Texas grocery giant H-E-B is taking a giant leap into the digital retail world with the announcement Wednesday that it is leasing an 81,000-square-foot facility in East Austin for what it calls “a world-class tech facility and innovation lab.” The facility, a renovated industrial warehouse, is set for completion in 2019 and will serve as a creative and collaborative workspace for the privately held H-E-B and its newest acquisition, Favor, to capture a larger portion of the digital retail market.
“This state-of-the-art space will be a hub for creativity and innovation as we continue to develop the ultimate digital experience for our customers,” Jag Bath, H-E-B’s chief digital officer and Favor CEO and president, said in a news release. “Bringing H-E-B and Favor closer together will allow us to promote collaboration between our two companies as we strengthen our commitment to building out H-E-B’s omnichannel services.”
The facility will be located on East 6th Street near downtown Austin. Favor has always been an Austin-based company, while H-E-B is based in San Antonio. Bath said that H-E-B’s expanded Austin footprint will bring several hundred new jobs to the Austin economy—mostly in the areas of product management, product design, and software engineering. The new tech facility is the latest move by the company that has sales of $25 billion and operates 400 stores in Texas and Mexico. The building is being designed by IA Interior Architects, the grocery giant said.
The initial focus of the innovation lab may be dictated by H-E-B’s aggressive expansion into its H-E-B Delivery and H-E-B Curbside services, which is now available in more than 145 stores across Texas with plans for expansion to another 165 stores throughout 2018. The growing trend in the grocery world is toward convenience. H-E-B’s acquisition of Favor in February helps it move in that direction. Favor, now a wholly owned subsidiary of H-E-B, has dominated the Texas delivery market since it started in 2013, and generated more than $100 million in revenue in 2017. “I’ve been with H-E-B for 26 years, but to my knowledge, we’ve not ever acquired a company like this,” Martin Otto, H-E-B’s COO, told Texas Monthly in February. “It’s been a heck of an education. But very importantly, we’ve not joined forces in the past because we haven’t seen the need to do that.” So what changed for H-E-B this time around?
Beyond the focus on its delivery and curbside services, there was no immediate word about other digital plans. But Favor has already had an impact in this world with its app-based delivery service, which has a network of more than 50,000 runners. This should make H-E-B more competitive with online retail giant Amazon, which became only the second American company to reach $1 trillion in valuation on Tuesday. Amazon owns Whole Foods Market and has begun rolling out delivery for its Prime customers.
This post has been updated since publication to correct an error. Favor does not oversee H-E-B’s on-demand delivery service.