H-E-B Business Model Analysis

Before beginning this assignment, I was clueless as to what company I am passionate about or even really interested in, for that matter. In order to make the selection easier, I first asked myself which company’s products or services I used the most. I thought about a clothing retailer because I really like shopping, but I realized this wasn't such a good idea because my closet houses items that come from a variety of brands and stores. Although I enjoy dining out, there are too many restaurants in Austin alone for me to choose one whose business model I’d like to analyze. All of this was going through my head while driving back from my two-and-a-half-hour grocery shopping trip last week. And then it hit me. Why on Earth does it take two and a half hours for one female to get groceries for just herself? I did have a pretty long list of items I needed, but H-E-B wasn't very busy that day for me to have spent over two hours there. I soon realized that getting groceries isn't a bullet point on my to-do list; rather it’s towards the top of my want-to-do list. Grocery shopping for me is, in fact, more of a hobby than a chore or task. For this reason, I chose to do more research on H-E-B’s business model.

H-E-B is a well-known food retailer in the central and south Texas area, as it was founded in the small town of Kerrville near San Antonio. I grew up in the Dallas/Fort Worth area, so I wasn’t very familiar with this grocer as a kid. In fact, I used to think that H-E-B began operating in Mexico because I only saw their stores there when I visited with my family. As I grew older, I learned that Central Market was owned by H-E-B. It was their only store in North Texas until late 2010, when a H-E-B opened up in a city about 14 miles south of where my parents live. H-E-B has been in operation for over 100 years and has established itself as a family oriented grocery store with low-prices, diverse products, and a willingness to provide the best customer service.  This company offers a broad range of grocery items along with services including prescription refilling.

While both Central Market and H-E-B are food retailers, they offer different types of products, thus target different customer segments. In class, we also discussed that companies’ value propositions differ for each of their customer segments, for if the company offered the same benefits for each group, customer segments wouldn't exist at all.

H-E-B’s roots strongly influenced the group of people to which it caters. H-E-B is a family owned business and has dedicated itself to “serve families all over Texas and Mexico.” It is to no one’s surprise to find many families shopping at their local H-E-B. It’s also very interesting to see that H-E-B has become a household name as a result of how frequently this segment visits the store. H-E-B offers a lot more than groceries to the family segment, however. Taking the time to shop for groceries to make their families home cooked meals and sitting down to eat with them is often associated with the need to be an exceptional parent. Parents or family members that shop at H-E-B should feel as though they are given this opportunity because this company provides items at reasonable prices, in-store coupons, and organic products. Household providers often feel a sense of accomplishment when they know they have purchased their families products from a store like H-E-B.

Students make up another customer segment that I believe is important to H-E-B’s business model. H-E-B does not specifically mention that they target students, but it’s more than evident that they bring in a lot of individuals from this group when its stores are placed in college towns. In my opinion, the biggest benefit for students is the accessibility and savings from shopping at H-E-B. In Austin, for example, there are many H-E-B locations that students can easily access to obtain their groceries or refill their prescriptions. Many students are probably very price-conscious, so the in-store coupons are definitely a plus for this segment as well.

Let’s not forget about the segment targeted by H-E-B’s Central Market. According to Central Market, this place is for “everyone really into food,” or foodies. I’d like to distinguish this customer title even more and name it the global foodie. Central market offers its foodie a variety of global products. It allows its customers to have in international culinary experience in their own home or even just inside the store café. These customers value rich, gourmet meals, so it is probably safe to say that this group also appreciates the many organic products that H-E-B stocks in its stores. Due to the quality and variety of these products, it is more expensive to buy all of your groceries at Central Market. Consequently, Central Market customers not only benefit from the wide range of items in the store, but they can also claim the status associated with shopping at this type of establishment.

 

Hispanics are also one of H-E-B’s segments and there are several factors that highlight this group. The most obvious indicator is that the company expanded to Mexico in 1997, where it has been very successful. In addition, Houston is home to H-E-B’s newest Hispanic store called ‘Mi Tienda,’ which the Houston Press named Best Hispanic Supermarket. Catering to Hispanic markets is also attributed to geographical location, given that Texas borders Mexico, but I believe that the Hispanic segment appreciates being able to find some Mexican aspects in the store including the freshly made corn and flour tortillas in the bakery section. H-E-B offers many more Hispanic food products thus enabling this segment to have a taste of their culture without having to leave the country.

As mentioned before, I truly enjoy the whole grocery shopping experience. It represents more than a mundane activity because I actually associate this kind of shopping with my mother and family in general. One of my favorite things to do as a kid was to tag along with my mother or grandmother and help them pick out groceries. After restocking the refrigerator and pantry, they’d get together and cook a meal for the whole family. Today, I immediately recall this image by simply picking out Serrano peppers at H-E-B. While browsing through H-E-B’s website I came across a statement that read, “We believe food is a way of uniting families and communities to one collective dinner table, of preserving our cultures and our traditions.” I am living proof of how H-E-B has successfully delivered that message.

If someone were to conduct an in-depth laddering interview on me, the attributes to shopping at H-E-B include organic products, in-store coupons, and its proximity to my apartment. The benefit of my getting groceries here is that I can use my purchased items to create different meals that I can later enjoy with my friends just as I would do with my family if I were back home. The hidden value to grocery shopping at H-E-B is that I like to spend time with family and friends and I can do that by cooking and sharing my food. For most people, grocery shopping continues to be another to-do list item, but for me it will always represent spending time with family and friends. Thankfully, H-E-B does a good job of fostering my peculiar hobby.


Sources:

http://www.heb.com/home/home.jsp
http://www.centralmarket.com/Home