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Texas-bred chain thrives in Mexico
Grocer H-E-B provides a rarity, customer service, and isn't interested in expanding past its loyal fan base in the northeast part of the country.


Cox International Correspondent
Published on: 06/03/08

Monterrey, Mexico —- At Mexico's newest H-E-B, the bells and whistles are enough to make Luis Infante Soto dizzy.

Flat-screen TVs dangle from the ceiling, frozen mocha cappuccinos are for sale in the cafe, and an aroma diffuser spreads the sweet smell of baby lotion through the kids section in hopes of luring shoppers.

But the retired tobacco company executive said that the real reason he comes to H-E-B is for something many American consumers take for granted: customer service.

"Here you ask people where things are and they actually tell you, or find someone who knows," Infante marveled. "For me, it's about the service. The clerks don't give you the runaround like in other stores."

Such glowing reviews help explain the rapid growth of the Texas-based grocery chain in northern Mexico, especially in the industrial powerhouse of Monterrey, Mexico's most affluent city.

Just 11 years after opening its first Mexican supermarket, H-E-B controls 29 percent of the northeast Mexico market, according to numbers provided by the company. H-E-B has 19 stores in Monterrey and another 10 in cities such as Saltillo, Torreon and San Luis Potosi, as well as border towns Nuevo Laredo and Reynosa.

Plans are in the works to open another four stores over the next 10 months: two more in Monterrey as well as the chain's first store in Piedras Negras, across the border from Eagle Pass, Texas, and a first-of-its-kind discount store in Rio Bravo, in the border state of Tamaulipas.

Industry analysts and company officials say H-E-B, which was founded over 100 years ago in Kerrville, Texas, has managed to export not just its stores but also a fierce brand loyalty. Many of its northern Mexico shoppers have deep ties to Texas and had shopped in H-E-B before the chain expanded in Mexico.

"The main reason H-E-B has been so successful in northern Mexico is due to the fact that the consumer base in Monterrey is not all that different from its core South Texan shopper," said Natalie Berg, grocery research manager for Planet Retail, a London research organization.

"H-E-B has really created a niche for itself by staying regional instead of going out and trying to conquer the whole of Mexico."

Macedonio Garza, H-E-B Mexico's director of human resources, said that unlike other American supermarket chains in Mexico —- notably Wal-Mart —- H-E-B has been linked with the region for a generation.

"It is very identified with the border," Garza said. "As a kid I used to cross the border from my hometown of Reynosa to shop with my family at H-E-B in McAllen."

Rosa Maria Figueroa, a Monterrey retiree, said she first shopped at H-E-B in Houston, where her daughter lives. When an H-E-B opened in her well-to-do Monterrey neighborhood, she dragged her sister to the opening.

"It's different from other supermarkets here," she said on a recent shopping trip. "We are very excited."

H-E-B still trails Soriana, the market leader in northern Mexico, which has nearly 50 percent of the Monterrey market share. The Monterrey-based supermarket recently expanded, absorbing much of rival chain Gigante in December.

The dominant player in the highly competitive Mexican supermarket sector is Wal-Mart, which has pursued an aggressive strategy, opening new stores and taking over smaller rivals. But while Wal-Mart is particularly strong in central Mexico and Mexico City, the chain is less powerful in northeast Mexico.

H-E-B officials say there are no plans to expand outside northern Mexico or challenge Wal-Mart in Mexico City. "We have a lot left to grow in this area," Garza said.

Shoppers and company officials say that H-E-B's arrival in Mexico has forced long-established chains such as Soriana to adjust, especially when it comes to customer service.

"Before H-E-B you would go to Soriana and you wouldn't get treated well," said H-E-B Mexico spokeswoman Lillian Torres. "We revolutionized the concept of service."

Torres said Mexican employees receive extensive training based on the company's standards in Texas.

H-E-B has also taken advantage of a strong taste in northern Mexico for American goods.

"Mexican consumers, especially those in northern Mexico, have a strong affinity for American brands, which the likes of Wal-Mart and H-E-B have really been able to capitalize on," Berg said.

H-E-B has designed its stores to fit Monterrey's various economic levels.

While it has five stores that cater to the city's wealthiest residents, including those making more than $90,000 a year, it also has several aimed at lower-middle-class Mexicans making less than $12,000.

Its store in Mi Tienda in Rio Bravo will be aimed at low-income Mexicans making as little as $2,800, Torres said.

H-E-B also uses a number of innovations to lure its Mexican shoppers: at ultra-high-end stores, chefs will cook up shoppers' steaks or salmon to order; also, stores offer classes, much like Home Depot, on everything from natural childbirth to making "barbacoa," slow-cooked meat. Its "Super Comboloco" deals give a variety of free items when shoppers buy designated items. For example, buying fajita meat, rice and soy oil will net shoppers free tortillas, canned corn and mole sauce.

"H-E-B is one of the most innovative supermarkets in the U.S.," Berg said. "A key attribute that it has exported south of the border."

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