Donald Back to His Roots as CEO of Haggen

ELLIOT ZWIEBACH

BELLINGHAM, Wash. — Jim Donald, a longtime industry veteran who ran Pathmark Stores for several years and then became chief executive officer of Starbucks Corp., is scheduled to join regional retailer Haggen Inc. today as president and CEO.

Observers said the 33-unit supermarket chain, based here, should benefit from Donald's range of experience, people skills and operational expertise.

“Jim has the ability to see complex problems and simplify them so they become more easily solvable,” one former colleague, who asked not to be identified, told SN.

Donald was not available for comment last week, but in a press statement said he couldn't pass up the opportunity to lead Haggen, which he called “one of the most respected companies in the Pacific Northwest.”

“Haggen has led the industry in innovation, quality and service, and I am proud to join its 3,700 associates in continuing this trend. Joining Haggen brings me back to my roots in the supermarket industry, a business that I have always had a passion for.”

Haggen, which is privately held, had estimated sales last year of approximately $870 million, a high per-store average that approaches the unit volume of Pathmark.

Donald succeeds Dale C. Henley, who has been Haggen's president and CEO since 1996. Henley, who announced earlier this year his plans to retire, will become a non-executive chairman of the board and will continue as president and CEO of Briar Development Co., a Haggen affiliate that owns and develops real estate.

Donald was chairman, president and CEO of Pathmark Stores, now a division of A&P, Montvale, N.J., from 1996 until 2002. Earlier in his career, he was president of Safeway's eastern division; vice president, food merchandising, at Wal-Mart Stores; and held various positions at Albertsons.

From 2002 until last year, he was with Starbucks Coffee Co., Seattle — the first three years as president of Starbucks North America and the last three as president and CEO of the company.

Earlier this year, Donald was executive-in-residence for the business program at the University of Washington's Bothell campus.

In a letter to Haggen associates last week, Don and Rick Haggen, co-owners of the chain, said Donald “has the ability to connect with and motivate people at every level, from clerks to senior management. His emphasis on empowering employees to make decisions has been a hallmark throughout his career.”

The letter said Donald had already spent “a great deal of time” in the stores talking with associates in all departments, “and [he] has commenced on the great energy and enthusiasm for growing sales. We look forward to Jim's leadership and new ideas for Haggen.”

Observers told SN it's no surprise Donald has already spent time at the stores.

“He will know the names of all 3,700 Haggen employees within six weeks,” the former co-worker said. “His door is always open, and if there's an issue to deal with, he's as likely to discuss it in his office as in the store or over a beer. He's equally comfortable talking with a cashier as with a member of the board of directors or a security analyst, and he'd probably prefer talking to the cashier.”

Jonathan Ziegler, principal at PUPS Investment Management, Santa Barbara, Calif., said he remembers Donald for the people skills he exhibited at Pathmark.

“As an analyst I was positive on Pathmark because of Jim Donald's leadership,” Ziegler told SN. “The kinds of people skills he has are what you need in a retail organization. It's important to create that kind of culture at a supermarket company because it's the employees who have that face-to-face with customers, and if they have positive leadership at the top, it permeates through the entire organization and reflects how employees treat customers — and it reduces turnover.”

Those skills should be especially effective in a 33-store company like Haggen, Ziegler added. “I think it's significant that Haggen would go out and hire such a high-powered guy for such a small operation, and I believe the one-on-one with customers should be a lot better as a result.”

A security analyst who declined to be named said Donald was “a talented executive at Pathmark and a good marketer who was very motivating for the organization.”

According to another analyst — Gary Giblen, executive vice president of Quint-Miller, New York — “Store operations are Jim's real strength. He's good at walking a store and getting people revved up, like a cheerleader.

“But while he's an A-plus guy when it comes to store operations, I'd give him significantly lower grades as a strategist. Under his watch, Starbucks over-expanded and cannibalized its own stores, which led to lower profits and productivity. Starbucks was also slow to recognize the competitive threat of companies like McDonald's and Dunkin' Donuts, and the company let pricing get out of hand.

At Pathmark, Giblen said, Donald let the chain's low-price position slip and its service and perishables positioning erode, which he said allowed ShopRite and other competitors to gain market share.

The analyst who declined to be named said Donald was “the fall guy” for many of the problems Starbucks encountered due to excessive growth, “while at Pathmark he had a lot of tough things to deal with and meaningful challenges due to limited cash flow and a lot of leverage, but he did a good job there.”

The former associate offered a similarly positive view of Donald's tenure at Pathmark.

“Jim was a quick study in assessing the strengths and weaknesses of the company, and he knew what he knew and what he didn't know quickly,” he noted.

“He took a private company with very poor performance, negative earnings, years of losses and declining market share and turned it into a public company with strong prospects for long-term growth and positive same-store sales,” he told SN.

“And he wasn't afraid to make decisions that seemed controversial — for example, deciding in 1998 to sell off the chain's distribution centers and outsource most of Pathmark's distribution to C&S Wholesale Grocers.

“He also had the vision that enabled Pathmark to pursue an urban-store initiative, with markets in Atlantic Center in Brooklyn, Springfield Garden in Queens and Harlem in Manhattan that were very expensive, very risky and very time-consuming projects but all of which have been highly successful.”