Transaction includes sale of two Albertsons and three Vons stores
Pacific Northwest grocery chain Haggen Food and Pharmacy is about to become a much bigger player in the highly competitive Southern California grocery industry.
The company announced on Dec. 19 that it is acquiring 146 stores, including five in Santa Barbara County, as part of a government-required divestment sparked by the pending merger of national grocery chains Safeway – the parent company of Vons – and Albertsons, which was announced earlier this year.
Locally, the transaction includes two Albertsons locations and three Vons stores in Santa Barbara and Carpinteria. However, some Albertsons and Vons stores in these markets will continue to operate under their current corporate ownership, said a Haggen spokeswoman.
None of the parties to the deal divulged a price for the store acquisitions, which is subject to Federal Trade Commission approval. Bellingham, Wash.-based Haggen will expand from 18 stores and 16 pharmacies to 164 stores and 106 pharmacies across Washington, Oregon, California, Nevada and Arizona. Of that number, 83 Albertsons, Pavilions and Vons stores in California will be acquired by Haggen.
Here are the local stores to be sold to Haggen:
- Santa Barbara: Vons, 163 S. Turnpike Road and 175 N. Fairview Ave.
- Carpinteria: Vons, 850 Linden Ave.
- Santa Barbara: Albertsons, 2010 Cliff Drive and 3943 State St.
After the close of the transaction in early 2015, Haggen will convert all of the acquired Albertsons and Vons stores to the Haggen banner in phases during the first half of the year. Officials said all Albertsons and Vons store workers will have the opportunity to become Haggen employees and the company plans to retain current store management teams,
“With this pivotal acquisition, we will have the opportunity to introduce many more customers to the Haggen experience,” said John Caple, chairman of the Haggen board of directors and partner at Comvest Partners, a private investment firm that owns the majority of shares of Haggen, in a news release. “We will continue our focus on sourcing and investing locally with this exciting expansion.”
It was also announced that Unified Grocers, Inc. will be the primary supplier for all of Haggen’s newly acquired stores in California, Nevada and Arizona. This agreement will represent about $750 million annually in new business for Unified, according to the news release.
Haggen may find it challenging to retain customer loyalty ñ as well as grow market share ñ once it enters the South Coast grocery market, according to a commercial real estate broker.
“We are definitely saturated in this market with grocery options,” said Brad Frohling, a broker with Radius Commercial Real Estate & Investments. “It is quite crowded,” said Mr. Frohling, referring to the large chain supermarkets already doing business in the area and smaller specialty chains such as Gelson’s, Lazy Acres, Whole Foods, The Fresh Market and Fresh & Easy, which have their fans.
“If Haggen can bring a new value of some sort (to the market), whether it’s new brands or competitive pricing, I would imagine they’d be profitable,” said Mr. Frohling.
Stores like Vons also have rewards program and the news release didn’t address this detail. Also, some Vons stores operate gas stations. “Gas is another profit center for some grocers and I would imagine they (Haggen) would keep a profit center open.”
Mr. Frohling also noted that many grocery shoppers are creatures of habit. Since the Haggen stores will be in the same places as the former Vons or Albertsons stores, shoppers will likely continue to purchase goods at those locations out of convenience since they will not have to change their driving patterns.
Besides the deal with Haggen, Albertsons and Safeway announced plans to sell additional stores in Texas, Montana, Washington state and Wyoming to three other buyers. The 168 stores being sold were deemed too close to each other to stay under common ownership under guidelines the FTC uses to ensure that markets remain competitive for consumers.
For example, Albertsons is keeping its store on Casitas Road in Carpinteria, but selling its stores in Santa Barbara to Haggen. Vons is selling its stores on Turnpike Road and Fairview Avenue but its stores at La Cumbre Plaza and in Montecito aren’t affected by the deal.
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Summary of market insights and analysis from Q2 2019 South Coast commercial sales and leasing activity: Download the complete report here …