What will Haggen's bankruptcy mean for grocery store shoppers?

By Jim Davis and Emily Hamann

The Herald Business Journal

As Albertsons controls more of the grocery-store market in Snohomish County — and looks to add an even bigger slice — it’s reasonable to ask what it means for the shopper.

Higher prices and lower quality.

Or at least that was the opinion of the Federal Trade Commission chairwoman more than a year ago. That’s when Albertsons was seeking to merge with Safeway to become one of the country’s largest supermarket chains.

The FTC forced the companies to sell 168 stores in 130 markets across the West Coast — what’s called divestiture — before it would allow the $9.4 billion deal to go forward.

“Consumers everywhere rely on local supermarkets for their weekly shopping needs,” said FTC chairwoman Edith Ramirez at the time. “Absent a remedy, this acquisition would likely lead to higher prices and lower quality for supermarket shoppers in 130 communities.”

What’s happened since has played out painfully in the headlines. Albertsons sold 146 of those 168 stores to Bellingham-based Haggen Food & Pharmacy. The deal unraveled just months later with Haggen’s filing for bankruptcy and then selling and closing stores across the West.

At auction last fall, Albertsons bought back 30 stores that it had sold to Haggen.

Now, Albertsons has reached a $106 million deal on Friday night to purchase 29 of the 33 remaining Haggen stores in the Pacific Northwest, including five in Whatcom County. The agreement must still be approved by the U.S. Bankruptcy Court in Delaware.

Grocery store analyst David Livingston of Milwaukee-based DJL Research calls the “whole FTC process a joke.”

“I think Albertsons just used Haggen as a shill to end up becoming a bigger company,” he said. “I think that was the plan all along.”

Haggen didn’t have the financial and operational wherewithal to be a serious competitor. Which is why, Livingston said, Albertsons chose Haggen.

“In order to get the stores back they had to sell them to the most inept operator they could find,” he said.

A prime example of the fallout is at 7601 Evergreen Way in Everett.

That store was a Safeway two years ago and then became a Haggen last year. It’s being converted back to a Safeway — one of the stores purchased at auction last fall — and is expected to re-open March 30.

By itself, that may not be a problem. But the store is one of three now owned by Albertsons in just a little more than a two-mile stretch of Evergreen Way — the remodeled store, a Safeway at 4128 Rucker Ave. and an Albertsons at 6727 Evergreen Way.

So can Everett grocery shoppers look forward to “higher prices and lower quality?” The FTC notes that at least the store — and others like it — are being operated as grocery stores.

“While the divestitures did not lead to the full result we were looking for — a new supermarket competitor in each market area — most of the divested stores do remain supermarkets,” said Betsy Lordan, a spokeswoman from the FTC, in an email. “The FTC believes that it is best for consumers if these stores continue to operate as supermarkets, even if Albertson’s owns them.”

It’s a point echoed by Mike Trask, the owner of the IGA stores in Granite Falls and Edmonds. He’s also the chairman of the Washington Food Industry Association, a group representing the state’s independent grocers and suppliers.

He said it’s sad to lose Haggens, which he said was always a strong independent grocer in Washington that offered a shopping experience different from Albertsons and Safeway.

But at least the stores are being operated as stores. And that’s good for employees — who have a place to work — and shoppers who have stores in their neighborhoods.

Will it mean those shoppers will end up paying higher prices and getting lower quality? Trask doesn’t think so. He said that the merged Albertsons-Safeway is a good operator that wouldn’t allow that to happen.

He and Livingston both note that while Albertsons controls many stores in Snohomish County, there is also a lot of competition in this area. For instance, in the two-mile stretch on Evergreen Way there is also a QFC, and a Fred Meyer just south.

If Albertsons starts raising prices, consumers will shop elsewhere.

“The Walmarts and Wincos and Fred Meyers in the world, they’ll keep them on their toes,” Trask said.

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