The Haggen grocery chain uses a cash infusion to re-brand and freshen up store shelves.
Rick Haggen paused while recounting his family’s long history in the Northwest grocery business.
“I wish Don were here,” he said, meaning his brother who was older by 14 years, and who died last summer after a sudden illness.
Don would remember early details, like their parents closing a Bellingham market in the 1950s that was losing business to their uncle’s store nearby, and opening their first Thriftway across town.
He also would enjoy the renaming of the chain’s Top Food & Drug stores to Haggen — something the brothers often considered — and the new look and product mix that debuted at the first renamed store in Bellevue this month.
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“It would have been harder for us to move on some things,” Rick admitted.
He and Don could debate at length about how far apart to place cash registers, he said, and never get around to bigger matters like moving the pharmacy to a less central location or putting a life-size ornamental cow in the dairy aisle.
Not that they shirked innovation or hard decisions.
Over the years, Haggen has been first on many fronts, including becoming the first grocery store with an FTD floral department and an in-store Starbucks.
But more recently, Haggen has found itself in a situation similar to that of Larry’s Markets, a large-format traditional grocery chain in Seattle that filed for bankruptcy in 2006 and went out of business. The old-style grocery model — big spaces, lots of products, not-great prices — was butting heads with discount players and high-end grocers, and losing. When the recession hit, Haggen’s 34 stores in Washington and Oregon stopped generating enough money to reinvest for the future.
It was the toughest time the company — founded during the Depression — had ever seen.
“We didn’t think we had to be competitive, and we were wrong,” Rick said. “We needed to be educated.”
Although more people are cooking at home, already-thin supermarket profit margins have fallen in recent years. Supermarket profits fell to .98 percent of sales in 2010, down from 1.2 percent a year earlier, according to the Food Marketing Institute.
With the help of former Starbucks CEO Jim Donald, Haggen began slashing prices and closing a handful of stores.
A necessary sale
Early this year, before Don died, the Haggen family gave majority ownership to Comvest, an investment firm in Florida, for injecting an undisclosed sum into the chain — enough for remodels and other investments in Haggen’s future.
Haggen now has 28 stores, about 400 fewer employees — and that cow in the dairy aisle of its Bellevue location.The cow is part of a face-lift that includes an updated look and new product mix tailored to Northwest customers. The overhaul took six months, and the Bellevue remodel cost far less than $5 million.
It started when new CEO Gabe Gabriel hired the well-regarded Bellevue consulting firm Hartman Group to help with its corporate brand, from its mission to a marketing and communications plan.
“When I saw the data, I realized it’s bigger than that,” Gabriel said.
The folks at Hartman agreed, and said, “If you have the courage, follow us.”
Gabriel followed, and for a while dragged longtime Haggen employees with him.
At first, they resisted the Hartman Group’s ideas, things like offering more meat pies at the deli counter and mixing organic produce with nonorganic.
“They thought I was from Mars,” Hartman Senior Vice President Michelle Barry said of the meat-pie suggestion.
Then, a Haggen employee vacationed in Europe, where savory pies have caught on, and that idea was embraced — along with many others.
“We’re not often given permission to create what we know the consumer wants,” Barry said.
The “Moneyball” approach
Clients typically go part way, she said. Bartell Drugs has used Hartman research and design for some in-store changes, and Wal-Mart has used it for private-label strategy.
But in a move worthy of baseball manager Billy Beane in the movie “Moneyball,” Haggen is the first grocery chain to change its whole game.
At the Bellevue store, which is a template for changes coming to all 15 Top Food stores over the next three years and the chain’s 13 Haggen stores after that, the pharmacy no longer takes center stage.
Instead, a bandstand-looking area in the center of the store will feature product sampling, live music and eventually cooking demonstrations.
The prepared-foods counter has been renamed “Dot’s Kitchen” after Rick and Don’s mother, Dorothy, whose baked beans and potato salad remain customer favorites. They sit alongside new dishes, including the meat pies, cinnamon bread pudding, three-cheese macaroni and cheese and kale sesame salad.
The fish counter has been culled for mostly local seafood, and Haggen is touting its status as the only grocery chain in Western Washington to carry restaurant-quality beef from Double R Ranch in the state’s Okanogan region.
Bulk foods containers, cases for beer bottles and rolling baked goods carts have gotten face-lifts featuring shiny paint and warm woods. And white walls above the bakery, deli and other areas are now painted with colorful murals.
Touching the cow
In the produce section, customers can sit on a bench under a giant artificial apple tree, and a fish ‘n’ chips place has replaced the old “Oriental Express” counter.
“It’s very good, although they’re not going to put Ivar’s out of business,” said customer Jim McBeth of Bellevue.
Haggen also revamped its private label products, from honeycrisp apple juice that it now touts as “from the Northwest” to cans of green beans and corn that Haggen employees and others spent hours relabeling just before the Bellevue store opened.
CEO Gabriel said his goal is for private-label products to move from 17 percent of sales to 30 percent. In that area, he said, Haggen has become “way more hands-on about quality, to make sure we offer very high quality at really good value.”
Top Food regular Donna Shelley already loved the prices — they’re the reason she shops there — and now she likes the environment, too.
“I like the feel of it; it’s relaxing,” Shelley said.
And the cow is a nice bonus, she added. “I actually touched her. It is so cool.”
Melissa Allison: 206-464-3312 or email@example.com. On Twitter @AllisonSeattle.