Right before Christmas, Albertsons announced one of the bigger retail events of 2014 as it approaches the close of its merger with Safeway. One hundred forty-six Safeway and Albertsons stores from Arizona, California, Nevada, Oregon and Washington have been sold to Haggen, a formerly struggling Washington independent supermarket chain anchored historically in rural towns north and south of Seattle under the Haggen and Top Foods banners. 

We’ve written recently about the rise of Mariano’s and the rebranding of Price Chopper to Market 32. Both strategic moves are clear responses to the enormous pressures facing ordinary midmarket supermarkets stuck in a Hi-Lo strategy from yesteryear. The divestment of Safeway and Albertsons stores to Haggen is probably the most significant single shift in the past year in the supermarket industry in part because of where it is happening and the unique leadership involved. 

This does not have the makings of typical divestment at all, in our opinion: The company’s two CEOs (who, according to a Haggen press release, control Pacific Northwest and Pacific Southwest regions) have deep collective experience as former CEOs of Andronico’s and Save-A-Lot stores and are leading a substantially larger, multistate Haggen enterprise. As such, this formerly quiet, rural grocery chain is now poised to become a serious multistate competitor to top performing upmarket chains, such as Whole Foods and Sprouts — if the locations are positioned in the right neighborhoods. 

We have written previously about the importance of upmarket/midmarket/downmarket store segmentation in grocery today and continue to believe it is important. 

What the new Haggen brand has in front of it is an opportunity to extend high-quality fresh food retailing deeper into middle-class shoppers where quality has been uneven. And the current CEO of Pacific Northwest, as a former PNW regional president for Whole Foods, knows his upmarket fresh competition very well. 

Perhaps even more important than Price Chopper’s rebranding, we believe the entire food industry should closely watch how this unfolds as it may become a critical case study acting to further signify the significant shift toward all things fresh in the supermarket sector. Haggen’s new leadership is well poised to help the chain follow the upmarket specialty model of grocery retailing and spread it to former Safeway and Albertsons shoppers. 

Hi-touch, full-service, fresh perimeter-based food retailing, pioneered by local specialty grocers around the country years ago, is a class of retailing that is clearly accelerating its store count and will continue to put pressure, by implication, on center-store categories to justify their shelf space. 

The real challenge facing Haggen will be in retraining former Safeway and Albertsons store staff who are accustomed to a very different retailing model and doing so in short order. This may prove to be a significantly bigger challenge than rebranding and remerchandising the stores according to the Haggen model.