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Thursday, September 03, 2015

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MNB BREAKING NEWS: Haggen Accused Of Deliberately Overcharging Consumers

The Los Angeles Times this morning reports that a longtime Safeway employee, who moved over to Haggen when that Pacific Northwest-based chain acquired more than 140 stores that had to be divested when Albertsons bought Safeway, is now suing Haggen, accusing the chain of deliberately overcharging customers for products and then firing her when she brought the practice to management's attention.

It is just the latest legal and public relations imbroglio for Haggen, which went virtually overnight from 18 stores to 164 , and now is suing Albertsons for more than $1 billion, accusing the company of systematically undermining its ability to compete post-acquisition. To read related MNB coverage and commentary, click here.

Haggen is also being sued by Albertsons for allegedly withholding more than $36 million in payments that it owed for inventory received as part of its acquisition. And, the United Food & Commercial Workers (UFCW) has filed charges against Haggen, Albertsons and Vons, saying that the three chains violating the terms of their collective bargaining agreement.

According to the Times, "Debra Sukiasian, a pricing specialist, said she was discriminated against and forced to retire after she reported a mismatch between prices on the shelf and at the cash registers at the Haggen store where she worked in Carpinteria, Calif., according to the lawsuit filed Wednesday in state court in Santa Barbara County ... Sukiasian said many items that were tagged with one price on the shelves ended up scanned as higher prices at the register, the lawsuit said.

"Sukiasian brought up the problem with a Haggen employee responsible for pricing at several Haggen stores, the lawsuit said. She believed that kind of overcharging violated both state and federal laws banning false advertising as well as regulations governing weights and measures, according to the suit."

The story goes on to say that "after several weeks passed with no response, Sukiasian emailed Bill Shaner, the Haggen executive responsible for California, Nevada and Arizona operations, and told him about the problem, according to the complaint.

"Shortly afterward, Sukiasian said she was 'upbraided' by a district manager and a Haggen executive for emailing Shaner, the lawsuit alleges. That executive also told a manager at the Carpinteria store to find a way to fire her, the suit said. Given little choice, the lawsuit says, Sukiasian decided to retire "rather than risk termination."

Haggen has not yet commented on the new lawsuit.

The Times notes that not only have customers complained about high prices at Haggen's new stores, but the company also found itself on the defense when it first converted stores in Southern California and about 1,000 items were found to be erroneously overpriced at certain stores; a lesser number of items were found to be erroneously underpriced.

Since that time, Haggen has been experiencing a serious traffic, sales and profits problems in the new stores, enough so that it already has announced the sale and/or closure of 27 units. Cash flow is said to be a problem, with internal memos showing that the company paying only some vendors some of the time, and canceling some deliveries of product, with stores as a result suffering from growing out-of-stock problems. Sources tell MNB that there are growing concerns in the supplier community about a possible bankruptcy filing.

KC's View: First of all, let's be clear about one thing. I am not so naive as to think that everything alleged in this lawsuit is necessarily true. I've seen enough to actually believe very little at face value. (As Indiana Jones once said, "It's not the years. It's the mileage.")

It is hard to conceive of this getting any worse for Haggen.

In the end, I think, the problem that is going to consume any credibility and viability that Haggen has left is the fact that the perception among consumers is that this is a supermarket chain that can't compete. It doesn't matter whose fault it is ... in the end, do I as a shopper want to walk into a store where the company has admitted (in the lawsuit against Albertsons) that it is not as competitive as it needs to be? The new pricing lawsuit only reinforces the perception created by the earlier pricing problems, whether or not it is successful in court.

Consumers want to know that the places they shop are putting them first. At this moment, consumers will have a hard time believing that Haggen even has its shoppers in the top five.

By the way ... I think this is an excellent object lesson for every retailer. Whenever you do things that can be perceived as not being in the customer's best interests, you run the risk of losing that customer's loyalty. Sure, there are tons of things that a retailer needs top think about when making strategic, tactical, and operational decisions. But in the end, the most important prism on any decision is the one through which the customer looks.

One other thing. While all this legal tussling is going on, there's something else occurring that will render Haggen even less competitive - competition. Because everybody else in the markets that Haggen now serves is sitting there smelling blood in the water, knowing that Haggen's store fleet is vulnerable ... to say the least.

I'm not sure we're in "dead company walking" territory yet. But we're getting close.

We're certainly in Humpty Dumpty territory. And for the life of me, as hard as I try, I cannot figure out how to put Haggen back together again.

A Scheduling Note From The Content Guy

As is my custom at this time of year, I'm taking the week before Labor Day off ... though I promise that Michael Sansolo and I are monitoring the news in case any major stories occur. (Like anything to do with Haggen...)

MNB will be on hiatus until Tuesday, September 8, when we'll return with all new stories and commentaries. Between now and then, the MNB archives will, of course, be open. And, I may post the occasional note or picture on Facebook if the spirit moves me … You can keep up with me here.

Thanks, as always, for your patience … I hope you enjoy the last few days of summer.

Slàinte!

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There's Good News, And More Good News



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