Heb Case Study

1. What are the industry characteristics? And who is H.E. Butt in that context (at time of case)?

Retail grocery stores constitute a major U.S. industry. At the time of the case, in 1992, the total retail grocery sales in the US was $376 billion with the top 5 national retailers representing about 21% of total sales (McFarlan 1). There were 133,000 U.S. grocery stores that were owned by almost 90,000 firms. By far the largest part of these sales was accounted for by supermarkets and other general-line grocery stores (Moody 3).

The industry characteristics of the retail grocery channel during the early period included mainly regional competition with large retail chains (retailers with 10 or more stores) operating in multiple regions and competing with other chains and smaller retailers (called Independents), but without any truly national competitors. Retail chains provided 70% of total US grocery retail sales as against ‘Independents’ (McFarlan 1). The four largest grocery store companies in 1992 had a total of 4,850 establishments, about the same as in 1982. The 5th through the 8th largest companies in 1992 had about 3,100 establishments, about 3,700 fewer than in 1982, even though companies in this size category increased their share of total sales. This development reflects a trend in these companies towards larger but fewer stores. Because of the cost and inconvenience of traveling long distances to shop for groceries, grocery store markets tend to be local or regional in character. Over the past several decades, there has been an increase in the average concentration in local grocery store markets. (Moody 5).

The grocery retail industry was in the earlier stages of its life cycle at that time and was not yet mature. With the top 5 retailers representing only 21% of the total market sales, there was huge scope for growth in the retail grocery industry. (McFarlan 1)

Another characteristic of the grocery retail industry at the time...