. Having slipped the leash, these giants were after commanding market power — over the supply chain, workers, etc. — not something so trifling as the number of stores they operated.
A more creative solution would have been necessary. There might be a lesson for other efforts to address the very mixed effects of industry consolidation and concentration (e.g., cheaper goods but a model for lower wages and less community leadership). At the least, the divestment should have been larger and with a more experienced outfit.
The grocery business, which has famously thin margins, has also changed. According to Supermarket News’ 2015 rankings, the largest U.S. and Canadian food retailers and wholesalers are Wal-Mart, Kroger, Costco, Loblaw (a Canadian chain), Safeway, Publix, Ahold, C&S Wholesale, Albertsons and H-E-B. The top 75 list includes Target, drug stores, dollar stores and Amazon (62).
So while most places don’t have individual stores or small independent chains that fulfill roles as community stewards and allow for local buying, it’s difficult to make the argument that competition is lacking.
Also, Haggen was no longer the family-owned independent chain. In 2011, a controlling stake was sold to Comvest Partners, a private equity outfit based in Florida. Some private equity wants to slash and burn; some is patient. But the end game is typically to reward investors with a sale or public offering. Growing is hard. It’s not surprising that Haggen’s Northwest executives were gobsmacked by the ruthlessly competitive, complex market in California. More surprising is that the private equity owner seemed to fail in its role of providing expertise and guidance.
The entire truth may never come out. In a $1 billion lawsuit, Haggen claimed Albertsons made “coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states,” and “made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors under the Haggen banner.” The suit was later settled.
Today’s Econ Haiku:
Watch out for the cloud
Wall Street might want to float it
Free of Amazon