U.S. Grocery Chain Heading South of the Border

At least once a week, Saulo Salinas crosses the border to go shopping. A resident of Matamoros, Mexico, he comes here looking for bargains.

But instead of browsing the downtown shops and bartering in pesos, Salinas heads farther north to a neighborhood H-E-B grocery store.

“Food is cheaper here,” Salinas said. “Things are much cheaper at H-E-B versus what I can buy in Mexico.”

Aracely Saldierna agrees. She makes a similar journey from Matamoros to shop for products such as eggs and chicken.

“I can get more American things,” she said, “things that are better for my home.”

On any given day, parking lots at this and other H-E-B stores along the Texas-Mexico border are packed with cars bearing Mexican license plates. Store officials are banking on that popularity as they prepare to become one of the first American supermarkets to expand into Mexico.

“The awareness of H-E-B [in Mexico] is high, and we feel that will be a factor that will support our efforts,” said Mike De La Garza, a spokesman for the San Antonio-based grocer.

H-E-B is scheduled to open its first Mexican store in Monterrey in late December or January, and a second Monterrey store is expected to open in mid-1997.

The stores will be somewhat different from their Texas counterparts, with 70% to 80% of the products purchased in Mexico and the rest from the United States, de la Garza said.

Store officials said they are optimistic about the transition, despite Mexico’s economic volatility and the fact that the market is relatively untested by American grocers.

Wal-Mart and its grocery store-like supercenters have been in Mexico since 1993, but H-E-B is one of the first traditional American grocers to expand there, industry analysts said.

H-E-B is “really very innovative,” said Michael Garry, managing editor of Retail Technology magazine and the former senior editor of Progressive Grocer magazine. “They’re very savvy in general, so I would think they’d probably have a pretty good shot at it.”

H-E-B has displayed an adventurous spirit since Charles C. and Florence Butt founded the company in 1905 in Kerrville. Their son, Howard Edward Butt, took over the company after World War I, and the business flourished.

The company’s first expansion came in 1928, when H-E-B moved its headquarters to Harlingen. Although the country was suffering through the Depression, H-E-B opened new stores and began manufacturing goods.

Today, the business is headquartered in San Antonio and operates 232 stores in 122 Texas communities and Louisiana, employing about 45,000 people. The company remains in the Butt family, now run by Howard Butt’s son, Charles.

As successful as H-E-B has been, becoming the largest grocery store chain in Texas, the company and its owners shy away from the limelight, rarely discussing the business in public.

But the grocery chain is known as a fierce competitor that is always eager to try something new.

“It’s really considered to be a leader in many ways,” said David Merrefield, executive editor of Supermarket News magazine.

One example of that innovation, analysts said, is H-E-B’s use of different formats for different communities, such as the Pantry Foods division founded seven years ago. There are now 65 Pantry Foods stores around Houston and northeast Texas.

The stores are smaller than regular H-E-Bs and feature four basic departments: grocery, health and beauty, meat and produce. H-E-B officials said the smaller format allows the company to offer low prices in markets with firmly entrenched competitors.

At the opposite end of the shopping spectrum are H-E-B’s MarketPlace in San Antonio and Central Market in Austin, which offer international specialty foods from gourmet coffee to sushi.

Last year, H-E-B took another step in altering its format, introducing gas stations at some stores.

In addition to its creative formats, H-E-B is considered the industry leader in technological advances, analysts said. In Progressive Grocer’s annual report of the industry, manufacturers routinely rate the company as the best in the business at applying technology to its operations.

“They do things before everybody else when it comes to technology,” Garry said. “They’re actually pioneers in it.” He cited technological improvements the company has made in warehousing and distribution, as well as in-store functions.

It’s all part of a philosophy that has helped build H-E-B over the past 91 years, de la Garza said. The Mexico expansion is the latest addendum to that doctrine, he said.

“It’s going to be a learning experience for H-E-B,” de la Garza said, adding that if the first two stores are successful, the company would like to open more in the Monterrey area.

“Mexico is a market that is understored,” he said. “If a grocer can go in and market effectively, there is opportunity for growth.”