- October 20, 2015
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Hungry for Marketing, Grocer Goes Belly Up
If you don’t think that marketing–integrated or otherwise–nourishes and sustains your business, consider what’s happened to Haggen.
Local Southern California Albertson’s and Vons grocery stores suddenly underwent a name change early in 2015. Old signs started coming down and new ones quickly went up. It seemed like almost overnight, the new Haggen grocery chain grew from 18 to 164 stores.
Today, six months later, the Washington state-based company announced it is closing 27 stores in an effort to “right-size” itself while filing for Chapter 11 bankruptcy protection. The failure is considered “one of the quickest collapses to hit the supermarket industry in decades,” according to the OC Register. “In all of retail, I haven’t seen anything like this,” said industry analyst Burt Flickinger of Strategic Resource Group.
Research Fail
Haggen began in the Pacific Northwest with 18 stores. In February it purchased 146 Albertsons and Vons stores in Southern California and quickly began changing the signage and décor with the new name and look.
But the company made the costly mistake of not sufficiently researching the market or introducing itself to its customers with a concerted marketing campaign.
Shoppers in Washington and Oregon were already familiar with the brand and its values. But in Southern California, where price is the main driver, customers didn’t have “a feel for the place.”
Homework Fail
“Consumers are willing to pay more in Washington state,” explained Flickinger. “But Southern California is a highly competitive market, with many low-priced alternatives for groceries, including Walmart and Trader Joe’s. Haggen didn’t do sufficient homework,” he said.
Haggen was consistently overpriced in grocery “power categories” that are important to consumers: dairy, cereal, frozen foods, pet food, shelf juice, and peanut butter.
Marketing Fail
High prices weren’t the only issue. Haggen also failed to sufficiently market itself in California, according to Jim Hertel of Willard Bishop, whose consulting firm initially worked with Haggen.
After changing the signage to a new name that had no meaning to Californians (many of whom weren’t even sure how to pronounce the name), the company needed to introduce itself and create awareness
Unfortunately, however, Haggen, didn’t make an adequate investment in marketing, aside from home mailers. For more examples of companies using marketing to overcome obstacles (including bankruptcy), take a look at some of our previous strategy posts: “Quiznos Integrates Digital Video Into Its Ad Mix,” “High-Stakes Campaign a Gamble or a Sure Thing?” and “The Choice of Voice: How Humor Helps Define Charmin’s Brand.”
