SAN ANTONIO -- H.E. Butt Grocery Co. here is heading north, the company said last week.
The supermarket chain plans to open up to 10 stores in the Dallas/Fort Worth area next year -- which would put it in competition with Albertson's, Tom Thumb and Minyard Food Stores. Boise, Idaho-based Albertson's, with 57 stores in the area, holds a formidable 24% of the market share.
"H-E-B has had a real interest in the Dallas/Fort Worth market for many years," said Stephen Butt, vice president and general manager of the company's new Dallas/Fort Worth division.
"Building a presence to serve the Dallas/Fort Worth area would place our stores in all major Texas cities, as well as utilize our existing infrastructure," he added.
The company has 259 stores in Texas, Louisiana and Mexico, including 172 combination food and drug superstores, 81 Pantry Foods stores, three Central Market gourmet supermarkets and three Super Mercados Internacionales food and drug combination stores.
Mike De la Garza, vice president of public affairs and communications for H-E-B, said the company plans to open five to 10 stores "at the outset" and then "on an annual basis, an additional five to 10 stores," for a three- to five-year period or "until we feel we have an adequate number of stores."
Details over what formats the stores will operate in have not been decided yet, according to De la Garza. He said the company is sure "it won't be the Central Market format, though they may have some elements of the Central Market."
He also said the company is planning "to have land to build on by late 1999" and begin construction "in early 2000."
Analyst Charles Cerankosky of McDonald Investments, Cleveland, said the plan "seems to make geographic sense seeing how the company is already well-established in south Texas. It makes sense to go to another large metropolitan area in your own state.
"It's another case of a new entrant going to an established market and, as always, the established players will fight back and sometimes the fight begins before the new stores open."
Cerankosky said he expects the first responding salvos to take the form of stepped-up promotions from the established companies "designed to enhance customer loyalty." Later, he added, "there can be some updating of existing facilities, the so-called 'defensive remodeling.' "
Another analyst, Jonathan Ziegler of Salomon Smith Barney, in San Francisco, said H-E-B's excursion north "will only make Albertson's and Kroger better. Does this make it any more fun for the market? No."
Ziegler said he expects the move by H-E-B to be a successful one on two counts. First, "they know how to compete," he said. Second, "Dallas/Fort Worth is a very stable market. Maybe this market is receptive [to more competition]. They're considered one of the strongest operators in the country and this is a natural extrapolation for them."