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Format Diversification: H-E-B Balances Needs of Multiple Banners

The differences between H-E-B’s Central Market format and its Joe V’s banner might seem like night and day — but in reality they are like fraternal twins with much of the same genetic material.

What connects the high-end, foodie-oriented Central Market and its price-impact sibling is an operating philosophy of the San Antonio-based parent company that keeps the operations of the two banners distinct in the eyes of the consumer, yet connected in some key ways.

“I think one of the keys for H-E-B has been to look at where they can have synergies, and what they can leverage out of the main operation, vs. what really needs to be run separately to create a distinct format and banner,” said Neil Stern, senior partner, McMillanDoolittle, Chicago.

H-E-B, he said, “does a great job of balancing those two things.”

“In areas where Central Market needs to be distinct, it is run very separately from H-E-B — they have different operations people,” Stern explained. “Yet at times they will collaborate with the main H-E-B folks on things like private label, or prepared foods, so they run a nice balance between when to keep it separate and when to integrate.”

The same goes for the six-unit Joe V’s discount format, which the company has been rolling out in Houston ahead of Aldi’s nascent expansion push in that market.

“There are some things that are unique for Joe V’s, like buying by the truckload, and some things that are in common with H-E-B, like private label,” Stern explained.

When some companies have tried to experiment with multiple formats, they have not differentiated them enough to make them a truly unique proposition, he said.

Joe V’s and Central Market even have their own distinct websites — with Central Market’s site touting recipes and ingredients for home chefs, and Joe V’s offering a bare-bones page with access to its weekly flier, a place to apply for jobs at the chain and an offering to lease space inside the stores.

In addition to its Central Market and Joe V’s banners, H-E-B also has a specialty Hispanic format called Mi Tienda, which debuted in Houston in 2006 and now has two locations, and H-E-B Plus, a superstore format with an expansive general merchandise offering. It also operates a store called H-E-B Alon Market in San Antonio that features an expansive selection of kosher and other offerings tailored for the local Jewish population.

Another key to H-E-B’s success has been its willingness to experiment — and not all of its tests in format diversification have been successful. Several years ago it abandoned a rollout of a small, traditional format called The Pantry, which had grown to about 45 locations in Houston. Most of those stores were converted to or replaced by larger, traditional H-E-B stores.

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