Professional Documents
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H E B Own Brands
H E B Own Brands
H-E-Bs Own Brand is key to the companys ongoing success. A 1999 customer
study indicated that customers perceived H-E-Bs Own Brand products as generally
lower quality than national brands. Consumers also saw no distinction between H-E-B
and Hill Country Fare brands. Product research revealed that in some categories,
including diapers and feminine hygiene, the H-E-B products did not meet national brand
performance. This violated the original standards the company set providing EDLP and
quality. For example, Own Brand products that confused consumers were water and
pasta sauce.
sales in 2000. Water was segmented both by source (imported spring, domestic spring,
and purified) as well as by size. The sales leader in H-E-Bs market in the bottled water
category was Ozarka, a Texas spring water. The leading imported spring water was
Evian, from France. Purified drinking water was Coca-Colas Dasani and PepsiCos
Aquafina, among others. H-E-Bs Own Brand was Glacia. Glacia was positioned as
Evian-quality water. The product was bottled at the source at a spring in Feversham,
Canada. While it was formulated against Evian, Glacia was shelved next to Ozarka,
priced below Ozarka, and packaged in all the same key sizes as Ozarka. Rob Price, who
became vice president of Own Brand in early 2000 commissioned customer research.
When prompted without prompted without packaging, only 19% of Glacia consumers
were aware the product was bottled in Canada. 64% believed it was from Texas. Even
when prompted with packaging (which incorporated a red maple leaf and the phrases
Product of Canada and Natural Canadian Spring Water), only 74% of customers
In the pasta category Hill Country Fare, which was an H-E-B Own Brand product
was positioned against national entry brands such as Ragu and Prego, while the H-E-B
brand competed against more premium sauces. The consumers were unaware that the H-
E-B brand was positioned to compete against premium products while the Hill Country
Fare brand was positioned to compete against economy products. Major issued that
impacted Own Brands was pricing. For example, if H-E-B sell Del Monte canned corn at
2 for a $1. Assume Green Giant offers a cost reduction that enables them to reduce their
price temporarily to $.39. The H-E-B brand is $.35, and Hill Country Fare is $.33. What
happens if a competitor like Wal-Mart prices Del Monte at 3 for a $1.00? H-E-B is in an
awkward position. If they match the competitors price on Del Monte, then Green Giant
becomes the highest priced product on the shelf. This would be unfortunate, given their
support of H-E-Bs everyday low price stand. If they dont match the competitors price
on Del Monte, then they risk the perception that they have failed to honor the EDLP.
Issue Analysis
discovery about hidden downfalls to Own Brands. Since Own Brand operated privately,
their products were shipped through its distribution channel solely. National Brands had
other stores that could assist them in distribution as well as its own. Own Brand depended
on National Brand for interest, and surpassing them in sales and revenue may have
burned bridges in this crucial ingredient to Own Brands strategy. The pricing department
in the company gradually became more complex with increasing competition. H-E-B
found themselves in the middle price wise of three competing products. One of the
competitors shared their vision on low prices. If Walmart were to price their brand of
products at a certain level it could destroy H-E-Bs slogan about low prices and great
quality. It was a constant challenge in balancing Own Brands and national brands in the
store. Own Brands were critical to H-E-Bs financial health and differentiation.
However, if Own Brands dominated consumers may lose interest in the national brands.
income was an important revenue source, not just for H-E-B, but also for other grocery
store chains.
To remain a leader, and to be able to gain a larger share in the market, H-E-B has
to perform and be more cost effective. As more and more companies fight for the same
dollar, it is not enough to be selling well to be survive, you have to be able to be efficient
in all aspects of business and to be able to deliver the best service possible, because
prices are too similar. But if a company can provide the best service with the best price,
they will be able to achieve maximum growth and survival in the industry. H-E-B has a
comfortable market position, but the new trends with the low-cost nationwide chain of
Critical Problem
Changing the consumer's perception about the perceived value of H-E-B brand is
a major challenge and is a problem at the moment that they conceive the product of
portfolio of products containing food items which are perishable is riskier one to maintain
when there is huge lump of national brands substitutes is already in shelves with
significant market share. But when we talk of products like cooked meat, no comparable
product is in shelves but less discounted prices could be hindrance in sales of such
One alternative is to reposition the H-E-B Own Brands and dissolve the other
brands in the category (per page 5), meaning having fewer options for customer to choose
from. The second alternative is to reexamine the 4Ps of the existing H-E-B brand
products.
Currently H-E-B offers specialty brands to compete against national brands, Hill
Country Fare to compete against economy brands, and H-E-B brands to compete against
premium brands. It would be in the interest of the company to offer the H-E-B brand to
compete against premium and economy brands and eliminate the Hill Country Fare brand
altogether. This will also help as to not confuse the customer about the products and they
For the second alternative, let us examine the application of the 4 Ps to H-E-Bs
Glacia bottled water. From the consumer research results, H-E-B saw that there were two
segments to target in the bottled water market: First segment valued imported water,
second segment didnt care about 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 imported waters such as Evian. Imported water customers even preferred
Canadian water to French water. So, Rob Price could change his strategy on the Four Ps
features of the product dont come forward in current packaging. Rob Price needs to work
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 were
aware the product was bottled in Canada. 64% believed it was from Texas. Even when
prompted with packaging, only 74% of customers recognized Canada as the source. H-E-
B needs to advertise this product to emphasize the Canada message. In-store promotion
such as staff introducing and explaining the features would work. Also direct selling
promotion strategy for making a successful product mix to harvest lucrative benefits.
3.Price Increase the price to be higher than Ozarka but lower than Evian. Check the
price elasticity for products like cooked meat to make a better pricing decision for getting
4.Placement - Move the Glacia product closer to Evian to give the impression that they
are in the same category. Whereas food products are concerned, H-E-B need to consider
the other distribution channels as well rather than just relying their own shelf space.
Recommendation
H-E-B has done a great job balancing their own brand while maintaining
procurement revenue form national brands. However, there are major issues with
packaging and placement of the products. H-E-B needs to work on its 4 Ps in order for
the customer to perceive value correctly and to be able to make informed decisions on
which brands to purchase. This way, cost-conscious consumers can build loyalty towards
H-E-B brands depending on what type of quality they prefer. At the same time, the
general public will remain interested in shopping at H-E-B due to its variety and available
national brands. The availability of national brands gives customers options to purchase
whatever product they like at convenience. Products should clearly state information
about production and value. Customers should know what the H-E-B brand is
comparable to. This helps with product identification. For example, the H-E-B water
should be next to the comparable product so the customer can see the price difference.
Consistency in quality is an issue too. According to the charts from the article the
majority of the H-E-B brand products are supposed to be of greater quality than regular
or generic brands. If this is not the case, this should be advertised or evident.
H-E-B cannot compete directly with Wal-Mart on everyday low prices. When
Wal-Mart puts national brands on sale, they attract customers who are loyal to national
brands only. Wal-Mart, however, does not have the ability to cater to regional customers
tastes as H-E-B does. If H-E-B communicates the position of its Own Brand products as
high quality, unique products tailored to meet the needs of the community, it will be
successful as a grocery store that gives customers the option to purchase certain national
brands for the food they choose as well as the option to specialty products only available
at H-E-B for others. Customers dont have to choose between buying national brand
products only or Own Brand products only. At H-E-B, however customers can purchase,
for example, premium baked goods by Own Brand as well as have the satisfaction of
knowing that they can purchases Springdale milk at an affordable price, even if it may
not be the lowest available. With Hill Country Fair items, the store can retain its
everyday low price promise, even if it does not apply to national brands.