Sign up for the MNB Wake Up Call!

Tuesday, September 01, 2015

  • Change Font Sizes:
  • A
  • A
  • A
  • A

MNB BREAKING NEWS: Haggen Sues Albertsons For More Than $1 Billion

Haggen, which continues to flounder through its West Coast expansion from 18 stores to more than 160 because of poor sales and profits, leading to cash flow issues that some market observers believe could send it seeking bankruptcy protection, is suing Albertsons for more $1 billion. Haggen is charging that in selling off stores to satisfy regulator requirements when it merged operations with Safeway, 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,” 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 complaint goes on to say that Albertsons engaged in "premeditated acts of unfair and anti-competitive conduct that were calculated to circumvent Albertsons obligations under federal antitrust laws, FTC orders, and contractual commitments to Haggen, all of which were intended to prevent and delay the successful entry of Haggen (or any other viable competitor) into local grocery markets that Albertsons now dominates.”

Once its acquisition of Safeway was complete, Albertsons controlled a national network of more than 2,200 stores with $61 billion in combined sales. Haggen has already had to announce the closing of 26 of the stores it acquired - and one of the stores it owned previous to the purchase of 146 Albertsons and Safeway units.

The suit says that "Albertson’s anti-competitive actions critically damaged the operations, customer service, brand goodwill and profitability of the divested stores from the outset ... [and] have caused significant harm to competition, local communities, employees and consumers ... Haggen has had to focus on strategies to recover from Albertsons’ wrongful acts, which include, sadly, Haggen’s efforts to find new jobs for displaced employees who too are victims of Albertsons’ actions.”

According to the complaint, among the misdeeds committed by Albertsons were "using proprietary and confidential conversion scheduling information to plan and execute aggressive marketing campaigns intended to undermine Haggen grand openings" ... "providing Haggen with false, misleading and incomplete retail pricing data, causing Haggen stores to unknowingly inflate prices" ... and "timing the remodeling and rebranding of its retained stores to impair Haggen’s entry into the relevant markets."

Haggen also accuses Albertsons of deliberately under-stocking non-perishable merchandise, over-stocking perishables, and not doing routine maintenance and repairs in the stores sold off to Haggen, thus sabotaging its ability to operate those units in an efficient and effective manner.

This is just the latest legal twist and turn in the Haggen story. In July, Albertsons is suing Haggen for fraud, saying that the grocery chain has withheld more than $36 million in payments that it owed for inventory received as part of its acquisition of former Albertsons and Safeway stores.

And it was just a week ago that the United Food & Commercial Workers (UFCW) filed charges against Haggen, Albertsons and Vons, saying that the three chains "violated the collective bargaining agreement and deprived bargaining unit members of their rights under the contract in the way it handled and implemented the sale of Albertsons and Vons stores to Haggen. These violations caused each affected employee to lose all their contractual rights, including but not limited to, seniority, wages and benefits they enjoyed at Albertsons."

KC's View: Well, I suppose that if you're having continuing and severe cash flow problems, suing someone for $1 billion is one way of trying to resolve them ... though it is hard for me to imagine that this lawsuit will do anything to solve Haggen's short-term problems.

It was less than a week ago that an internal memo at Haggen, provided by sources to MNB, made it clear to employees there that a number of commodities would not be delivered to a number of stores in advance of the weekend, and that a number of orders in the system were being cancelled. Sources tell MNB that suppliers perceive Haggen as playing a kind of shell game, paying suppliers on a rotating basis based on cash flow so they can keep something resembling an in-stock position in their stores.

Blaming the other guy will only take you so far.

When companies stop purchasing products to sell to shoppers, it is a very, very bad sign. Suppliers have to think twice about selling products that are not C.O.D. ... and consumers who walk into the store and find large empty gaps on the shelves are likely to leave and go somewhere else, and are unlikely to return. Which creates more cash flow issues, which creates more out of stocks, which creates even lower sales, which creates more cash flow problems. (For the record, Haggen keeps saying that it expects all its suppliers to be paid. But in my not-so-humble opinion, the public statements have been carefully parsed so that if things go sout- or even more south than they already have - it cannot be accused of lying. Dissembling, maybe. But not lying.

So Haggen did what any retailer would do in such a circumstance. It sued the company it bought the stores from.

Blaming the other guy will only take you so far.

Let me be clear about this. I have absolutely no idea if Haggen's charges have any basis in reality and if, in fact, it is a legitimately aggrieved party. I have been told by people who know a lot more about this stuff than I do that the charges Haggen is making are tough to prove. I'm also not so naive as to think that the Albertsons folks wouldn't do everything and anything they could to make sure they came out of the various merger-and-acquisition activity in as strong a competitive position as possible ... and that they probably looked at Haggen with roughly the same degree of malevolence (and confidence) that Godzilla has when looking at human beings.

It seems to me in reading portions of the complaint that Haggen has to make the case that it could have and would have made these stores it acquired from Albertsons/Safeway successful if it had not been hamstrung ... and I have no idea if that's possible. I do know that in talking to various people that Haggen has seemed to be operating more on a dream and a prayer than with any workable strategy and tactics ... and that any reasonable reading of the situation would've told them that they were in an untenable competitive situation. Remember - this is a company that had all it could handle with 18 stores. Expanding virtually overnight to more than 160 ... well, from the very beginning, there have been those (including some inside Haggen, I've been told) who questioned the wisdom of such a move.

I am reminded of the scene in War Horse, when British troops went off to fight the Germans, astride magnificent horses and carrying rifles and bayonets, only to find that the enemy was equipped with machine guns.

Guess who's who.

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!

Editorial continues after a word from our sponsor...

Corporate Drumbeat

From MyWebGrocer...

Now back to regularly scheduled editorial...

Editorial continues after a word from our sponsor...

Corporate Drumbeat

Register Now for the Shopper Marketing Conference & Expo


Visit www.ShopperMarketExpo.com for a complete list of speakers, exhibitors and the full conference agenda. Register today to reserve your spot!

The Shopper Marketing Conference & Expo is the world’s largest gathering of shopper and retail marketing professionals, and is an official event of the Path to Purchase Institute.

Now back to regularly scheduled editorial...

Editorial continues after a word from our sponsor...

Corporate Drumbeat

New from Kellogg. Special K® Medley Flatbread Breakfast Sandwiches

Kellogg brings frozen breakfast sales to life with two new Special K® Medley Flatbread Breakfast Sandwiches. Each brings new flavors and ingredients shoppers have been looking for, including spinach-infused eggs or crisp bacon combined with tasty cheese between bagel flatbread made with whole grain. 

See more at centerstoregrowth.com.

Now back to regularly scheduled editorial...

Editorial continues after a word from our sponsor...

Corporate Drumbeat

From ReposiTrak...


Now back to regularly scheduled editorial...

Editorial continues after a word from our sponsor...

Corporate Drumbeat

There's Good News, And More Good News



From MNB, May 29, 2015:

USA Today reports this morning that "companies are scrambling to hold on to workers amid a tightening labor market and higher turnover, doling out bigger raises, expanding benefits and providing more training and other perks ... The U.S. unemployment rate last month fell from 5.5% to a near normal 5.4%, helping shift the labor market's balance of power to employees. In March, 2.8 million workers quit their jobs, largely to take other positions, the most since April 2008.

"Companies are responding. Wages, salaries and benefits jumped 2.6% in the first quarter, the most since 2008, according to Labor's Employment Cost Index."


This is just the beginning...and it is both good news and good news. It means that there is competition for great jobs at great companies, and that great people can find great opportunities. But they can't do it alone.

Samuel J. Associates currently is engaged in dozens of searches, matching exceptional talent to great companies that are both national and regional, chain and independent, bricks-and-mortar and online. And we have a singular reputation for identifying and recruiting winners - people who are focused, motivated, savvy and determined to excel.

If you are looking for a change, and for fresh opportunities to make a contribution and embrace new challenges, contact Samuel J. Associates today.

It's time to get to work.

Now back to regularly scheduled editorial...

Editorial continues after a word from our sponsor...

Industry Drumbeat

From the National Grocers Association (NGA)...

The Financial Management & Technology Conference is a highly interactive educational program uniquely tailored to independent grocers to help improve financial status, better utilize technology solutions and position your company for growth. Developed in conjunction with FMS Solutions, this conference will gather independent operators from across the country to provide industry-best practices, review case studies, share practical ideas to grow their business and participate in panel discussions with industry leaders.

Speakers include Andreas Schulmeyer, former SVP/CFO-Global Ecommerce, Walmart, and Ken Esch, Private Company Services, PwC.




Click here for more information and to register!

Now back to regularly scheduled editorial...

Editorial continues after a word from our sponsor...

Industry Drumbeat

Happy With Your Digital Marketing?


Webstop provides comprehensive grocery websites with advanced integration of mobile features, digital coupons and other award winning marketing tools for grocers. To talk to us, call 727.942.2797 or just email shawn@webstop.com

Now back to regularly scheduled editorial...

Finally, a word from our sponsor...

Industry Drumbeat

The Reviews Keep Coming In...

"Your presentation was well-received, very thought-provoking and was a great lead-in to the overall theme of our show."  - Tim Myers, CMO, Affiliated Foods Midwest

"Your presentation was unbelievable – everything we hoped for and much, much more!  Thanks for making our customers (and us) better!"
- Joe Himmelheber, Director of Marketing and Merchandising, Caito Foods

"Both of your presentations kept the audience engaged ... This was a difficult subject, but you made it easy to understand - and learn from. Everyone who has not yet seen one of your presentations, should know how informative and to the point your program is and how it will definitely enhance their event. "
- John M. Dumais, president/CEO, New Hampshire Grocers Association

"Kevin is an engaging speaker who really brought the content to life.  He customized his program to meet our needs to ensure our event was a success!"
- Kim Richardson-Roach, Network of Executive Women (NEW), New England Region

"The response to this session was overwhelmingly positive. The audience appreciated the lively and enlightening exchange between the moderator and panelists ... the spark you added to the panel as moderator contributed to the flame of excitement this event engendered ... Thank you for helping ground the material in a reality readily recognized ..." - Leslie G. Sarasin, President/CEO, Food Marketing Institute (FMI)

With a uniquely fast-paced, provocative and entertaining approach, Kevin Coupe identifies the ways in which consumers are changing, the reasons behind these changes (technology, the economy, culture, demographics), how new and unorthodox competitors are altering the marketing landscape, and what companies need to do to find and exploit differential advantages.

Want to make your next event unique, engaging, illuminating and entertaining?

Start here: KevinCoupe.com. Or call Kevin at 203-662-0100.

PWS 29