HOUSTON — Around North Texas, lots of people are asking “When is H-E-B opening in my neighborhood?”
Now that the Texas retailer has started its big push into Dallas-Fort Worth, it’s a reasonable question, but forget about D-FW for a few minutes.
Some answers about how quickly an H-E-B supermarket might wind up in your neighborhood may be found in Houston, where H-E-B is now the market share leader.
It took the San Antonio-based grocer two decades to build enough stores to leap over all the competitors in Houston: longtime dominant grocers Kroger and Randalls; home-grown Fiesta Mart; and Walmart, which was also in expansion mode during the 1990s and 2000s with its giant Supercenters and on its way to becoming the largest U.S. grocer.
H-E-B, which was founded in 1905 and had sales last year of more than $34 billion from 420 stores in Texas and Mexico, first topped the Houston list in 2014, according to multiple market share sources.
“H-E-B will be very patient, deliberate,” said Randall Onstead, who was CEO of the Houston grocery chain Randalls until it was sold to Safeway in 1999. It’s now owned by Albertsons. “What’s important to them is getting it right.
“It’s hard to believe a Texas company would take this long to get to Dallas,” Onstead said.
H-E-B will open stores this fall in Frisco and Plano and next year in McKinney and Allen with plans for more thereafter.
The D-FW grocery market is one of the most competitive in the U.S., with more than two dozen food retailers operating here. The North Texas region’s population growth has broadened the pie, and “there’s plenty of room for a good new competitor in Dallas,” Onstead said. “But a big new player the likes of H-E-B is going to take market share from everybody.”
Houston debut
Back in 1992, no one thought H-E-B was a threat to the status quo when it entered Houston. Kroger, now the largest U.S. traditional supermarket retailer, and Randalls, the locally based longtime leader, were locked in a fierce competition, building bigger and better Signature and Flagship stores. Kroger, which had been known as a basic supermarket operator, had moved upscale in Houston. It even had one location with valet parking. Randalls, family-owned and -operated, broke with its policy and added beer and wine sections.
H-E-B came into Houston with a new concept it called Pantry stores. They were small, with about 25,000 square feet and no frills. But even back then, H-E-B did basic better than North Carolina-based Food Lion, which had national aspirations when it came to Texas the same year.
Food Lion pulled out of Texas in 1997, and by 2000, H-E-B started closing Pantry stores in favor of H-E-B supermarkets.
Slowly and deliberately, under the leadership of chairman and CEO Charles Butt, the youngest grandson of the founder, H-E-B grew in Houston. Butt tapped a Frito-Lay alum Scott McClelland, who had held several marketing and operations positions at H-E-B, to be president of H-E-B’s Houston operations.
McClelland put himself and H-E-B out into the community. The retailer became involved in local charities and food banks, sponsored events around Houston and helped when weather disasters struck. He became the face of the brand on popular TV commercials with some of Houston’s pro athletes, including a long string of spots with former Houston Texan J.J. Watt. McClelland became known as the “H-E-B Guy,” and H-E-B ingrained itself into the Houston psyche.
When H-E-B said in March 2021 that it was ready to expand in D-FW, the company already had leadership in place over this region. Juan-Carlos Rück has been H-E-B executive vice president, North West Food/Drug Division, since 2019. It’s not clear whether Rück will become the face of the chain here.
By the mid-2000s, H-E-B was building seven to 10 stores a year in Houston, and one of those, the Bunker Hill store on I-10, is a legend in the Texas grocery business. It clocks an average of $3.5 million in sales a week — six times the average for a supermarket. The Bunker Hill store now has 150 employees just dedicated to filling 700 curbside orders a day, and twice that on the weekends.
“H-E-B doesn’t have a prototype store. They’re rethinking, tweaking, very much always evolving,” said JoBeth Prochaska, Weitzman’s senior vice president development and asset management in Houston. “They’re never done, and that’s part of their big success.”
H-E-B has built four double-decked H-E-B stores in Houston with the parking garage below the store to squeeze into older neighborhoods of the city, which is prone to flooding.
It also created the Joe V’s Smart Shop concept in Houston, which boasts the company’s lowest prices. A gallon of whole milk is still under $3. The store’s butchers create “bundle packs” of meats for family cookouts for $20 that include pork ribs, sausage, chicken leg quarters, seasoned pork and chicken breasts.
The retailer’s Hispanic grocery store MiTienda first opened in Houston. It not only has the fresh tortillas that are made in all H-E-B stores but varieties of ground corn and flour for cooks who want to make tortillas at home. The store’s bakery, café, salsa and juice bars and “paper thin” cuts of meats represent an authentic Mexican and Central American experience.
But H-E-B, with its South Texas roots and stores in Mexico since 1997, already had a reputation with Hispanics as a place to shop for groceries. Hispanics make up 45% of Houston’s population, and that has grown almost 30% in the past decade.
Real estate strategy
“H-E-B won’t take any locations out of expediency, and they train managers from their first store to open their next store,” said Drew Alexander, who was CEO of Weingarten Realty Investors until the Houston real estate investment trust was sold to Kimco Realty Corp. in 2021.
When H-E-B came into Houston, on any given day there were landlords in its waiting room offering great deals on anchor sites, Alexander said. They could “make their money on pad sites” surrounding them.
“As a privately held company, [H-E-B] doesn’t have to explain to Wall Street why it only opened eight stores after it said it would open 10,” said Alexander, who grew up in his family’s grocery business that later became a commercial real estate company. “Grocery is a thin margin business, and to pay costs of operating, grocers want to be in densely populated areas near good consumers.”
H-E-B is still growing in Houston.
Dallas-based Weitzman is developing Manvel Town Center, a huge 272-acre mixed-use development about 25 miles south of downtown Houston along a newly completed toll road with 28 active home developments that will eventually have 72,000 homes.
Last summer, H-E-B said it would be the project’s first anchor grocery store. The store is expected to open next year, and the developer and retailer started talking in 2017, Prochaska said.
It’s one of four new suburban H-E-B stores in the works in Houston that will bring its total to 104 local stores, according to the Houston Chronicle.
Kroger is still Houston’s largest supermarket operator by store count with 109 Houston stores. Randalls’ store count is down to 14 in Houston, down from almost 50 in its heyday.
Central Market
H-E-B declined to answer questions about its Houston expansion and how that market experience could shed light on its D-FW plans.
Greater Houston is a big place. It covers nine counties in Southeast Texas and Gulf Coast, or more than 10,000 square miles.
The city of Houston is 665 square miles, 40% bigger than the size of Dallas, so while H-E-B started out building new stores in fast-growing suburbs similar to its Collin County selections, it was also building inside Houston.
Three of its first H-E-Bs were west of Houston in suburban Katy, southeast in Pasadena and along Westheimer (Houston’s equivalent to Preston Road in Dallas) just a mile from the Galleria.
A big difference between the Houston and D-FW expansions centers on H-E-B’s Central Market.
At the same time the family-owned regional grocery was tackling an expansion in Houston, it was also evolving and expanding its upscale Central Market concept. The first Central Market opened in Austin in 1994 and later moved its headquarters to Dallas, where it’s led by Butt’s nephew, Stephen Butt.
Six of the 10 Central Market stores are in D-FW. There’s only one in Houston.
D-FW residents waiting for an H-E-B or any new grocery store to open near their neighborhood can glean from the grocer’s history in Houston that these stores take time.
“It takes more time than people think. A lot has to happen behind the scenes for any development,” Weitzman’s Prochaska said. “I’ve seen H-E-B trash totally finished plans they’ve spent a couple hundred thousand dollars on and then start over.”
Twitter: @MariaHalkias
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