NW grocer Haggen files for bankruptcy after rapid expansion

SEATTLE – Struggling Haggen filed for relief from suppliers and partners it owes more than $50 million while it winds its business into a smaller, profitable footprint, a surprisingly early demise for its brazen bid to become a West Coast grocery superpower.

Haggen also said it has parted ways with Bill Shaner, whom the company had hired in December to lead its bold expansion into the Southwest as one of the company’s two CEOs.

The Bellingham-based grocer on Tuesday filed a Chapter 11 bankruptcy petition with a U.S. court in Delaware.

Haggen says lenders have committed up to $215 million to keep the company running and products on the shelves while it sells stores. While the company declined to specify how many stores it would sell, a statement released late Tuesday said Haggen would focus on profitable “core” stores, and that it’s in talks to sell “many of the company’s remaining assets.”

The move is the latest in a saga of woe that began earlier this year when Haggen took over 146 stores shed by Albertsons and Safeway in the wake of their merger, mostly in California, Nevada and Arizona – markets where the 18-store Northwest grocer was unknown. It opened one store in the former Safeway in Liberty Lake.

Haggen, backed by the deep pockets of owner Comvest, a private equity firm based in Florida, paid more than $300 million for the stores, according to court documents. It prepared for a big ramp-up as the sale was approved by regulators in January. But its ambitions ultimately backfired.

Higher prices turned many customers off, and in June the company began cutting back employee hours and laid off hundreds. The layoffs triggered a firestorm of negative press across Haggen’s vastly expanded territory, and plenty of litigation, including from a developmentally disabled former employee who was laid off. Unions also cried foul.

Last month, Haggen said it would close or sell about a fifth of the stores it acquired, and last week it sued Albertsons for $1 billion, accusing the grocery giant of sabotaging its entry into the new markets. In the lawsuit, Haggen blamed the higher prices it was charging customers on inaccurate pricing information provided by Albertsons during the transition.

Albertsons had previously sued Haggen for not paying for some of the inventory that had been transferred with the stores.

In the filing, Haggen tallied the nearly $52 million it owes to dozens of suppliers, including Unified Grocers, Starbucks and Charlie’s Produce, a Seattle distributor and longtime Haggen partner that opened a new division in Southern California to better serve its client there.

The disputed $41.1 million claim by Albertsons was not included in the count.

In a statement, CEO John Clougher said, “The action we are taking today will allow us to continue to serve our customers and communities while providing Haggen with a process to realign our operations to be positioned for the future.”