Essay on H.E.B Case Analysis

1716 Words Mar 24th, 2011 7 Pages
H-E-B Own Brands
History and challenges

H.E.B, the 11th largest grocery chain in United States, started 30 years ago. When the company was started, it was a predominantly private label company. Recognizing the customer drawing power of national brands, H.E.B took crucial steps to build a strong national brand presence. HEB was known for its superior quality products, its customer service and a broad assortment of merchandise. Additionally the company’s focus on delivering on its promise of everyday low prices, especially to the low income households that it catered to, was amongst its most critical success factors. 1. Competition :

In the 1990s, HEB faced a number of challenges, those in the face of increased competition
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Recommendations: 1. Competition and Private Labels:
To understand the role of H-E-B’s Own Brands, we need to understand the role of private labels to a retail store. Retailers manufacture carry private brands since retail gross margins in the private labels are relatively high. Retailers are able to realize cost advantages since they do not have additional advertising and distribution costs associated with private labels. In addition to increasing profits, store brands help to attract and retain customers. Retailers however need the critical procurement revenue from national brands for ad space and displays on stores and hence need to maintain a balance between their Own Brands and national brands.

Customers get important cues of the product from the product quality, packaging, pricing, placement and promotions. A review of the pricing of select product categories (see figure 1) reveals that in all product categories that had a competitive National brand, HEB was priced lower than the leading National Brand. Customer psychology assumes that the brands charge for quality and that a highly priced brand signals a high quality product. HEB strategy to price lower than leading National Brands works against building a high quality reputation amongst its customers. To fix this disconnect, the company should price its H-E-B brand very close to

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