Retailers take note, the story told in this article from The Seattle Times details the evolution of Top Foods and their breakthrough commitment to change. Successful retailers will be required to embrace change over the next five to ten years and leverage it to create relevant consumer brands. This account details how Bellingham, Oregon based grocer Top Food and Drug with the help of the Hartman Group, has radically reinvented itself and created a new BRAND that includes every aspect of the customer experience from the name on the front of the store, to the in store experience, to its Private Brands. “CEO Gabriel said his goal is for private-label products to move from 17% of sales to 30%. 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.”
Goodbye Top Foods, hello Haggen groceries
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.
“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.