Jun 20

Chronicle 100: New stores compete in Houston’s ‘grocery wars’ Houston Chronicle

Look for the competitive local grocery scene, shaken in recent years by scrappy newcomers and established players alike, to be stirred further with the forecasted addition of more than 30 new stores in the coming year.

Much of the expected growth, this year and beyond, will be in the suburbs. But observers say the competition will only intensify in all corners.

“Without a doubt this theme of grocery wars will be here, maybe, forever,” said Jason Baker of Houston-based retail brokerage firm Baker Katz. “The footprint has changed and everyone is fighting for market share.”

The dominant players are likely the most familiar: Kroger, H-E-B and Wal-Mart, which rank Nos. 1 through 3, respectively, on this year’s Chronicle 100 list of the region’s biggest grocers. These chains together operate 275 stores here, accounting for 55 percent of the stores surveyed by the Houston Chronicle this year.

An estimated half of the roughly 2.7 million square feet of retail development underway in Houston is said to be grocery, brokerage firm CBRE’s Houston office estimated earlier this year.

In the meantime, smaller retailers like Trader Joe’s, Sprouts, Aldi and Fresh Market have aggressively entered the market in hope of changing the way people shop. Some of these stores may focus on a specialty, such as organic or health food, while others offer unique snacks or cheaper options for the bargain buyers.

While the newcomers have not always necessarily succeeded — Fresh Market has already closed one of its Galleria-area stores and Baker said others are finding it harder than expected to compete — the major players are responding with larger and more sophisticated stores. They are offering more of the specialty-store features while promoting their one-stop convenience.

“Grocers recognize that to be competitive, they’ve got to be just a little unique,” Baker said. “There’s a new lineup of competitors all at once.”

Extra touches at the recently opened H-E-B in Tanglewood include an in-house restaurant, a sushi bar, bulk hummus and a takeout barbecue booth. Two miles away is a Whole Foods Market that debuted last fall with an in-house brewery and a souvlaki grill. Whole Foods has also announced it will open a mixed-use location in Midtown.

Yet most of the growth in the coming years will be in the fast-growing suburbs. An annual forecast from Wulfe & Co. says that 32 new stores will be added across the Houston region.

They will include an Aldi in Spring, a Fiesta Mart in Cypress and a Trader Joe’s in Cinco Ranch. Wal-Mart added 40,000-square-foot neighborhood markets in Atascocita, Cypress and Pearland this year.

Kroger has announced it will invest $409 million in the Houston region with new stores and upgrades. The expansion plans include Katy, Huntsville, Baytown and Clute.

As stores proliferate, one prominent local grocer said, they must remain alert to changes in consumer habits and react quickly. Scott McClelland, president of H-E-B Houston, said that in a hyper-competitive market, it’s important to be able to offer healthy options or a range of price options as tastes change. Some customers are willing to pay more for premium goods while coupon-savvy shoppers still love to play the bargain game.

Among the strategies H-E-B is using to appeal to specific customers is the opening of smaller Joe V Smart Shop stores for bargain-hunting shoppers and Mi Tienda stores that appeal to the growing Hispanic community. The stores are typically smaller and offer less expensive products.

“A shopper might have to pass three competitors to get to one H-E-B store in Houston,” McClelland said. “My value has to be pretty compelling to get you to be willing to do that. We are constantly on the prowl for what is different.”