14 November 17–23, 2022 dallasobserver.com DALLAS OBSERVER Classified | MusiC | dish | Culture | unfair Park | Contents skated along the eastern edge of the state, McClelland needed to clean stores so work- ers could restock shelves with fresh food and essentials. But he knew FEMA officials, al- ready in place, wouldn’t let his teams in. So, he wrote a letter on his own letterhead, signed it, got a Cadillac Escalade and put a blue flashing light on the top. He told his crew to just drive to the store. When they were stopped at a checkpoint, they handed over McClelland’s letter. It worked. The po- lice let them in. “We kind of coined the phrase fake it ‘til you make it. That’s the way we go about handling natural disasters. We’ll do what- ever it takes,” McClelland told Cutter. Then in January 2020, just when there were rumblings of a virus spreading on the other side of the world — COVID-19 — H-E- B didn’t wait for guidance from the govern- ment. Texas Monthly reported the company started running simulations with their Chi- nese counterparts in January before many of us even knew what would hit us. In 2020 after winter storm Uri left thou- sands freezing and powerless across the state, H-E-B was once again a pillar, providing es- sentials while the state government floun- dered. In one case, the lights went out inside an H-E-B in Leander. Anxious shoppers, who were stocking up on essentials, headed to the front of the store with full carts. A post on Twitter, and later confirmed by H-E-B, ex- plains that workers checked baskets for alco- hol, and allowed all others to just leave with carts full of groceries. For free. During that time, Greg Jefferson with the San Antonio Express-News called H-E-B a “de facto arm of government.” Perhaps most importantly, the Butt fam- ily donated $10 million to help build a new elementary campus in Uvalde following the school shooting in May 2022 that left 19 stu- dents and two teachers dead and 17 others wounded. It also donated another $500,000 for the victims and their families, and $500,000 to support the nonprofits helping the residents of Uvalde. How Did H-E-B Get to This Point? For decades — since its original opening in Kerrville in 1905 — H-E-B was just a neigh- borhood grocery store. Leigh McAlister is a professor of business marketing at the University of Texas at Aus- tin and an executive director of the Market- ing Science Institute. She said H-E-B has one advantage when it comes to gaining its rock-star-like status: it’s privately owned, giving it more freedom to innovate. Early in- novation and “productivity gains” like elec- tronic scanners, McAlister pointed out, lower the chain’s costs, which draws more customers and feeds a “productivity loop” that encourages more innovation, giving H- E-B a continual competitive edge. McAlister cites the example of fresh pro- duce, something H-E-B is known for, with its emphasis on Texas-grown food. Innova- tion has allowed H-E-B to lower prices, which in turn draws more customers, which means it sells more fresh produce, turning product over more quickly so that “the fresh stuff is ‘fresher.’” Innovation needs talent to implement it, and McAlister noted that 25 years ago, H-E-B was on the UT campus “fighting for our high- est-performing MBA students and offering top MBA salaries.” She said she thinks it also recruited talent at Harvard, the University of Virginia and other top MBA programs. “At the same time, other retailers,” McAli- ster said, “if they even bothered to recruit on campus, were asking me for my ‘lower-cost,’ ‘C students’ in the undergraduate program.” McClelland, who put the blue light on top of an Escalade after the hurricane, grad- uated from Harvard’s Advancement Man- agement Program. H-E-B consistently ranks at or near the top on Dunnhumby’s Retailer Preference Index. In 2021 it was ranked No. 2 among national grocery store chains. In 2020 it was ranked No. 1; the company celebrated by giving each of its employees a $100 bonus. The report highlights the company’s strate- gic superiority and a strong balance of great price and perceived quality, “driven by its best-in-class private brand while also mak- ing improvements during COVID in digital.” Why Not Dallas? As far as extending the love to Dallas, that’s a complicated question with an even more complicated answer. Today, H-E-B has stores in Burleson, Waxahachie, Frisco and Plano, with stores planned for Mansfield, McKinney, Allen and north Fort Worth. There are three Central Markets, H-E-B’s upscale sister store, on the north side of Dal- las in addition to stores in Fort Worth, Southlake and Plano. McAlister said she’s “heard that the Dal- las market is ‘over-stored,’” meaning the grocery stores currently in Dallas more than cover the demand for groceries. But she also recognizes that food deserts, places where people lack access healthy food options within a 5-mile radius of their homes, are a huge problem. In January the Observer reported on the city’s efforts to lure grocers to southern Dallas, which has areas that are considered food des- erts. Around that time, the City’s Economic Development Committee met to discuss why they can’t get grocers to Dallas’ most under- served communities. At the meeting, they heard from Gary Huddleston, the Texas Re- tailers Association’s grocery store consultant. (We reached out to him for comments about H-E-B’s current play in the area, but he was unable to comment on H-E-B specifically be- cause the association represents several retail- ers.) In January, though, he told the city that the market is “extremely, extremely competi- tive” and a difficult business with profit mar- gins between 1% and 2% of sales. “The bottom line is there’s got to be some thought that at some point the store is going to be profitable,” he said. “We want to serve the community, but it’s still got to make a profit.” Which is a hard pill to swallow when Kroger’s net income for 2021 was $2.6 bil- lion. And Albertsons was planning a $4 bil- lion dividend payout this year. The companies didn’t make that money by shov- ing stores into unprofitable locations. No company is obligated to any geographical area or purpose. Huddleston was not speaking about H- E-B specifically, and as McAlister pointed out, the chain is privately held, un- Plano is the newest location for H-E-B. Jack Moraglia Butt Why? from p13 >> p16
