H-E-B Own Brands

H-E-B OWN BRANDS

For over a hundred years, the H. E. Butt Grocery Company stores have provided people in Texas and Mexico with superior products and service. Headquartered in San Antonio, Texas, H-E-B was the 11th largest grocery chain in the United States. Florence Butt founded the company in 1905 with a $60 investment. A few generations later and four failures later, Charles Butt became president of the company in 1971 and took the family name to a higher level.

Charles Butt was committed to maintaining H-E-B's entrepreneurial spirit without detracting from the focus on the detail needed to succeed in the grocery business. The H-E-B private-label brand contributes greatly to the grocery store's success. By staying true to its small-town roots, H-E-B continues to prosper as a family-owned--and family-focused--chain of grocery stores. Despite H-E-B's regional concentration, it was regarded as a world-class competitor. Today, H-E-B boasts more than 300 locations throughout Texas and northern Mexico and employs upwards of 60,000 people. In 2001, sales approached $9 billion and the chain surpassed 275 stores, H-E-B remained privately held by the Butt family, and Charles Butt stayed actively involved in corporate strategy.

SITUATION ANALYSIS

"The main objective of our Own Brand program is to enhance our relationship with customers. Our products offer low prices and great quality. Beyond this, many Own Brand products are only available at H-E-B. Our program communicates to customers how deeply committed we are to exceeding their expectations each and every time they visit H-E-B," says Charles Butt, chairman and CEO.

World-Class Operator

H-E-B concentrates its trading area in the Southwest, but operates on the level of a world-class grocer. While other retailers are outsourcing many support functions for the sake of economy, H-E-B invests heavily in its Own Brand Product Evaluation Center, Test Kitchen, Package Design Department, employs its own Quality Assurance Team, and operates 10 own brand manufacturing facilities. H-E-B employs a staff of 62 partners in its corporate Own Brand department, in addition to 12 team members from the autonomous quality assurance department assigned to work full-time on auditing Own Brand manufacturers and ongoing product performance.

The Customer's Champion

"Go home a hero," is H-E-B's corporate slogan. It articulates the retailer's commitment to being the customer's champion when it comes to low prices, excellent quality and superior service. H-E-B Own Brand products play an important supporting role in community aid, such as donations to food banks and disaster relief. Own Brand is also a component of H-E-B's educational support. The retailer is steadfast in its single-minded focus on researching and delivering what its customers want - unique H-E-B Brand products that deliver the taste of Texas, as well as Hill Country Fare food, household products, and Personal Expressions health and beauty care.

Own Brand products represent great value for the dollar and are comparable to the leading national brands. At H-E-B, they use two tiers of private label: Hill Country Fare which goes after building their price reputation; and H-E-B Own Brands which target product differentiation. H-E-B knows the needs of its customers and provides consumers with foods that they want to eat on a local and regional level.

Product Innovation

The turning point in the development of H-E-B's current own brand strategy came in the early 1990s through the effort by H-E-B to learn about great retailers around the world. H-E-B studied grocery retail innovators from around the world to learn how they created great products that complemented existing national brands. Today, H-E-B Own Brands has a lineup of more than 3000 Own Brand items constituting about 19% of the company's domestic food and drugstore sales.

H-E-B Brand Positioning

The H-E-B Own Brand line represents the company's signature products. H-E-B Own Brands are targeted at customers with discerning tastes in certain categories. Products are least equally preferred to existing gold standard products. In many cases, H-E-B Brand products will be innovations, not available in any other brand or store. This tier of products undergoes extensive consumer research and sensory testing. Many H-E-B Brand products are sub-branded in order to enhance their impact within the categories. Some popular H-E-B Brand items are Cafe Olй Whole Bean Coffee, Creamy Creations Premium Ice Cream, Vitamin E Enriched Milk and Classic Selections Frozen Pizza.Hill Country Fare Brand offers products comparable to national brands in basic categories. The focus for this brand is to offer customer significant savings from national brand alternatives. Hill Country Fare products include frozen and canned vegetables, flour, sandwich bread and cake mixes. The Own Brand product development teams work to support the overall vision of category managers in H-E-B's procurement and merchandising arm. Close collaboration results in an assortment of Own Brand and national brand products that together are greater than the sum of its parts. The driving goal of the Own Brand department is to provide the category managers additional tools to grow overall sales. This is accomplished most effectively when genuine value is added to products that enhance customer choice and affordability. Much of H-E-B Own Brand's success is attributable to the insight of very demanding and creative category managers. A key component to H-E-B's ability to innovate is its in-house manufacturing. The company's 10 plants allow H-E-B to provide the best quality, freshness and cost for customers on products such as dairy, ice cream, meat, bread, tortillas and snack foods. An important benefit of H-E-B's manufacturing is the ability to create formulations especially for regional customer tastes. Examples include marinated meats with southwest seasoning, ice cream with local strawberries and home-style flour tortillas.

Own Brand Customer Research

A key point of difference from competitors is the H-E-B Product Evaluation Center. The primary role of this area is sensory evaluation. This includes supporting formula development and testing product with customers to make certain that quality and flavor standards are met. The research team also conducts frequent studies with customers to understand their needs and trends. H-E-B also has an in-house design team whose role is to design packaging that is both attractive and functional.