Spanning nearly 38,000 miles, some 2.4 million people live in South Texas. While San Antonio, Corpus Christi, Laredo and Brownsville are among the largest cities, most of the towns located within this expansive region are much smaller.
Grocery powerhouse H-E-B dominates the region, with a nearly 50 percent market share, according to Shelby Report data. Its aggressive expansion plans included opening 10 new stores across region in the last year alone.
“H-E-B is the most beloved grocery retailer in South Texas and, quite possibly, the entire country,” said Bob Hoyler, insights manager – retail and e-commerce, Euromonitor International.
“In part, this stems from the retailer’s history of philanthropy in South Texas. But from a day-to-day standpoint, H-E-B’s success is due primarily to its extensive assortment of high-quality foods and beverages, with a product selection geared to cater to the specific tastes and preferences of South Texas communities, with an especially large selection of products designed to appeal to the discerning palates of consumers of Tejano and Mexican descent.”
Hoyler pointed out that while H-E-B may not always be able to boast the least expensive prices on grocery items – especially when compared to Walmart or Dollar General – it is not the most expensive option either, and its extensive assortment of private label products helps to reinforce the retailer’s value proposition.
“In short, H-E-B’s combination of competitive prices, high-quality products and welcoming stores have endeared the grocer to South Texas shoppers across the income spectrum,” he said.
Of other grocers in South Texas, Walmart stands out – not just for being the giant of U.S. grocery retail, but also for its successful foray into the online grocery space.
“When it comes to dairy products and other perishable foods, U.S. consumers prefer curbside pick-up over home delivery. This plays into the hands of Walmart, which has embraced curbside pick-up to a greater degree than any other U.S. retailer,” Hoyler said.
[RELATED: Simmering Southwest: Region Boasts Unique Brew Of Grocery Retailing]
In many of the more rural areas, as is common across other parts of the U.S., residents often turn to non-traditional outlets for groceries. These include Dollar General and its perishable-focused format and DG Market, which features meat, dairy, produce and packaged grocery products.
About 80 percent of Dollar General stores serve communities of 20,000 or fewer people, and residents in these communities often rely on the retailer for their everyday essentials. South Texas towns such as Falfurrias, Hebbronville and San Diego have seen DG Markets open recently; one is scheduled to open in Alice later this year.
“We are constantly looking for ways to better serve our customers and one of our top priorities is to ensure the communities we call home have access to fresh, affordable and convenient food options,” said Emily Taylor, EVP and chief merchandising officer at Dollar General.
“We have exceeded our goal of having 5,000 total stores with fresh produce by January 2024. We’re proud to leverage our footprint to meet the need for healthy food options in more communities than any other retailer across the U.S.”
Economic factors shaping market
The South Texas grocery market is navigating a confluence of economic factors. Rising food costs on a national level are impacting consumer spending habits, causing many shoppers in the region to cut back on how much they are buying.
“South Texas, with its historically lower per capita income, is particularly vulnerable to these price increases,” said Michael Pachter, managing director at Wedbush Securities.
The ongoing border boom in certain areas of South Texas serves as a double-edged sword. While it presents an opportunity for increased sales, experts note it also is straining resources and driving up labor costs.
Those following the state of the supermarket industry in South Texas point out that the challenge for grocers in this region is balancing these factors and ensuring they have adequate staffing to meet growing demand.
Neil Saunders, managing director of GlobalData Retail, sees technology adoption playing a central role going forward.
“We’re seeing a growing demand for online grocery ordering and delivery options in South Texas. Grocers that invest in robust online platforms will be well-positioned for future growth,” he said.
Despite the complexity of the region, grocers that can adapt to changing consumer preferences, leverage technology effectively and maintain a strong focus on localization will be the ones to thrive in South Texas, experts note.
New entrants shake up scene
The arrival of new players such as Trader Joe’s in select South Texas markets, including San Antonio, is welcome news to many. According to Euromonitor analysts, Trader Joe’s entry indicates a growing demand in the market for the retailer’s combination of competitive prices and unique product offerings.
“At a time when many in South Texas are dealing with economic uncertainty, Trader Joe’s provision of low prices in an upscale-feeling retail environment is particularly attractive to middle-class consumers,” Hoyler said.
“In some respects, Trader Joe’s and H-E-B are somewhat alike, but Trader Joe’s more discounter-oriented model means that most of its customers have bargains in mind when shopping at its stores – even if the quality of goods is higher, and the product variety more unique, than one would typically expect to find at another value-focused retailer.”
That said, Hoyler believes H-E-B’s status as a full-service supermarket, as well as its wider product assortment, means that many consumers who might soon be visiting Trader Joe’s in South Texas will continue to prioritize H-E-B as their primary grocer.
Elsewhere in Texas, Corpus Christi’s downtown soon will be getting a new grocery store. Part of the Downtown Management District’s effort to get new businesses in the area, Community Grocery will offer farm fresh produce, gourmet ingredients, take-and-bake options and food classes.
According to news reports, the owners are renovating space in what was a former fitness center. In addition to groceries, the store will include a ramen bar, café and wine.
For Corpus Christi and the 1,200 residents who call its downtown home, a new grocery store opening comes as good news. The Community Grocery store is aiming to open this summer.
Meanwhile on the southside of Corpus Christi, Vmart, a new Asian-inspired market, opened in March. What sets Vmart grocery store apart is that it carries foods from a variety of Asian cultures, including China, Japan, Thailand, Korea and Vietnam. The 15,400-square-foot store also features a large hot food court, which is open six days a week.
Discount stores have new competition in the state. Daiso, a Japanese value chain, is increasing its footprint in Texas, according to news reports. As part of its rapid expansion plans, Daiso is opening several new stores this year in the San Antonio area.
Spanning in size from 5,600 to 8,200 square feet, Daiso stores feature a range of Japanese-inspired products from food and cosmetics to household and home décor. The company has more than 100,000 products in its range, many that are not widely available in the U.S. Prices range from $1.75 to $25.
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