April 30, 2012
H-E-B Takes on Competitors Big and Small
H-E-B’s competitors in Texas come in all shapes and sizes, and the company has succeeded by refusing to adopt one-size-fits-all types of responses with a couple of recent examples to reinforce the point.
With more Walmarts — particularly Supercenters — in Texas than in any other state in the U.S., H-E-B has had to find ways to compete simply as a matter of survival.
As grocery industry watchers know, H-E-B has done much more than survive. Among the chain’s responses to the world’s largest retailer has been the development of its Plus (supercenter) format. Core fresh categories (meat, produce and seafood) are given expanded space and the store layout features a number of destinations, including Entertainment (consumer electronics, etc.), Texas Back Yard (barbecues, garden tools, flowers, ceramics, etc.), Healthy Living, Baby and Toddler, Pet and Apparel.
H-E-B opened its largest Plus store to date last week, a 182,000 square-foot unit in San Antonio. The store, which is close to San Antonio destinations including Sea World and Six Flags Fiesta Texas, offers goods likely to appeal to tourists as well as those products typically found in a Plus store.
![[Image: H-E-B Primo Picks]](data:image/svg+xml;base64,PHN2ZyB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciIHZpZXdCb3g9IjAgMCAxIDEiIHdpZHRoPSIxIiBoZWlnaHQ9IjEiIGRhdGEtdT0iJTJGcHVibGljJTJGaW1hZ2VzJTJGZGlzY3Vzc2lvbnMlMkYxNTk4MyUyRkgtRS1CLXByaW1lLXBpY2tzLmpwZyIgZGF0YS13PSIxIiBkYXRhLWg9IjEiIGRhdGEtYmlwPSIiPjwvc3ZnPg==)
In another grocery vertical, H-E-B finds itself getting ready to go up against Trader Joe’s, which is opening stores in cities across Texas. While denying any connection to Trader Joe’s, H-E-B has recently introduced a new line of very TJ-like products called Primo Picks, including a sub-$3 bottle of wine and Queso Pablano Chicken Sausage.
"We’ve been working on this for over a year," H-E-B spokesperson Cyndy Garza-Roberts told CultureMap Houston. "We’re always looking to introduce new and different items to our customers."
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Discussion Questions
Discussion Questions: Why does H-E-B succeed where many other grocers do not? Where do you see the chain’s greatest opportunities for growth?
Poll
I’ve spent a lot of time in H-E-B stores. I’ve counted about a 100 or more of them doing $1 million plus per week. H-E-B understands the Texas market, the Tex-Mex consumer, and they don’t come across as greedy. Employees have a high level of morale and hold top management in high esteem. Obviously Dallas and Ft. Worth have tremendous growth opportunities as stores like Tom Thumb and Albertsons appear to be on their way out. Perhaps the Texas panhandle as well. Really that should be enough. They still have a lot to do before leaving Texas.
It’s interesting to go into a larger mid-size market like Waco or Temple and find two or three H-E-B stores all doing a million plus, a couple of Walmarts and everyone else has been long eliminated. H-E-B’s story is well documented but you have to see them to believe it. It’s almost like an art rather than a business.
Last week I had dinner at the H-E-B Central Market in Austin. I’m probably one of the most difficult people to impress when it comes to grocery stores. About 95% of the grocery stores bore me. H-E-B never bores me.
H-E-B knows its markets, its customers and its customer service needs. It very carefully aligns these, while offering great pricing with great customer service. What else is there for any retailer to know? Customer service, customer sensitivity, great prices, and key product offerings are the mainstay of retail at all levels. H-E-B knows this and keeps doing the same thing for their success.
If you truly want to understand the answer to the first question, read Niall Ferguson’s, PhD Harvard, new book, “Civilization, the West and the Rest.” Ferguson suggests that Western civilization has thrived over the past 500 years because they have embraced risk-taking and made use of 6 unique applications.
Ferguson’s points apply to a global geopolitical view. But the 6 major “apps” to which he refers carry a microcosm in the State of Texas, and hence are a petrie dish for H-E-B’s success.
Growth in Western Civilization, and in Texas, has occured in an environment rich in “Modern Medicine”, “Science,” “Competition,” “Consumerism,” “Rule of Law,” and “Work Ethic.”
Put Medicine and Science aside for the moment — Texas excels at both — and consider the other four points:
1. Competition — H-E-B thrives on competition. They don’t fall into a ‘woe is me’ mentality. They prepare for competitors well in advance, and rally their associates around the need to put all hands forward to win.
2. Consumerism — H-E-B knows that all markets are local in nature. They take the best of new ideas, and incorporate them into their plan-o-gram, but they are not afraid to take a risk and customize a store to fit local needs.
3. Rule of Law — In too many states around the country, West Coast/East Coast in particular, retailers are faced with uncertainty in regulations, taxing authorities, and labor laws. In Texas, H-E-B has the flexibility to not be encumbered by burdensome regulations, policies, and wasteful bureaucracy.
4. Work Ethic — H-E-B seeks out and finds associates who are committed to working for their customers. Their turnover rate is lower than competitors, and they get greater productivity from happy associates.
H-E-B capitalizes on these “apps,” and then executes well on strategies everyday of the year. Their customers appreciate it, and reward them with their business.
Having both competed with and consulted for H-E-B, I have nothing but praise for this chain. Much of their success is the result of a very competitive merchandising and marketing culture, that promotes a willingness to take on the very best in price with “price,” while dueling it out with the very best in signature perishables with very high quality products and service departments.
They also understand the importance of “owning” the position of “THE” Texas grocery chain, having wrestled that position way from Randalls and Tom Thumb, when Randalls/Tom Thumb was purchased by Safeway. In addition, H-E-B does “local” better than any of their competitors, leveraging their history and their associates in very positive ways with sponsorships and community events.
While the “Plus” stores offer the shopper a very nice array of products and services, I believe much of their future opportunities for growth lies with smaller formats that offer specialty departments and unique products that compete head on with Trader Joe’s Fresh Market and others. HEB has cracked the code on mixing “price” and in-store presentation that will make their presence very formidable as they compete with these smaller format stores, particularly as they become more attractive to aging baby boomers and convenience-minded shoppers.
H-E-B knows its customers and what they want. They are good at what they do and know the Texas market. The competition comes in and thinks because they are “the big behemoth,” they can take over. It isn’t going to happen in Texas; and doubtful they will be able to push Publix in Florida either.
H-E-B has been the mainstay of South Texas where it preceded Walmart Supercenters by many years and was the only game in town for many cities. Being a Texas company, H-E-B obviously understands the Texas market and does a good job of being “neighborly.” (The annual Feast of Sharing is a phenomenal event!)
A couple of observations. I moved from South Texas to the DFW area where H-E-B is a newer competitor. Yes, it’s doing well BUT there’s another Texas company playing here — United Supermarkets. United’s upscale Market Street stores are meccas and, IMO, better than H-E-B’s Central Market. United also has a store called Amigos aimed at the Hispanic market. I haven’t shopped there but the three-store United lineup is interesting.
I noticed substantial price differences between the H-E-Bs in South Texas and the one I shop here. There’s a different product selection, too. I know this is a common practice, but I must say it’s a bit disappointing — and folks in a mobile state like this notice.
Customer service seems to be slipping, too — you shouldn’t have to wait for someone to bag your groceries, let alone take them to your car. Quite frequently, no one will emerge and you have to do it yourself. I’m disabled; this is a problem for me. I can’t shop at H-E-B unless a friend comes along to help me. Albertsons, on the other hand, has incredibly good customer service. So does United. Is outstanding customer service worth paying slightly more for some items? Yes.
A major plus for H-E-B is the attractiveness of its stores. They are kept in excellent condition and freshened up periodically. This is a company that takes good care of its properties and won’t allow them to become dated.
There’s plenty of room in Texas for Trader Joe’s. And Aldi’s. Texas is growing population-wise in leaps and bounds and some areas are underserved. Competition brings out the best in those well-prepared!
I like what Roger Saunders said about Rule of Law and Work Ethic. No unions and no taxes = no problem. There are lot of military bases in Texas and I noticed H-E-B hires a lot of retired military personnel. These people are usually still in their 40s and able to put in a good day’s work. They know how to follow and carry out orders with no backtalk. H-E-B is a bit of a cult, but a good one.
Nice, clean stores in convenient locations carrying the products customers want at prices they consider fair, along with employees who, for the most part, like their jobs and take care of customers is a recipe for success regardless of what you are doing. Bit of a shame that has become so rare in our industry people consider it a magic formula of sorts, don’t you think?
They are very sharp on price, do a good job with quality, and do a good job with mix. Their Central Market in central Dallas is great. Just, great. No other word can describe. The dead Randalls that had me thinking I was back in CA for a while across the street from it said it all. So did the Kroger down the street playing live piano music.
I also went to a couple of HEB bannered stores south of Dallas. Both stores were very busy, but not all that nice. Perimeters were limited; one didn’t even have hot food in its service deli other than prepackaged roast chickens.
Their staffing levels were very ample in all parts of the stores. The stores were cluttered yet well stocked. This is a volume focused operator that understands the importance of price, selection, and service. And by service, I don’t mean robotically asking if I found everything okay or thanking me by last name after I wait in a line 6 customers long for 10+ minutes to pay. I mean getting me in and out quickly with at least the basic greeting and thanks.
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I’ve spent a lot of time in H-E-B stores. I’ve counted about a 100 or more of them doing $1 million plus per week. H-E-B understands the Texas market, the Tex-Mex consumer, and they don’t come across as greedy. Employees have a high level of morale and hold top management in high esteem. Obviously Dallas and Ft. Worth have tremendous growth opportunities as stores like Tom Thumb and Albertsons appear to be on their way out. Perhaps the Texas panhandle as well. Really that should be enough. They still have a lot to do before leaving Texas.
It’s interesting to go into a larger mid-size market like Waco or Temple and find two or three H-E-B stores all doing a million plus, a couple of Walmarts and everyone else has been long eliminated. H-E-B’s story is well documented but you have to see them to believe it. It’s almost like an art rather than a business.
Last week I had dinner at the H-E-B Central Market in Austin. I’m probably one of the most difficult people to impress when it comes to grocery stores. About 95% of the grocery stores bore me. H-E-B never bores me.
H-E-B knows its markets, its customers and its customer service needs. It very carefully aligns these, while offering great pricing with great customer service. What else is there for any retailer to know? Customer service, customer sensitivity, great prices, and key product offerings are the mainstay of retail at all levels. H-E-B knows this and keeps doing the same thing for their success.
If you truly want to understand the answer to the first question, read Niall Ferguson’s, PhD Harvard, new book, “Civilization, the West and the Rest.” Ferguson suggests that Western civilization has thrived over the past 500 years because they have embraced risk-taking and made use of 6 unique applications.
Ferguson’s points apply to a global geopolitical view. But the 6 major “apps” to which he refers carry a microcosm in the State of Texas, and hence are a petrie dish for H-E-B’s success.
Growth in Western Civilization, and in Texas, has occured in an environment rich in “Modern Medicine”, “Science,” “Competition,” “Consumerism,” “Rule of Law,” and “Work Ethic.”
Put Medicine and Science aside for the moment — Texas excels at both — and consider the other four points:
1. Competition — H-E-B thrives on competition. They don’t fall into a ‘woe is me’ mentality. They prepare for competitors well in advance, and rally their associates around the need to put all hands forward to win.
2. Consumerism — H-E-B knows that all markets are local in nature. They take the best of new ideas, and incorporate them into their plan-o-gram, but they are not afraid to take a risk and customize a store to fit local needs.
3. Rule of Law — In too many states around the country, West Coast/East Coast in particular, retailers are faced with uncertainty in regulations, taxing authorities, and labor laws. In Texas, H-E-B has the flexibility to not be encumbered by burdensome regulations, policies, and wasteful bureaucracy.
4. Work Ethic — H-E-B seeks out and finds associates who are committed to working for their customers. Their turnover rate is lower than competitors, and they get greater productivity from happy associates.
H-E-B capitalizes on these “apps,” and then executes well on strategies everyday of the year. Their customers appreciate it, and reward them with their business.
Having both competed with and consulted for H-E-B, I have nothing but praise for this chain. Much of their success is the result of a very competitive merchandising and marketing culture, that promotes a willingness to take on the very best in price with “price,” while dueling it out with the very best in signature perishables with very high quality products and service departments.
They also understand the importance of “owning” the position of “THE” Texas grocery chain, having wrestled that position way from Randalls and Tom Thumb, when Randalls/Tom Thumb was purchased by Safeway. In addition, H-E-B does “local” better than any of their competitors, leveraging their history and their associates in very positive ways with sponsorships and community events.
While the “Plus” stores offer the shopper a very nice array of products and services, I believe much of their future opportunities for growth lies with smaller formats that offer specialty departments and unique products that compete head on with Trader Joe’s Fresh Market and others. HEB has cracked the code on mixing “price” and in-store presentation that will make their presence very formidable as they compete with these smaller format stores, particularly as they become more attractive to aging baby boomers and convenience-minded shoppers.
H-E-B knows its customers and what they want. They are good at what they do and know the Texas market. The competition comes in and thinks because they are “the big behemoth,” they can take over. It isn’t going to happen in Texas; and doubtful they will be able to push Publix in Florida either.
H-E-B has been the mainstay of South Texas where it preceded Walmart Supercenters by many years and was the only game in town for many cities. Being a Texas company, H-E-B obviously understands the Texas market and does a good job of being “neighborly.” (The annual Feast of Sharing is a phenomenal event!)
A couple of observations. I moved from South Texas to the DFW area where H-E-B is a newer competitor. Yes, it’s doing well BUT there’s another Texas company playing here — United Supermarkets. United’s upscale Market Street stores are meccas and, IMO, better than H-E-B’s Central Market. United also has a store called Amigos aimed at the Hispanic market. I haven’t shopped there but the three-store United lineup is interesting.
I noticed substantial price differences between the H-E-Bs in South Texas and the one I shop here. There’s a different product selection, too. I know this is a common practice, but I must say it’s a bit disappointing — and folks in a mobile state like this notice.
Customer service seems to be slipping, too — you shouldn’t have to wait for someone to bag your groceries, let alone take them to your car. Quite frequently, no one will emerge and you have to do it yourself. I’m disabled; this is a problem for me. I can’t shop at H-E-B unless a friend comes along to help me. Albertsons, on the other hand, has incredibly good customer service. So does United. Is outstanding customer service worth paying slightly more for some items? Yes.
A major plus for H-E-B is the attractiveness of its stores. They are kept in excellent condition and freshened up periodically. This is a company that takes good care of its properties and won’t allow them to become dated.
There’s plenty of room in Texas for Trader Joe’s. And Aldi’s. Texas is growing population-wise in leaps and bounds and some areas are underserved. Competition brings out the best in those well-prepared!
I like what Roger Saunders said about Rule of Law and Work Ethic. No unions and no taxes = no problem. There are lot of military bases in Texas and I noticed H-E-B hires a lot of retired military personnel. These people are usually still in their 40s and able to put in a good day’s work. They know how to follow and carry out orders with no backtalk. H-E-B is a bit of a cult, but a good one.
Nice, clean stores in convenient locations carrying the products customers want at prices they consider fair, along with employees who, for the most part, like their jobs and take care of customers is a recipe for success regardless of what you are doing. Bit of a shame that has become so rare in our industry people consider it a magic formula of sorts, don’t you think?
They are very sharp on price, do a good job with quality, and do a good job with mix. Their Central Market in central Dallas is great. Just, great. No other word can describe. The dead Randalls that had me thinking I was back in CA for a while across the street from it said it all. So did the Kroger down the street playing live piano music.
I also went to a couple of HEB bannered stores south of Dallas. Both stores were very busy, but not all that nice. Perimeters were limited; one didn’t even have hot food in its service deli other than prepackaged roast chickens.
Their staffing levels were very ample in all parts of the stores. The stores were cluttered yet well stocked. This is a volume focused operator that understands the importance of price, selection, and service. And by service, I don’t mean robotically asking if I found everything okay or thanking me by last name after I wait in a line 6 customers long for 10+ minutes to pay. I mean getting me in and out quickly with at least the basic greeting and thanks.