The Muzak bounces between Tejano and country, and the warm tortillas and marinated fajita meat are big sellers at H. E. Butt Grocery (H-E-B). Texas' largest private company and the #1 food retailer in South and Central Texas, H-E-B owns more than 335 supermarkets, including a growing number of large (70,000 sq. ft.) gourmet Central Market stores in major metropolitan areas and 80-plus smaller (24,000-30,000 sq. ft.) H-E-B-Pantry stores, often in more rural areas. H-E-B also has about 40 upscale and discount stores in Northern Mexico. H-E-B processes some of its own bread, dairy products, meat, and tortillas. The 100-year-old company is owned by the Butt family, which founded H-E-B in Kerrville, Texas, in 1905.
South of the border, the grocery company's Mexican subsidiary Supermercados Internacionales H-E-B has moved into Monterrey's more affluent neighborhoods, with stores operating under the H-E-B banner and the Economax name (a discount supermarket format). H-E-B stores in Mexico account for 7% of the company's total sales. Checkout lanes at its Texas stores account for the rest.
H-E-B has segmented the vast Texas market with store formats catering to different incomes, ethnicities, and market sizes. Its nine Central Market stores offer an upscale shopping experience and compete directly with Whole Foods Market stores. The company's H-E-B Plus stores, which range in size from 109,000 to nearly 200,000 sq. ft. and devote about 40% of their space to nonfood items, compete head-to-head with Wal-Mart Supercenters. For rural Texas towns, its down-sized Pantry format fit the grocery shopping bill. The Texas grocery chain's Mi Tienda format debuted in Pasadena, Texas, in October 2006. The Hispanic-themed store features a Mexican-style bakery and other amenities designed to appeal to Latino shoppers.
H-E-B rang up an estimated $18 billion in sales in fiscal 2011 (ends October), up from about $16 billion the prior year.
To cement its #1 spot in Central Texas and fend off Wal-Mart, which is expanding its supercenter presence in the region, H-E-B in 2012 announced plans to spend $100 million to expand, relocate, and remodel several stores in the Austin area and beyond. In recent years, the company has been opening huge H-E-B Plus stores in the San Antonio and Austin markets, where H-E-B has acquired stores from ailing rival Albertsons to bolster its position.
In 2012 the grocery chain will invest millions to further cut prices to better compete with Wal-Mart and other discounters. Previously, the company lowered the prices on more than 5,000 products sold under national brand names as well as H-E-B's own brands. To capitalize on consumers' hunger for low prices, H-E-B opened a new discount limited-assortment supermarket format called Joe V's Smart Shop in May 2010. Joe V's, the first of which launched in Houston, promises to offer fresh produce, premium meats, and more at "outrageously low prices." However, upstart grocer Trader Joe's has objected to H-E-B's use of the name and is threatening legal action.
More than 40% of the H-E-B stores have gasoline outlets, and about 190 have pharmacies, which are being remodeled to include drive-through windows and enlarged health and beauty aid selections. The retailer recently opened its first Payless Express shoe department in a Laredo store and has plans to open more.