‘That H-E-B Guy’ discusses retailer’s success, business model

H-E-B Houston Division President Scott McClelland discusses the grocery store chain’s business model and success during the Greater East Montgomery Chamber of Commerce’s luncheon Feb. 3, 2016.

Posted: Thursday, February 4, 2016 12:42 pm | Updated: 2:32 pm, Fri Feb 5, 2016.

By Jennifer Summer

While East Montgomery County communities expand, the opportunities for businesses in the area continue to push toward becoming a reality.

H-E-B Houston Division President Scott McClelland shared the H-E-B business model and what it has taken for H-E-B to be successful among a myriad of grocery stores in southeast Texas at the Greater East Montgomery County Chamber of Commerce’s lunch Feb. 3.

H-E-B is set to open a brand new, larger location in Kingwood near Town Center across from their current location and is looking for potential locations around the East Montgomery County area, but no decisions or sites have been selected at this time.

“In 1905, there was a woman named Florence Butt, whose husband had tuberculosis, and they were living in Tennessee,” McClelland said. “His doctor said it would be better for his health to move to an area where the air is better so they moved to Texas. They first moved to Kerrville, took the $60 they had and opened their first grocery store in the first floor of their two-story house.

“They would deliver groceries door-to-door in a little red wagon. Their son’s name was Howard Butt, and they were the ones who ran the store and developed the business because his father never was healthy enough to work.”

From that moment, they decided to open a second, a third store, a fourth store, a fifth store but they all went out of business.

When it came time to open their sixth store, they selected Del Rio as they place to open the new store and it succeeded. They began to open more stores in the southeast portion of Texas in cities such as Eagle Pass, Laredo and Harlingen, eventually moving the headquarters to Harlingen.

The name, H-E-B, stems from Howard Butt, but when he was born he was never given a middle name. So, he went to have his name changed to Howard Edward Butt, hence the store’s name, H-E-B, was born.

“H-E-B has really grown throughout the years,” McClelland said. “At H-E-B, we seek to be the best retailer. More than that though and what makes H-E-B a little bit different is we work to invest in three things — reinvest in our customers so we can have the lowest prices possible, we invest in our partners pay and benefits and we invest in our communities.”

Currently, H-E-B grosses 42 billion in sales, is the eighth largest retailer in the United States but they only operate stores in Texas and northern Mexico, operate 13 manufacturing plants, 85,000 partners — which is what they call their employees, and they have a 95 percent retention rate with department and store managers.

Houston has become one of the most competitive retail markets in the United States and in the past four years, more grocery retailers have moved into the state such as Aldi, Sprouts and Trader Joe’s.

Within the H-E-B brand, there are stores such as Mi Tienda, who targets Hispanic shoppers, and Joe V’s Smart Shop, offering discounted prices to shoppers, and Central Market, which is the high-end experience for shoppers.

According to data presented by McClelland, only 6 percent of Houston shoppers shop exclusively at H-E-B.

“We want our shoppers to use H-E-B as their primary shopping trip,” McClelland said. “Of the top 10 grocery store chains in 1995, only two remain now in their current format — Kroger and Walmart — and the main thing to take away from that is the consumer changes over time and we have to keep pace with what the customer wants.”

H-E-B focuses on a simple idea, “sell stuff they don’t,” which refers to selling items in their stores the consumer won’t see anywhere else such as Texas-shaped items such as cheese and chips, and sauces such as their customer favorite, That Green Sauce.

“We tailor each of our brands and stores to our customers,” McClelland said. “We sell the items in each store that fits the customer and consistently work to bring in new items they will enjoy.”