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HEB Case

HEB Case

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Published by ncivi
HEB case study
HEB case study

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Categories:Business/Law
Published by: ncivi on May 06, 2010
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05/12/2014

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Nurdan Civi
MGP 293-3 Product ManagementHomework #3Prof. Britta Foster
The H-E-B Case
8/22/2009
 
What is your recommendation for the Glacia product/brand?
From the consumer research results, HEB saw that there were two segments to target in thebottled water market: First segment valued imported water, second segment didn’t careabout imported water, more specifically, this segment valued Texas spring water.H-E-B Glacia, as an H-E-B brand, should be positioned as an upscale entry against importedwaters such as Evian. Imported water customers even preferred Canadian water to Frenchwater. So, Rob Price should do the following:1.Product - Packaging is very important. We understand from the case that valuablefeatures of the product don’t come forward in current packaging. Rob Price needs towork on a new packaging to make these features, such as Canadian spring water,more visible.2.Promotion - When prompted without packaging, only 19% of Glacia consumers wereaware the product was bottled in Canada. 64% believed it was from Texas. Evenwhen prompted with packaging, only 74% of customers recognized Canada as thesource. HEB needs to advertise this product to emphasize the Canada message.In-store promotion such as staff introducing and explaining the features would work.
3.
Price – Increase the price to be higher than Ozarka but lower than Evian.
4.
Placement - Move the Glacia product closer to Evian to give the impression that theyare in the same category.
What is the role of the H-E-B and Hill Country Fare private label brands? Howshould they be positioned with respect to other brands in the category? Howshould they be priced?
In order to answer the question, first we need to ask why retailers want to promote storebrands:Retailers carry store brand products because of the fact that they can sell them with ahigher gross profit margin. Store- brand products are generally cheaper than national-brandproducts because the retailer can optimize the production to suit consumer demand andreduce advertising costs. National brands are on average priced 40% higher than storebrands.In addition to increasing profits, store brands help to attract and retain customers. This isextremely important in the competitive supermarket business. If a consumer becomesaddicted to a particular store brand canned fruit or spaghetti sauce, for instance, they willreturn when they need to purchase these items again.Also, store brands enable retailers to get better deals with national brand manufacturers.If we go back to the case, we see that three major objectives of H-E-B (improvedprofitability, sales growth, deeper customer relationships) are in line with the informationgiven above.
 
H-E-B needs to take into consideration the quality and price of the national brands in thecategory when deciding on the store brands position, price and margin.It has two store brands: First is H-E-B brand for premium products which equaled orexceeded national brands in quality. The products under this brand should be pricedcomparably with national brands. The price could be slightly lower than national brand’s, butit should not be significantly lower.The next tier of products is Hill Country Fare. This tier serves to compete against other storebrands and approach national brand quality. The products under this brand should targetprice-conscious shoppers and be priced lower then national brands in order to get thoseconsumers.
What is the role of own brands or private label brands in H-E-B’s overall corporatestrategy? Why is it important? Should it be scaled up or down? If so, in whichproduct categories? 
H-E-B’s overall corporate strategy points are EDLP (Every Day Low Prices), improvedprofitability, high quality products, and deepened customer relationships. As I mentioned inthe previous question, private label brands would contribute significantly to each of thesepoints for H-E-B.H-E-B store brands are key to company’s ongoing success: The products in these brandsaccount for 19% of sales and generate gross margins 50% higher than national brands. Andmore importantly for Charles Butt was the strategy that the company could deepen itsrelationships with customers through these brands.Private label sales should be scaled up due to the following reason: H-E-B has high qualityproducts that could easily compete with national brands. Even though it prices them lowerthan national brands, it still gets a high gross profit margin from these sales and increasesprofitability of the firm. Ice cream, ready-made food, pasta sauce, canned and frozenvegetables are all good quality and they all enjoy high gross profit margins.Although private label sales average is 30% in the US, I think H-E-B can scale it up to theEuropean average, which is around 40%.
Consider yourself, are you a private label shopper? If so, in which categories doyou purchase private label brands and why do you purchase them? What have younoticed recently about private label or store brands?
Consumers in general have the idea that store brands are lower quality than nationalbrands. This is changing. Store brands have increased the quality of their products; becauseof the high gross profit margin advantage, they have a big incentive to make better qualityprivate labeled products. This has increased the sales of private labels.Another factor that has affected private label sales is the economic recession. Store brandsare usually 30% lower priced than national brands and in tight times people are moreinclined to buy cheaper products.

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