San Antonio-based H-E-B, the largest grocery chain in Texas with more than 400 stores, has acquired Austin-based Favor Delivery, a service that provides a wide-ranging menu of consumer-facing food delivery services. With so much noise in the grocery/restaurant-to-table market, why is this move such a big deal?
Privately-held H-E-B, which includes upscale Central Market among its brands, is a major player in three of the nation’s 10 largest metro areas—Dallas, Houston and San Antonio. Toss in Austin, the current headquarters of rival Whole Foods, and you have a powerhouse whose decisions in all things food have a major impact on more than six million shoppers.
Despite what it says in its PR missives, H-E-B has taken relatively small and deliberate steps into the future with curbside pickup and delivery options with Instacart and Shipt. Favor’s 50,000 contract drivers give the regional grocery giant an army of delivery agents. H-E-B’s COO Martin Otto says his company and Favor have similar working cultures, making the purchase an ideal combo.
“We see a unique opportunity with this partnership to support and accelerate each other’s growth through the sharing of experience, insight, and resources,” Otto said in an announcement.
Here are some interesting takeaways from the H-E-B deal with Favor:
- Amazon will have its work cut out to be a major player in the fastest-growing state in the nation. Not only does H-E-B have a market share lead over Whole Foods in major Texas cities, but Wal-Mart’s grocery business is stronger than Amazon’s grocery division. Technology alone will not allow the Seattle-based giant to leapfrog two entrenched players.
- Beyond Amazon/Whole Foods, as H-E-B begins its slow march into the 21st digital century, its new channels to the consumer for groceries and prepared foods will have a chilling effect on domestic and international competitors wanting to enter the Texas market.
- As far as Instacart goes, with $200 million new cash in its pocket, and a deal with Albertsons, what happens to its existing relationships with H-E-B and Whole Foods (which recently launched its own delivery service)? The smart money says that the San Francisco-based delivery service will look at other opportunities in the value chain beyond groceries. It would make sense for the growing number of ghost kitchens to partner with Instacart as the popular delivery company. This would work to leverage Instacart’s infrastructure in terms of drivers and likely some detailed data on customer behavior.
H-E-B will not be alone as a bellwether for future trends. More attention must be paid to chains such as Wegmans, Publix, and Harris-Teeter. These companies have intimate knowledge of their customer base and brand loyalty. These factors, more than any tech strategy, are the key to future success.