Lifetime Achievement Recipient Is Credit to His Company and Community

by Michael Barrett

Don Haggen had just returned to his fourth-floor office on Rimland Drive from a local elementary school. He’d been invited to share his recent adventure as an Olympic torch bearer with the grade-school children and appeared quite moved by the experience.

“The kids were really excited about it,” he says with a soft, lilting voice. “They were asking me lots of questions, interested in the torch I brought and even wanted my autograph.”

Haggen — a big man with bald head except for a tonsure of gray — and his brother, Rick, are co-chairs of Haggen, Inc., the sixth-largest privately held company in the state with an estimated $700 million in gross sales expected this year. Don Haggen is the recipient of the 2001 Lifetime Achievement Award, which will be presented to him March 14 during the Whatcom County Business Person and Small Business of the Year Awards Banquet at Resort Semiahmoo in Blaine.

Haggen, Inc. is currently on a roll. It just opened its 28th store — a 63,000-square-foot model like most of its Haggen Food and Pharmacy and TOP Food and Drug stores in Washington and Oregon — in Burlington. It hopes to open two more stores — one in Lake Tapps, Pierce County, and the other at Tigard, Ore. — by Christmas, and a third is soon to go into construction at 175th Street and Aurora in Seattle.

 

Born to grocer

Donald E. Haggen was born in Portland but came to Whatcom County with his parents, Ben and Dorothy, when he was 2. Ben and his brother Doug immediately set about making a name for themselves here in the grocery business. Don, after graduation from Bellingham High in 1949 and the University of Washington with a marketing degree in 1954 and a stint in the Air Force, decided a grocer’s life was for him as well. He worked 14 months for Associated Grocers and summers for The Maple Store at Point Roberts to whet his interest, and then came on full bore in 1957 to help open the new Haggen’s Thriftway on Bellingham’s Meridian Street.

“I ran the grocery department there and eventually ran the whole store,” he recalls.

Skip ahead to 1972. That’s the year he and Rick bought out their parents and took over the Haggen aegis. Don was named president, his brother vice president.

By then, Haggen’s had another store in Everett, which hadn’t done well since they purchased it in 1962. It had been a Brown and Cole store, and Jack Cole, who ran it, was eager to get out. Later, the Haggens were, too. It would prove an invaluable experience and a lesson in how to recognize a problem and quickly do something about it.

“For 12 years, we’d tried to make money,” Don Haggen says of the Everett store. “Our lease said we had to stay open and our attorneys told us not to close, but I went to another attorney who said the landlord has to mitigate the problem, at least help find someone else to lease it. We closed it and got out of it. It was so neat not to have to worry about it any more. I said: ‘God hasn’t put me on this Earth to make bad deals work.’”

Another positive out of the experience, oddly enough, was the way banks accepted it.

“The bank was very happy with what we did,” Haggen says. “We were failing, and we got out. Most independents have so much in their projects they don’t want to cut and run. The banks said we were the kind of business they wanted to do business with.”

A case in point was the story about the company’s East Wenatchee store. It was 1975, shortly after price controls imposed during the Nixon Administration were lifted and interest rates were high. A deal with the property owner went south, and rather than return home empty handed, Haggen found an orchardist nearby who wanted to sell his newly rezoned land.

“He wanted $93,000. I told him I’d pay the $93,000 but could only give him $25,000 now. We asked him: ‘If you will subordinate the mortgage, we’ll pay you the additional money, with interest, over five years. Meanwhile, we’ll pay to spray the orchard.’”

Upon purchase, Haggen had the property reappraised at $150,000 and used this to leverage the cost of construction. “For $25,000, we got financing for $150,000 and built a 33,000-square-foot building worth $150,000!”

 

Story of today’s Haggen’s

The turning point in Haggen’s history came in 1977 when Don discovered a mentor.

“David Blair (a Haggen’s executive) and I were coming back from a meeting in Chicago and we stopped at Minneapolis where I’d heard of a store called Byrley’s,” relates Haggen. “They had about seven stores in that area — very fancy, carpeted floors, chandeliers, very upscale and compartmentalized.

“Dave and I were really impressed and we wondered if we could talk to this guy (the owner). We went upstairs to an office and a nice woman said she’d see if Don — that was his name — was available. We waited about 15 minutes and spent two hours with him. We got all the information.”

They learned that an adjunct company named Supervalu did virtually all the work for Byrley — research, engineering, architecture, interior design, even selling the groceries — and they took the news back to Rick in Bellingham. Supervalu helped them with planning a brand-new, upscale Haggen Foods where Thriftway was on Meridian.

“We went to the City Council and showed them slides of Byrley’s. The city was very supportive and it gave us the zoning we needed to build a new store,” Haggen remembers. The only thing he nixed was the floor; Supervalu wanted carpet, he wanted tile.

The store was opened in 1979 to great acclaim and remains the vanguard of the 28-store chain.

“The Meridian store was a real departure from anything that had been done in the Northwest. It really put us on the map,” Haggen declares.

Even though it’s the oldest, the Meridian location is still relatively new, in terms of other chains. “We probably have the newest average-aged stores in the region,” Haggen guesses.

 

Opening ’round the clock

Another milestone was when they decided to open 24 hours a day, seven days a week.

“We were the first to do that in the area. Supervalu said we’d get a 20-percent bump in sales, and we actually got more than that. For one thing, people know you’re always open,” Haggen remarks.

The next major step for the corporation was incorporating a scaled-down version of the popular Haggen Food and Pharmacy, not far removed from the “warehouse” stores, which they called TOP Food and Drugs — “TOP” being an acronym for Tough On Prices.

“We were building another Haggen’s store in Alderwood and were again visiting in Minneapolis,” Haggen recalls. “Someone said we should go see a store out by the airport. It was a Cub (Foods) and they were selling stuff you wouldn’t believe. They had pallet-racking outside. We said, ‘That would work,’ and came up with the idea for TOP. We were going to sell cheaper in the store, so we had to do about 30 percent more business than we were making to earn the same amount of money. We did it and it was a tremendous success.”

Today, TOP Food and Drugs is a staple among chains south of Mount Vernon, with stores in Lacey, Puyallup, Auburn, Everett and farther afield.

“It used to be like a warehouse,” says Haggen, “but now TOPs are more like Haggens.”

 

The ups and downs

As the “new” Haggen and TOP stores proliferated in the region, there still were some downs to contend with, Don remembers.

“We put a Chinese kitchen in our store in East Wenatchee. We had it less than a year and it wasn’t doing well, so we closed it up and moved the equipment and put it into another store we were building. It was a location that wasn’t working. We stopped a loss,” he says.

During their association with Supervalu of Minneapolis, they were also talked into owning a Cub Foods franchise in Denver, Colo.

“I was the supervisor and went there every two, three weeks,” says Haggen. “One day, I saw a pallet of disc film come in. Now, disc film is not a big mover and a pallet contains a lot. They were running a lot of fourth- and fifth-tier items because they could buy them so much cheaper, but they weren’t selling. After two months there — we opened in November — we said, ‘We’ve got to get out of here.’ We exited in March, took our lumps and got out.”

You have to take risks to make a company prosper, Haggen avers, but many of the decisions made by him and his brother have been huge successes, in great part because of their management style. About his own, Haggen admits he’s “somewhat autocratic. I always worry about detail, serving the customer, being fair to the customer, trying to have a good image in the community, being respected and counted on — not only selling groceries but being able to help with projects.”

He’s an active member of the Rotary Club of Bellingham, one of only a handful of people selected for Boy Scouting’s “Distinguished Eagle Award,” and a recipient of the “Best Family-owned Business” Award given in 1995 by Pacific Lutheran University. Two years ago, his and Rick’s families were accorded the “Philanthropic Family of the Year” Award, not so much because of the money they provide to causes but because of “involvement in the community” among the two chairmen, their wives and their children. Now Don has the Whatcom County Lifetime Business Achievement Award as well.

 

Figures tell story

Nowhere does Haggen’s mettle shine more than in the accomplishments he’s made over the years to his own firm.

“Our sales have increased 282 percent since 1990 and the number of stores by 280 percent,” he says with pride. He quickly gives special credit to the current Haggen, Inc. president and chief executive officer, Dale Henley, who has been with the company for 18 years.

“We were doing about $36 million when he came here,” says Don Haggen. That’s a pittance compared to the $665 million it grossed last year and the $700 million it is expected to make in 2002, keeping it within the top 10 of state businesses.

Haggen, Inc. sees approximately 370,000 customers a week, served by 4,000 employees in two states.

The management team, he adds, is critical to the success, and he has specific objectives in choosing his managers. “They must like people,” he explains. “They have to be able to say tough things, so everyone knows how they stand. We like those who offer ongoing coaching rather than not say anything and then lowering the boom. No surprises. They have to like the work, and it’s hard work. We have great people here with a lot of longevity.”

And, as proven time and again, Haggen is willing to take risks to make the operation work.

“Always be ready for change,” he advises. “(Be) willing to take chances and try something else.”

 

Little-known Briar Development Handles Big Role

LLC Owns Property Where Haggen Stores Are Located

 by Michael Barrett

 

Haggen Food and Pharmacy and TOP Food and Drugs are two entities of Haggen, Inc. of Bellingham. But what, then, is Briar Development, often associated with the Haggen family?

“It was started as a partnership with Rick and myself,” says Donald E. Haggen, co-chair with his brother Richard Haggen, “and we recently made it an LLC — limited liability company. Three of my sons are involved in one half and Rick’s children are involved in the other half.”

Basically, Briar Development owns properties where Haggen and TOP stores are located, as well as the entire Burlington store, which opened last January. It’s named after Briar Road, where some Haggen family members live in the Edgemoor section of Bellingham’s Fairhaven District.

“The reason that Briar got started,” explains Haggen, “in 1975, we were trying to build a store in East Wenatchee. Price controls (enacted during the Nixon Administration) were coming off and we ordered the equipment. Interest rates were going up.”

One of the partners in the center was to be the old PAY’n PAK, owned by Dave Heerensperger, but it had trouble with its financing as costs continued to climb — three times in all, says Haggen. After a while, the scheme “didn’t pencil out.”

Meanwhile, Haggen’s store equipment arrived from the Midwest and, naturally, the vendors wanted their money. “But we didn’t have a grocery store,” Haggen declares.

“We found a pear orchard up the street that had been rezoned commercial and we told the owner we wanted to buy the property,” Haggen continues. “He wanted $93,000. I told him I’d pay the $93,000 but could only give him $25,000 now. We asked him: ‘If you will subordinate the mortgage, we’ll pay you the additional money, with interest, over five years. Meanwhile, we’ll pay to spray the orchard.’” That seemed to work.

“We bought it and had the property reappraised at $150,000. For $25,000, we got financing for $150,000 and built a 33,000-square-foot building worth $150,000!

“We went to Columbia Savings Bank,” Haggen recalls, “but in those days, savings banks couldn’t loan money to a corporation, so we started Briar Development.”

It was Briar that concluded the deal with the orchardist and made it possible for a new Haggen-owned grocery store to go in to serve customers in the Wenatchee area.

Meanwhile, four years later, when the company was renovating its old Thriftway store on Meridian Street in Bellingham into the first Haggen Food and Pharmacy, the family went to the bank again.

“We went to Rainier Bank this time and showed them a diagram, in color, of all the owners and I said I’d pledge it all to the mortgage,” Haggen remarks. The various boxes in different shades, including members of the family and Briar Development, apparently confused the bankers until “a man from another bank came in and explained it all to everybody.”

The financial exercises — in Wenatchee, Bellingham and elsewhere over the years — gave Don Haggen a knack for wheeling and dealing, which he would pass on to the present CEO of Haggen, Inc., Dale Henley.

“I really enjoy it,” he says, “and Dale is excellent at it.”