The H.E.Butt (H-E-B) Company operates in one of the oldest and most competitive businesses in the United States. The grocery industry includes over 31,500 supermarkets and generates over $365.4 billion annual sales, in which 64% of stores are affiliated with a chain, gaining 80% of industry revenues. Competition has become increasingly fierce with the creation of national-scale chain mergers, international grocery firms enetering the market, and the expansion of Wal-Mart into food retailing. Nonetheless efficient operation and strategic pricing are keys to survival in the low-margin industry, with gross margins of 20-35% and operating margins as low as 3%-6%.
H-E-B is long recognized as an innovative leader in the industry, offering a wide variety of products including fresh produce, meat and seafood, health and beauty merchandise, pharmaceutical products, deli, bakery, basic and staple commodities, household items, and home and garden hardware. Striving to create value to its customers by delivering its promise of everyday low process, H-E-B develops its Own Brands to achieve gross margins consistent with its EDLP strategy, while maintaining an appropriate balance of offerings between its Own Brands and national brands.
Political factors affecting H-E-B's operations include differences in government regulations in the U.S. and Mexico as well as variations in taxes across and within state boundaries. Protecting the property right of H-E-B offerings in its Own Brands is important; accordingly H-E-B should seek trademark protection against the unauthorized use of its name. Moreover, changes in food manufacturing and retailing regulations may lead to significant financial damages or investment opportunities for the company. Economic conditions are important indicators to the company's success. Generally consumers save most of their disposable income during recession periods, and sales tend to be slow. Also there would be more of a trend toward lower priced goods and staple...