H.E. Butt Grocery Co.

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H.E. Butt Grocery Co.

646 South Main
San Antonio, Texas 78204
(210) 246-8000
Fax: (210) 246-8067

Private Company
Incorporated: 1905 as C.C. Butt Grocery Store
Employees: 38,000
Sales: $3.2 billion
SICs: 5411 Grocery Stores

H.E. Butt Grocery Co. (HEB) is a leading Texas grocery store chain. HEB operated more than 200 grocery stores in more than 100 Texas cities in the early 1990s, and was expanding into Houston and other markets going into the mid-1990s. In addition, HEB was innovating new types of stores that were creating entirely new markets for the 90-year-old enterprise. HEBs story is one of hard work and perseverance.

HEB started out as a single store in Kerrville, a small town in the Texas Hill Country. Charles C. and Florence Butt moved to Kerrville from Memphis, Tennessee. Charles was suffering from tuberculosis, and they hoped that the drier climate would improve his condition. Once the family was settled in Kerrville, Florence was faced with supporting the family herself. She decided to open a grocery store. The family purchased a two-story house, planning to live upstairs and operate the store downstairs. With investment capital of $60, the family opened the C.C. Butt Grocery Store on November 26, 1905. They began selling food in bulk as a charge and delivery operation. Florences young sons delivered the food via baby carriage until they could afford to buy a little red wagon.

By 1908 the Butt store had established itself within the local community as dealers in staples, fancy groceries and fresh meats. The boys had even been able to buy a horse and wagon to make deliveries. Also, Florence was building a profitable fresh-baked bread business as a sideline. She arranged for bread to be delivered by train from San Antonio and then immediately delivered to residences by her sons. The market for fresh bread was relatively new at the time because many women were hesitant to buy bread for fear of being considered too lazy to bake their own. Nevertheless, bread deliveries increased, initiating what would become a legacy of innovation at Butt Grocery.

All three of the Butt brothersCharles, Eugene, and Howard E.worked in the family business while they were growing up. But it was Howard who took an early liking to the business, and was even described in company annals as a grocery man from the beginning. At the age of 22, in 1917, Howard was still working in the grocery store. Shortly after the United States entered World War I, however, Howard joined the Navy. After a two-year tour he returned to Kerrville to take over the store. He had a lot of ideas and was eager to implement them. His first move was to relocate the store to a busier corner in the burgeoning downtown Kerrville. In the new location, Butt installed the first in-store meat market and delicatessen. He also began a policy of constantly offering new and different items to patrons.

Importantly, Butt also tried a risky new experiment. Traditionally, customers had delivered or phoned in their orders, and the grocer had gathered and delivered the groceries along with a bill due at the end of the month. By the early 1920s, though, a growing number of people had their own cars and were able to more easily transport their own groceries. Butt believed that those customers, and maybe many others, would be willing to wait on themselves, pay cash, and transport their own groceries if they could save money. The savings would come from reduced labor and equipment costs at the store, and from the elimination of unpaid grocery bills. In December 1921 Butt sent out handwritten penny postcards to his customers, explaining the change. On New Years day the store opened under the name of C.C. Butt Cash and Carry.

The cash-and-carry experiment was an instant hit. In fact, Butt decided in 1924 that it was time to expand. He opened a new store about 60 miles from Kerrville in a town called Junction. Although other stores were already established there, Butts innovative cash-and-carry system and superior inventory allowed his store to thrive. Meanwhile, Butt continued to tweak his formula by experimenting with new services and products. Most importantly, he began to question why a housewife shouldnt be able to get common household items other than food and staples from a grocery store. Throughout the 1920s he slowly began adding to his inventory: everything from pots and pans to tools and textiles.

In 1926 Butt discovered a new avenue to growth. Piggly-Wiggly, a grocery store chain that had become well-known in the region by utilizing many of the same tactics that Butt was using, began selling franchises. Butt purchased some of the franchise rights, reasoning that he could successfully combine his views about customer service, as well as his experience with cash-and-carry, with the recognized Piggly-Wiggly name. Butt opened his first Piggly-Wiggly in Del Rio in 1926. The success of that venture lead him to open two more stores in 1927 in Brady and Gonzales, purchase three additional Piggly-Wigglys in 1928, and to build two more new outlets in San Benito and Harlingen. After roaring through the 1920s, Howard moved the companys headquarters to Harlingen to get closer to his Piggly-Wiggly stores. He also changed the name of the company to H.E. Butt Grocery Co. By that time, Butts first Piggly-Wiggly store in Del Rio was serving 5,000 customers each day.

The stock market crashed in 1929, spawning the Great Depression. Fortunately, Butt was relatively well positioned for the downturn in comparison to many other businesses at the time. His stores were geared for value, and grocery items were among the last goods that people stopped buying during the Depression. In fact, rather than slowing down, Butt continued to grow during the late 1920s and early 1930s, opening stores throughout the Rio Grande Valley and remodeling existing stores. By 1931 Butt Grocery was operating a total of 24 stores, and plans were being made for new outlets.

Butt suffered a major setback in 1933, when a hurricane swept from the coast into the Rio Grande Valley and damaged many of Butts stores and warehouses. Interestingly, Butts Piggly-Wiggly in Harlingen was the only grocery store in its area to open immediately after the hurricane. Despite the bad luck, Butt quickly restored his businesses and even managed to pursue a charitable venture. In 1934, when he was still in his 30s, Howard filed the H.E. Butt Foundation charter, a charitable organization created to aid the community. That effort was the first of many charitable acts that would earn Butt a reputation as a dedicated philanthropist.

H.E. Butt began to integrate vertically when it opened its own bakery and purchased a canning company in 1936. By that year, Butt was generating about $2 million worth of business annually from 31 stores. A new outlet built in Kerrville sported a parking lot with 100 spacesquite a step up from the horse hitching post stationed in front of the original Kerrville store. In 1938, moreover, Butt expanded into the 75,000-person Austin market, the largest metropolitan area that it had entered. The company was also doing business in San Antonio by 1942 and was increasing its presence in its established markets.

Butts contributed to the World War II effort during the 1940s by supplying canned vegetables and fruits from its canning facility to troops overseas. In addition, many company employees served in the armed forces. At the same time, the company continued to progress. It opened the first air-conditioned grocery store and also began offering frozen foods, which were considered a novelty at the time. Shortages of many food items continued after the war, but by the late 1940s Butts business was back to normal. Encouraged by the success of the air-conditioned store, Howard opened one of the first truly large grocery stores in Texas in 1949. The Corpus Christi store had 22,500 square feet of space and was the first to have a separate drug department, cosmetic area, and lunch counter.

The large grocery store was a hit, and Butts focused on the concept from that point forward. In 1950 the company opened a large store in Wacothe companys 53rd outletthat featured an unheard of 12 checkout stands, two parking lots, and a self-service meat counter. Within two years several similar stores had been built and H.E. Butts chain had swelled to 58. The company continued to push for more growth. To increase sales at existing stores, it began operating the Texas Gold Stamp Company as a subsidiary in 1955; the promotion gave customers stamps for each purchase, which they could then exchange for household items. Howard continued to add new stores during the late 1950s and early 1960s. One store even featured spectacular magic carpets (automatic doors), parking for 300 cars, and 12 separate departments.

By the end of the 1960s, HEB, as it had become known, was ready for a change. The dynamic and innovative Howard Butt officially passed the torch to his sons, Howard E. Jr. and the younger Charles. Charles Butt, a Wharton graduate, assumed the helm. He restructured the companys management and recruited several experienced grocery executives to help him make HEB a force in the 1970s and 1980s. To that end, HEB opened its own ice cream plant, a new bread bakery, a large pastry bakery, and new offices and warehouses during the early and mid-1970s. Butt also began designing the companys first Futuremarket, which would incorporate a gourmet deli, flower market, and in-store bakery among other features. Meanwhile, Howard E. Butt, Sr., fulfilled a long-time dream when, in 1974, he opened the H.E. Butt Camp, an 1,800-acre camp in the Texas Hill Country where nonprofit and Christian groups could retreat.

HEB opened its first superstore, or Futuremarket, in 1981. The then-massive store had 56,000 square feet and was considered a one-stop shopping center. Also in the early 1980s, HEB began selling generic goods and added a photo-processing plant to support in-store photo departments. Going into the mid-1980s, HEB was operating nearly 150 stores throughout central and south Texas and serving more than one million families. And it continued to expand its store offerings with an array of new departments ranging from seafood shops and salad bars to nutrition centers and fast-food, take-home departments. Furthermore, Charles Butt was branching into new markets outside of the grocery store industry. Most notably, HEB opened its first H-E-B Video Central/HEB Video Superstore outlet in 1987 to capitalize on the booming home video industry; within a few years, HEB would tag more than 20 additional video stores onto that division.

A secondary benefit of HEBs foray into the video store business was that it gave the company an in-road into the massive Houston and surrounding East Texas markets, which it still had not entered by the late 1980s. Indeed, in 1988 HEB entered the East Texas market with a new store concept called HEB Pantry Foods. These stores were smaller than the superstores and featured only four departments: grocery, meat, produce, and health and beauty. They also focused on value, attempting to minimize operating costs by eliminating nonessential, low-profit departments. HEB quickly added to the chain and by 1991 was working to build 22 more Pantrys in Houston within a year. Also in 1991, H. E. Butt Sr. died. Among his legacies was the successful Howard E. Butt Foundation that he had established in 1934. By the time he died, the foundation had built libraries, swimming pools, charitable food centers, and other amenities in the communities in which Butt stores operated. It had also reached out to the needy in other parts of Texas and even Mexico, among other initiatives.

At the same time that HEB was expanding with smaller stores, it was also engaged in the development of a new venture that would lead to the chains biggest-ever store. In the late 1980s, the innovative Charles Butt dispatched a team to study the great food merchandisers of the world in London, New York, Atlanta, and other places. He used the ideas they brought back to create the unique Central Market, a superstore that threw out the concept of one-stop shopping and emphasized perishable goods. The company opened the first Central Market in Austin in 1993. The store boasted 60,800 square feet and a large, tree-shaded parking lot. In contrast to conventional superstores, the Central Market offered a plethora of fresh foods and flowers, including many exotic goods, while it shunned common items like detergent, packaged baked goods, and ordinary sodas, and cereals. Although the store still emphasized value, it was geared more toward upscale buyers with a greater amount of disposable income.

Initial success at the H-E-B Central Market was accompanied going into the mid-1990s by ongoing gains at HEBs Central superstore, as well as HEB Pantry Foods, H-E-B Video Central, and other divisions. The still privately-held company was opening additional Central markets and was working to secure its position as a major force in the grocery industry throughout Texas by the turn of the century. At the same time, Charles Butt sustained the grocers legacy of charitable giving, as evidenced by an ambitious program to install 1,000 satellite systems in Texas schools by the year 2,000; by 1994, HEB had already installed 450 of the systems.

Principal Subsidiaries

Central Market; H-E-B Pantry Foods; H-E-B Video Central; H-E-B Rx Express

Further Reading

Douglas, Michael, H-E-B Bites Into Houston Market With Discount Grocery Stores, Houston Business Journal, November 4, 1991, p. 12.

Dunlap, Lisa, HEB Cracks Houston Market With Videos Instead of Groceries, San Antonio Business Journal, January 9, 1989, p. 3.

The History of H.E. Butt Grocery Company, San Antonio: H.E. Butt Grocery Company, 1994.

Sharpe, Patricia, Central Marketing: H.E.B.s Research Said Austinites Would Rush to a Huge Gourmet Grocery. It was Right, Texas Monthly, May 1994, p. 98.

Sultenfuss, Diana, H-E-B Processes 130, 000 Gallons of AMPI Milk Daily, San Antonio Light, March 28, 1992, Bus. Sec.

Dave Mote