Key H-E-B Exec Shares the Secret to the Grocer's Success

So how does H-E-B prosper in an era when everybody from Amazon to Target to Walmart is moving into the grocery space?  

News Radio 1200 WOAI reports H-E-B Houston district President Scott McClelland told a business group in College Station that it all boils down to four words.

"Our strategy at H-E-B, 'sell stuff they don't'," McClelland said.

He cited the company's cooperation with Whataburger on ketchup and other condiments as a good example of how that helps H-E-B keep its prices down.

"We have 200 buyers at H-E-B that every day are trying to come up with ideas like Whataburger," he said.  "So because of that, we are able to sell Heinz or Hunts (Ketchup) at whatever price Walmart wants to sell it."

McClelland said a major part of H-E-B's strategy today is focusing on Millennials, which are the largest single population group in Texas.  He cited the company's recent move into home delivery with Favor, an Austin based food delivery business that H-E-B purchased last year.

He says home delivery is a loss leader for the company, but he says if H-E-B doesn't do it, customers will go to Amazon. 

"You get my $5, it costs me $17 to get that order," he said.  "And over the time, we'll come up with ways to get the cost of doing it down."

And he points out that home grocery delivery is an equally large loss leader for H-E-B's competitors.

"So if Amazon comes in in a big way, and on top of what Kroger is already doing, if Amazon were to take 10% of their sales, the impact there is, they lose another ten percent of their business and their profitability would go down by 63%."

Another key, he said, is to serve the market.  H-E-B serves Texas and northern Mexico, and he says the company wants to remain true to its core market.

"Anything that we put in a shape of Texas, we can get an extra 75 cents for."

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