H' E' Butt Grocery Company

1
H. E. Butt Grocery Company

• Presented by The Harry Butts

Tom Alexander Jeff Sopcak Jennifer Arnold Nguyen
Tran Lynn Gruber Greg VanderVeen Roger
Humburg Gary Walker
2
HEB In The Beginning

• 1905 First store opens in Kerrville, Texas
• Florence Butt
• 1919 - Howard E. Butt takes charge
• Youngest son of Florence
• 1927 - Second successful store opens
• Del Rio
• 1928 - Headquarters move to the Rio Grande Valley
• First major expansion of HEB
• 1938 Headquarters move and new stores emerge

3
HEB Today

• San Antonio, Texas
• 12th largest grocery retailer
• 260 stores
• 45,000 employees
• 7 billion in sales for 1998
• Top Retailer of 1996
• Category Management
• Leader in retail technology

4
HEB The Business

• Part of a 402 billion industry
• Tight margins
• Mass merchandisers (i.e. Wal-Mart)
• Everyday low price (EDLP)
• Joint industry project
• Efficient Consumer Response (ECR)
• Category management (CM)
• Continuous replenishment (CRP)
• Point-of-sale (POS) scanning

5
HEB The Business (cont.)

• HEBs Mission Statement
• Produce double-digit sales growth with a profit

6
Problem Identification

• What is the problem?
• Competition
• Discount stores
• Wholesale clubs
• Market share
• Supply chain management
• Lack of trust
• Forward buying

7
Problem Identification (cont.)

• What is the problem? (cont.)
• Product pricing
• Independently operated
• Updating issues
• Scanning accuracy
• Improve to 98
• Implement computerized store ordering (CSO)

8
Problem Identification (cont.)

• What is not the problem?
• Technology
• Electronic mail
• Hand-held radios
• Change management
• Cost savings
• Dynamic characteristics

9
Analysis/Discussion

• Efficient Consumer Response
• Replenishment
• Pricing and promotion
• Product introductions
• Merchandising management

10
Analysis/Discussion (cont.)

• HEBs focus
• Technology
• Continuous replenishment
• Online shopping
• Cutting edge
• Management
• Organizational efficiency
• Employee empowerment
• Cost control
• Cost benefit analysis

11
Analysis/Discussion (cont.)

• Courses of action
• Form a Strategic alliance
• New distribution channels
• Possible take-over
• Abandon CRP
• Resource intensive
• Low reliability
• Traditional approach
• Accelerates flow of goods

12
Analysis/Discussion (cont.)

• Courses of action (cont.)
• Develop CRP but restrict use
• Possible competitive advantage
• Large development costs
• Develop CRP and license
• Recover development costs
• Quickly copied

13
Recommendation

• Align services with demographics
• Invest in technology
• Company strength
• Competitive Advantage
• Scan-based trading (SBT)
• Develop future technologies
• WOW network
• Self-scanning technology

14
Implementation Plan

• Immediate customer service initiative
• Increase selection
• Recover market share
• Implement SBT by Q3/00
• Pilot WOW network in Q4/00
• Evaluate success
• Proceed as needed
• Partner with IBM

15
HEB Tomorrow

• A peek into the future