New H-E-B concept is discount-minded

New H-E-B concept is discount-minded
http://www.chron.com/disp/story.mpl/business/6967987.html

By DAVID KAPLAN Copyright 2010 Houston Chronicle

Known for its diversity of concepts, H-E-B is about to launch another one called Joe V's Smart Shop, a discount grocery store.

The first Joe V's will open May 5 in northwest Houston at Antoine and Veterans Memorial.

The store will have less assortment compared to a traditional supermarket while aiming to take on all competitors on price on many items, said Armando Perez, vice president, Houston, at San Antonio-based regional grocer H-E-B.

H-E-B's new concept is an example of a trade-down taking place in retail. Many retailers see a need to offer the lowest prices possible, because increasing numbers of budget-minded consumers are demanding it, analysts say.

Joe V's is a no-frills operation, resembling a warehouse from the outside.

Smaller than a full-size H-E-B, Joe V's will carry about 9,000 items, compared with a traditional supermarket, which has about 37,000.

Joe V's might have five ketchups, while a full-size H-E-B would have 25, Perez said. The Joe V's ketchups will include well-known brands and H-E-B private labels.

Joe V's will have produce and self-serve meat, seafood and bakery departments. The biggest savings will often be in the grocery and general merchandise sections, Perez said.

Joe V's represents a trend in grocery and retailing in general in which traditional chains are becoming more discount-minded.

Many U.S. consumers are in debt or barely making ends meet and unemployment is high, said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York City.

“Customers are so price-sensitive, and if you're H-E-B or anybody else, you've got to deal with that,” he said, and many grocery chains recently lowered prices on many items.

Meanwhile, discount grocer Aldi is “roaring across the U.S.,” he said.

Essen, Germany-based Aldi has been in the U.S. since 1976 and has 1,085 stores in 31 states.

Over the past three years, Aldi has ramped up its expansion, opening about 100 units per year.

Privately owned Aldi is extremely competitive on price and highly efficient, said David Livingston, a grocery analyst at Waukesha, Wis.-based DJL Research.

“They don't borrow money, so they don't have debt,” he said.
Aldi in Houston?

In Texas there are 20 new Aldis in the Dallas-Fort Worth area, with seven more planned this year, said Heather Tarczan, spokeswoman for the U.S. division of Aldi, based near Chicago. The first Texas store opened last month.

“There are no plans to open Houston stores this year, but we're always looking for new opportunities for expansion,” she said.

Joe V's was not created in response to Aldi, Perez said.

Like Aldi, however, Joe V's aims for efficiency.

It will have the first automated machine called iCash to operate in the U.S., he said. It is being tested at several H-E-B stores in San Antonio. Joe V's customers will pay for their groceries using the iCash machine, while employees scan and sack their purchases. The iCash accepts cash, debit and credit cards, WIC and food stamps.

The iCash machine is a major timesaver in that it eliminates the need for employees to set up and balance the cash register tills through the day, Perez said.

At Joe V's, a lot of time and labor will also be saved when putting out the merchandise. For example, 100 cases of canned corn, which arrive by truck on pallets, will be delivered by pallet jack to the store aisle without being touched by an employee.

The prototype Joe V's is nearly double the size of the average H-E-B Pantry.

H-E-B owns the property and developed the center anchored by Joe V's at 12035 Antoine Drive and will lease space to other tenants, including a liquor store and beauty supply shop.

Inside Joe V's are spaces for Pronto Insurance, First National Bank and others.
Kroger, Wal-Mart

Asked about Joe V's, Bill Breetz, president of the Kroger Southwest Division, said in a written response: “Kroger recognizes that many of today's consumers value low prices, but do not want to sacrifice the quality of products, customer service or the atmosphere of their shopping experience.” Breetz noted that Kroger offers in-house brands, as well as a senior discount, double/triple coupon programs, fuel rewards and generic drug pricing.

Wal-Mart spokesman Daniel Morales wrote in an e-mail: “Shoppers everywhere trust Wal-Mart to be the price leader. Especially now, with our current focus on rollbacks ... We welcome competition in the marketplace, as it makes both companies better.”

H-E-B does not have firm expansion plans for Joe V's, but if the prototype is a success, the company will likely open more, Perez said.

“Joe V” does not refer to a real person, Perez said. “It's a name we came up with to personalize the store.”

david.kaplan@chron.com