Joe x Two: H-E-B Opens Second Joe V's Smart Shop Discount Grocery Market in Houston, Texas Today

Texas supermarket chain H-E-B opened its second Joe V's Smart Shop discount grocery store today. The store, like the flagship Joe V's which opened in May of this year, is in Houston, Texas. It's at Wallisville & Uvalde in East Houston, across town from Joe V's Smart Shop number one. Here's the grand opening ad.

The first Joe V's Smart Shop store, which is at 12035 Antoine Drive in Houston, was a test of the limited assortment discount format by H-E-B. The format passed the test, at least as far as doing good enough in Houston to warrant a second store in the city, according to Jose Villarreal , Joe V's general manager.

In September of this year Fresh & Easy Buzz correctly predicted H-E-B would open a second Joe V's Smart Shop store in the city. Read our story - September 12, 2010: Shout it Out Loud Joe: H-E-B Opening Second Joe V's Smart Shop Discount Grocery Store in Houston, Texas. Also see - August 26, 2010: What's Up With Joe? Texas Grocer H-E-B Planning 'Major Announcement' About its Joe V's Smart Shop Soon.

Shortly after the first store opened in early May of this year, iconic grocery chain Trader Joe's filed a lawsuit against H-E-B, asking a judge to order the grocer to cease from using the Joe V's Smart Shop name, arguing that it infringes on the Trader Joe's trademark. We're told the case is still pending. However, the court denied Trader Joe's initial request to order H-E-B not to use the Joe V's name pending a resolution of the lawsuit.

Although Texas-based H-E-B doesn't say it's the case, the grocer developed Joe V's in-part because of the movement of hard-discount grocer Aldi USA into its home market in 2009. Germany-based Aldi continues to open new stores in the Lone Star State, where it plans to have a significant presence.

The Joe V's Smart Shop stores are much bigger - four-to-five times bigger, in fact - than the 10,000-12,000 square-foot Aldi discount markets. The stores also offer more than twice as many SKUs - about 9,000 at Joe V's, compared to about 3,500 at Aldi USA.

H-E-B isn't a discount food and grocery retailer like Aldi is. Its two primary formats are superstore (H-E-B) and upscale-specialty (Central Market). However, there's only so much share of stomach and pantry, even in Texas. Therefore H-E-B, which has done an excellent job over the years with its superstores taking on mega-retailer Walmart in its home state of Texas, wants a discount format that it can strategically position against the Aldi small-format, hard-discount stores opening throughout the state. That format appears to be Joe V's Smart Shop - at least to the tune of two stores in Houston so far.

Related Stories

September 12, 2010: Shout it Out Loud Joe: H-E-B Opening Second Joe V's Smart Shop Discount Grocery Store in Houston, Texas

August 26, 2010: What's Up With Joe? Texas Grocer H-E-B Planning 'Major Announcement' About its Joe V's Smart Shop Soon

May 5, 2010: H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

May 6, 2010: Say it Ain't So Joe: Trader Joe's Tells H-E-B's Joe V's Smart Shop to Change its Name

May 20, 2010: H-E-B Tweaking Product Assortment at Joe V's Smart Shop Discount Grocery Store in Texas Opened May 5

May 20, 2010: 'The Insider': Welcome to Discountopia USA

H-E-B Tweaking Product Assortment at Joe V's Smart Shop Discount Grocery Store in Texas Opened May 5

Discount Format Food & Grocery Retailing

A mere two weeks after opening its first Joe V's Smart Shop discount grocery store in Houston, Texas on May 5, San Antonio, Texas-based grocery chain H-E-B this week is giving the new store's product assortment a bit of a tweaking, Fresh & Easy Buzz has learned.

The product assortment adjustment started on Wednesday (May 19), and is based on feedback and other inputs the grocer has gleaned over the two weeks Joe V's has been open, according to Joe Villarreal, the general manager of H-E-B's Joe V's Smart Shop division.

We aren't surprised family-owned H-E-B would be doing a product assortment adjustment only two weeks after the discount format grocery store opened. H-E-B is among the most fastidious and best retail grocery merchandisers in the U.S. It's a good - and smart - sign at the smart shop.

Additionally, since Joe V's Smart Shop is a new format for H-E-B, and it's first price-focused discount grocery format to boot, it makes good and logical sense in our analysis for the grocer to tweak the store's product assortment so early in the game, and continue doing so regularly.

Since Joe V's is a limited assortment discount format - the store carries about 9,000 SKUs -regular product assortment adjustment is even more important for H-E-B, or for any other grocery chain that operates a limited assortment format, because with a limited assortment a retailer has to obtain the maximum sales bang from far fewer SKUs than a typical supermarket carries. For example, the average U.S. supermarket, which averages 46,755 square-feet, carries 46,852 SKUs, according to the Food Marketing Insitute's research. FMI is the leading trade organization for the U.S. food and grocery retailing industry.

That H-E-B, which was founded 105-years ago and does $15 billion in annual sales in about 300 stores in Texas and Mexico, is adjusting the Joe's V's Smart Shop product assortment so early is a sign the grocer understands the importance of item optimization when it comes to operating a limited assortment discount grocery format.

Fresh & Easy Buzz has heard from a few readers who've visited the Joe V's Smart Shop store in Houston in the two weeks it's been open. All of the readers told us the store was extremely busy during their visits.

Big reusable grocery bag giveaway at Joe V's

H-E-B is also taking an aggressive approach with Joe V's. Smart Shop in the area of reusable shopping bags.

During the store's first eight opening weeks, which started on May 5, the grocer is giving each shopper who makes a single item qualifying purchase four free reusable grocery bags, according to general manager Joe Villarreal. (Here's an example of a qualifying item.) The purpose of this aggressive approach is to equip as many customers as possible with reusable bags at no charge, so they can bring the bags with them to the store on return trips, thereby dramatically reducing the amount of single-use plastic carrier bags Joe V's uses on an ongoing basis.

H-E-B's Joe V's smart shop division initially considered not offering single-use plastic carrier bags at the store at all, according to Joe Villarreal. However, it later decided to offer them, but to give out the reusable bags for free as a way to encourage regular use of the bags by customers.

The free reusable bag promotion also fits into what is a key promotional feature at H-E-B's Joe V's Smart Shop, which is what the grocer calls its FREEBIE! And the tagline is: "There's always something free at Joe V's."

And yes, Jose Villarreal, or Joe which he uses in e-mail correspondence, is the person and name, at least inspirationally, behind the Joe V's Smart Shop format and store name, although neither H-E-B or Mr. Villarreal has stated Joe V's Smart Shop is directly named after its general manager, Joe Villarreal.

Related stories from Fresh & Easy Buzz:

May 5, 2010: H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

May 6, 2010: Say it Ain't So Joe: Trader Joe's Tells H-E-B's Joe V's Smart Shop to Change its Name

Say it Ain't So Joe: Trader Joe's Tells H-E-B's Joe V's Smart Shop to Change its Name

Analysis & Commentary

Yesterday we reported on and wrote about Texas grocery chain H-E-B opening its first Joe V's Smart Shop discount grocery store at 12035 Antoine Drive in Houston, Texas. Our story - May 5, 2010: H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

Last night we heard via e-mail from a reader who visited the store yesterday. He told Fresh & Easy Buzz there was a big crowd at the new store - and new format for grocer H-E-B - for the Cinco de Mayo grand opening. There was plenty of free food and lots of bargains offered, he said. It was a good, strong grand opening for H-E-B's Joe V's, according to the reader, who works in the food and grocery industry in a sales capacity.

But not all is good for H-E-B and the fictitious Joe V's beyond yesterday's grand opening.

The other Joe - Trader Joe's - is striking back. The local Houston Business Journal is reporting that Monrovia, California-based iconic grocer Trader Joe's filed a cease-and-desist order on April 26, just days before yesterday's grand opening, against H-E-B regarding its use of the "Joe" name for the new Joe V's Smart Shop discount format store.

The publication reports that, "according to documents filed with the U.S. District Court in Austin, Texas, Trader Joe’s is demanding that H-E-B 'immediately cease and desist its use of the word Joe in the proposed business name Joe V’s Smart Shop and in the associated promotional materials for the store,' and threatened to 'pursue any and all available legal remedies' if those demands were not met."

But H-E-B begs to differ.

On April 29, H-E-B responded to the Trader Joe's legal complaint by filing a declaratory judgment petition asking the federal judge to determine that "there is no likelihood of confusion, mistake or deception as to the source or sponsorship of H-E-B’s goods or services sold and planned to be sold under the Joe V’s name," reports the paper

"H-E-B contends that the only common element between the Joe V’s name and the Trader Joe’s name is 'Joe,' a term in which Trader Joe’s has no exclusive rights," an H-E-B spokesperson told the reporter. Further: "The name 'Joe' is an extremely common surname, and is widely used by many retail businesses, including in the grocery and food fields," he said.

Trader Joe's doesn't operate any stores in Texas - yet.

The full Houston Business Journal story is here.

Ironically, we lead our May 5 piece by making an analogy between Trader Joe's and H-E-B's Joe V's. Below is our lead paragraph:

"Unlike the "Joe" in the name of the iconic Southern California-based grocery chain Trader Joe's, which represents a real person - founder Joe Coulombe - the "Joe" in Joe V's Smart Shop, the name of the new discount grocery store concept by Texas-based grocery chain H-E-B, is a creative fiction, designed to personalize the popular privately-held grocer's new warehouse-style discount format, the prototype store of which opened today at 12035 Antoine Drive in Houston, Texas."

But it wasn't mere irony that lead us to choose that particular lead. Trader Joe's is vigorous in protecting its trademark name, including the use of "Joe" or "Trader" (and not just together in the same name) by grocers and any other business, regardless of the context.

When we first heard about H-E-B's Joe V's a couple months ago, one of the first things that came to mind was a challenge from Trader Joe's. We've even exchanged e-mails with a regular reader from Texas over the Trader Joe's-Joe V's name irony topic over the last few weeks.

We wrote about Trader Joe's trademark vigor in these two stories in the blog published on January 15, 2009: [Small-Format Food Retailing USA: The Big Apple Won't Be A Two-Trader City: Judge Says No to Gristedes' 'Trader John's' 'Trader Joe's' Knockoff and Small-Format Food Retailing USA -Trader v. Trader: Gristedes Complies With Judge's Order; Covers Up 'Trader' Portion of its 'Trader John's' Store Sign]. In this instance Trader Joe's was successful in forcing New York City's Gristedes supermarket chain from using the name "Trader Johns" on a new concept, small-format grocery store it opened last year in the city.

We aren't trademark lawyers here at Fresh & Easy Buzz. But it seems to us that the Gristedes "Trader John's" name was clearly an attempt to cash in on the Trader Joe's name, although the owner and CEO of Gristedes, billionaire John Catsimatidis, is named John.

But the use by H-E-B of the name Joe V's Smart Shop doesn't appear on the face of it to be an attempt to rip off the Trader Joe's trademark. Perhaps the use of Joe V by the grocer has some subliminal motivation behind it in terms of resonating in consumers minds. After all, "Joe," as in its usage in any variation when it comes to grocery stores, seems to be perceived as pure gold. But it's unclear to us that Trader Joe's is on solid footing in its legal attempt to get H-E-B to change the store's name. But then, we aren't trademark lawyers, so we'll have to wait and see. But a legal fight to the end over the name clearly is something that's likely to happen if H-E-B sticks to its guns.

Interestingly, in our piece yesterday we had some fun about the fact the Joe V of H-E-B's Joe V's Smart Shop is a creative fiction, unlike the Trader in Trader Joe's, who is a real person, founder Joe Coulombe, who sold the grocery chain to Germany's Albrecht brothers, of Aldi ownership fame, many years ago. Theo Albrecht is today the sole owner of Trader Joe's. He and his brother Karl both own Aldi, but under a separate ownership structure.

In the Houston Business Journal report, Armando Perez, the senior vice president for H-E-B in Houston, comments that the Joe V’s brand is based on the name of an H-E-B executive who was instrumental in developing the new concept over the past two years. We take Mr. Perez's word for that - but he's on the record in more than one instance saying the Joe V's name was created in order to personalize the new discount grocery chain. Other H-E-B executives have also said there's no real Joe V. Perhaps the H-E-B executive was an inspiration?

So we ask: Will the real Joe V please stand up?

The Trader Joe's cease-and-desist order against H-E-B and it's Joe V's Smart Shop is worth following. When it comes to its name, Trader Joe's, like fast food chain McDonalds, is willing to spend whatever it takes and devote whatever time is required to win. That it decided to challenge Joe V's suggests Trader Joe's will fight the name like a hungry dog going after a prime rib bone.

We said this in the last paragraph in our story about Joe V's yesterday: "The Joe V's format and prototype store will be an interesting development, from one of the most interesting and successful grocers in the U.S., to observe and follow closely. We will be doing just that.

But we have to admit, we didn't know it would get so interesting - so fast.

H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

New Format Development

Unlike the "Joe" in the name of the iconic Southern California-based grocery chain Trader Joe's, which represents a real person - founder Joe Coulombe - the "Joe" in Joe V's Smart Shop, the name of the new discount grocery store concept by Texas-based grocery chain H-E-B, is a creative fiction, designed to personalize the popular privately-held grocer's new warehouse-style discount format, the prototype store of which opened today at 12035 Antoine Drive in Houston, Texas.

H-E-B's Joe V's in Houston is no frills inside and out. The store's exterior (above) looks more like a barn than a supermarket. The store's interior (below) is no frills and utilitarian all the way: cement floors, warehouse-style shelving and basic signage.

The Joe V's Smart Shop prototype store is 50,000 square-feet, according to H-E-B.

The premise and positioning of Joe's V's is no frills - it's discount all the way.

Here's the Joe V's mission statement and promotional tagline, for example:

We’re Joe V’s Smart Shop and we never met a low price we didn’t like! From farm fresh produce and top quality meats to everything in between, we have what you need for less. That way you don’t have to shop around. We’ve already done it for you! What’s our secret to low, low prices? We keep things simple and pass the savings on to you. After all, you know a great deal when you see one. That’s why we have outrageously low prices on the items you use every day. So come get to know us. After just one trip you’ll agree, “Those who know…save big with Joe.”

It clearly communicates a focus on price-value. It also takes a shot at communicating that personalization aspect in the last line, referring to the fictitious Joe.

Keeping with that no frills, discount focus, Joe V's Smart Shop also offers a limited item selection: about 9,000 SKUs, compared to the 37,000 -to- 40,000 SKUs carried in the H-E-B flagship stores, according to the retailer. At 9,000, that's still a bit more than double the SKU count of small-format grocers like Aldi USA, Supervalu's Sav-A-Lot and Tesco's Fresh & Easy though.

Joe V's item selection includes both manufacturers' national and regional brands and H-E-B's store brands.

The prototype discount market has all of the standard departments: dry grocery, perishables-dairy-deli, frozen foods, produce, meat-seafood and bakery. What you won't see in these departments at Joe V's though are the many upscale and higher-end items which H-E-B is known for offering in its flagship stores - and even more so in its very successful upscale-specialty format Central Market banner stores.

The new format's focus is on price-value: The discount price-value shopper is the target market for the fictitious Joe V.

In keeping with its no frills, discount positioning, Joe V's will have one of the first automated iCASH machines to be used in a U.S. grocery store. The machine, which H-E-B has been testing in some of its stores in San Antonio, Texas, allows customers to pay for their groceries using the self-service machine, while employees scan and bag their purchases at checkout. The iCASH machine accepts cash, debit and credit cards, WIC Vouchers and food stamps, all of which Joe V's is accepting. Joe V's also accepts manufacturers' coupons.

A key efficiency aspect of the The iCash machine, besides being a big time-saver, which equals employee labor savings, is it eliminates the need for employees to set up and balance the cash register tills through the day. The machine does that task automatically. The machines are used in a number of supermarkets in Europe.

Additionally, in keeping with the store's warehouse design style and shelving, all of the product to be shelved is brought out onto the floor on pallets, using a forklift. Hand stocking by store employees is kept at a bare minimum. This isn't a new concept. For example, warehouse formats like Food 4 Less and others have been doing it for decades. But it is labor-saving

An interesting note about the prototype Joe V's Smart Shop unit is that H-E-B owns the property where the store sits, along with the store building, and developed the shopping center anchored by it's first discount grocery market. H-E-B is in the process of leasing retail space it's built next to the store in the center.

The grocer also is leasing some space inside Joe V's to tenants. So far two are going in: Pronto Insurance and First National Bank, according to H-E-B. There's additional space available in the store for a couple others.

A key merchandising focus for H-E-B with Joe V's Smart Shop is on non-foods, general merchandise. For example, the Houston store is featuring the comforters pictured above for $5 each as part of its grand opening sale. The store is calling this promotional item, and some others, a "Facebook Deal" because it's promoting them exclusively on its Joe V's Facebook site. Notice the Facebook "f" logo on the signs in the photograph above, for example.

The store will offer lots of general merchandise, household and even durable goods items (comforters, clothing, electronics, yard furniture, ect.) on an in-and-out basis. We see shades of Aldi USA's "special buys" merchandising program in that regard, although it's important to note that numerous U.S. food retailers have used such merchandising long before Aldi set up shop in America. What makes it interesting regarding Aldi USA is it does so in a small-format box.

H-E-B is kicking off the Cinco de Mayo grand opening of its Joe V's Smart Shop store today by offering some hot promotional items in its advertising circular. Some of those items include: bananas at 3 pounds for $1; sweet corn at 8 ears for $1; chicken breasts for 67 cents pound; and assorted 16 ounce cans of vegetables at 3 cans for $1. [You can view the ad circular here.]

It's no accident, in our analysis, that H-E-B's opening of the first Joe V's store, in what could become a no frills, discount grocery chain, comes at a time when small-format, hard-discount Aldi USA is barnstorming its way throughout parts of Texas, opening numerous stores. Take a look here at Aldi so far in Texas. It's just getting started.

H-E-B has said Joe V's Smart Shop isn't a response to Aldi entering Texas. And since the first Joe V's is in Houston, where Adi has yet to open any of its hard-discount stores, we take H-E-B at their word on that - at least from a geographical standpoint.

But it only makes sense that at least a significant portion of Texas-based H-E-B's motivation in creating Joe V's would come from competitive concerns over Aldi's entering the state. In fact, if this isn't part of its motivation, we would be stunned, since H-E-B is one of the best and most competitive grocers in the U.S.

There's also significant and growing overall competition, including in and from the discount segment, in Texas - particularly in the Dallas-Forth Worth, Houston and Austin market regions - with more to come. The state is fast-becoming one of the most competitive food and grocery markets in America - from the discount format and mid-range segment, to the upscale and natural-organic format and segment.

The grocer is very successful with its H-E-B banner supermarkets and upscale Central Market chain. But it's flagship H-E-B supermarkets face somewhat of a competitive threat from Walmart and numerous other food and grocery retailers in Texas.

And of course there's Aldi, which has made Texas a major current and future focus, with plans to open a couple hundred stores in the state.

Therefore, it's a logical, competitive thing for H-E-B to create and test its own no frills, discount grocery store format named Joe V's Smart Shop (or another name), even though the "Joe" in its name is a creative fiction. We'll withhold judgement on the fictitious Joe V name for now.

H-E-B is using the Joe V's Smart Shop store as a prototype and, according to our information, isn't planning to open a second unit soon. Rather, it wants to study, analyze and tweak the first Joe V's for a while before opening another, or for that matter not opening any additional units, which seems "smart" in our analysis.

The Joe V's format and prototype store will be an interesting development, from one of the most interesting and successful grocers in the U.S., to observe and follow closely. We will be doing just that.

CEO: Supervalu to Open 100 New Sav-A-Lot Stores This Year; Strategy to Double Store-Count to 2,400 in 5 Years in Place

Supervalu Inc. plans to open 100 new small-format, hard discount Sav-A-Lot grocery markets this year, president and CEO Craig Herkert said today during the company's reporting of its fourth quarter and fiscal year 2010 sales and earnings.

The 100 new Sav-A-Lot stores will be a mix of corporate-owned/operated and independent-owned/operated units, Herkert said. He wouldn't offer a precise breakdown on the percentage of corporate vs. independent for the 100 new stores.

Supervalu, which also owns and operates a grocery wholesaling division serving independent grocers, franchises its Sav-A-Lot stores to independent owners, along with owning and operating the stores corporately. The company handles all of the logistics, distribution, marketing and merchandising support functions for the independent Sav-A-Lot store operators, for which the operators pay it an annual fee. In return, the independent operators agree to follow specific operational and marketing guidelines laid out by Supervalu.

The company opened 22 Sav-A-Lot units in the fourth quarter of 2009, according to Herkert.

The CEO said the 100 new store target this year is a speeding up of the grocery chain's expansion plans first formulated in mid-2009.

Supervalu plans to open about 15 new Sav-A-Lot stores in the first quarter of this year, slightly more than that in the second quarter, and the balance of the stores, to reach 100, in the last half of the year, Herkert said today.

Additionally, the CEO confirmed today that his plan to double the current Save-A-Lot store count of about 1,200 stores over the next five years is in place as a strategy and is being implemented. This is a very ambitious and major initiative. That would work out to opening in the neighborhood of 240 new stores on average in each of the next five years, for a total of about 2,400 Sav-A-Lot units.

"We are developing the internal expertise and skills to ramp up to a pace that will allow us to more than double in five years. Our newest Save-A-Lot stores are doing quite well, with sales averaging 10% above our internal projections, and initial capital costs 10% below our best spend rate," Herkert said today. "The Save-A-Lot team has had good success controlling capital by utilizing existing storing periods, aggressively negotiating construction bids, and leveraging internal architectural and engineering expertise."

Supervalu, which owns and operates about 2,300 stores in the U.S. under various banners - including the Albertsons and Bristol Farms chains in Southern California and a handful of Sav-A-Lot stores located in Southern and Central California where Tesco's Fresh & Easy is headquartered and has the majority of its 150-plus fresh foods and grocery markets - reported its fourth quarter and fiscal year 2010 sales and profits today.

Supervalu said it returned to profitability in its fourth quarter. Fourth-quarter earnings for the grocer were $97 million, or 46 cents a share. In contrast, in the same period last year, the company lost $201 million.

Additionally, the grocery company reported full-year fiscal 2010 net sales of $40.6 billion, and net income of just $393 million.

[You can read the full financial release issued today here for full financial details, along with this summary report by Dow Jones.]

Herkert said the company expects similar results for fiscal year 2011.

Supervalu Inc. has been struggling for a number of years. In fact, one can time its problems as beginning soon after its acquisition of the majority of then Boise, Idaho-based Albertsons Stores Inc.

This multi-year struggle is in part why Herkert, a grocery retailing veteran who prior to taking the position at Supervalu was a senior executive at Walmart, came aboard as Supervalu's CEo in May 2009.

Before joining Walmart he spent 23 years with the old Boise, Idaho-based Albertsons Stores Inc. and the no longer existing Salt Lake City, Utah-based American Stores. Albertsons acquired American Stores. Later on Supervalu acquired Albertsons. As a result, some might say its "all in the family" for Craig Herkert, with Walmart being a mere detour.

Shortly after taking the leadership reins last spring, Herkert decided to refocus Supervalu's strategy to emphasis its small-format, hard discount Sav-A-Lot format and banner, hence the aggressive new store expansion program doesn't come as a surprise to us.

But opening 200-plus new Sav-A-Lot stores a year for five years is big, surprise or no surprise.