H-E-B Acquires Delivery App Favor

In a move to expand its online presence in a digitally focused retail climate, H-E-B said it has acquired the on-demand delivery service Favor Delivery, which will become a wholly owned subsidiary. Terms of the transaction were not disclosed.

The deal arrives days after Amazon’s launch of Prime Now same-day delivery capabilities from Whole Foods stores and online delivery service Instacart’s fundraising round of $200 million, and continues a trend of marriages between technology and retail companies that saw Amazon buy Whole Foods, Albertsons buy Plated and Target acquire Shipt over the past several months.

Through this partnership, H-E-B officials say the company aims to accelerate its path to becoming a digital retail industry leader in Texas, enabling customers to choose how they shop, pay for and receive products. With Favor, which delivers everything from lunch to household items, H-E-B gains access to the company’s consumer-facing technology and on-demand advanced delivery system. H-E-B will also leverage Favor’s data-driven approach to capture valuable insights to deliver the best customer experience possible.

"Convenience matters to consumers and retailers have to keep up. So, it's no surprise to me that H-E-B made a play to acquire an already successful technology company built around convenience to compete with the likes of Instacart," Casey Gannon, VP of marketing at Shopgate, said in a statement. "H-E-B now has the opportunity to create personalized experiences based on their buyers' behavior using sensor data native to their phones and beacon technology within stores." Gannon also adds that H-E-B can now know shoppers' proximity to its stores and what they do when in-store, which will allow the retailer to cater to consumers' preferences using a mobile-first environment. 

Related:Whole Foods Adding Delivery Through Prime Now

“I am thrilled to have H-E-B join forces with another well-respected and innovative Texas company,” said Martin Otto, COO of H-E-B, based in San Antonio. “We share similar values, including a commitment to excellence in customer service and to our greatest resource—our people.”

Favor says it can "deliver anything" through its app and contracted "runners" who shop restaurants, grocery and retail stores in 50 Texas cities. It will continue to operate independently as a separate brand led by CEO and President Jag Bath. H-E-B said it would retain all of Favor’s employees and runners.

“Over the past two years, we have established a strong working relationship with Favor that has proven to be immensely successful for both companies,” Otto said. “We see a unique opportunity with this partnership to support and accelerate each other’s growth through the sharing of experience, insight and resources.”

Related:Instacart Raises $200M to Beef Up Against Amazon Delivery

Founded in 2013, Austin-based Favor has quickly expanded its presence to 50 cities across Texas, where it is currently the best-rated delivery service. In 2017, Favor more than doubled its footprint across the state, and says it became the first U.S. on-demand delivery company to achieve profitability at scale.

“We could not be more excited to be part of H-E-B,” said Bath. “I am incredibly proud of our team’s success and the business we have built at Favor. H-E-B’s extensive resources, capital and retail food industry experience will enable us to further build on our momentum and significantly accelerate our growth throughout Texas.”

The acquisition marks a powerful step for H-E-B to effectively position itself on level ground against Amazon, who looks to gain ground on Texas territory, said Tushar Patel, CMO for Kibo. "The same-day delivery grocery landscape has completely changed over the past year, and it has been exciting to see the competition getting stronger as Amazon, Walmart, Target and others continue to step up their game," he says. "With this move, H-E-B is incorporating Favor's resources and technology to the greatest extent and focusing on offering its customers a growing portfolio of fulfillment options and putting its groceries and top-favored products in the hands of Texas consumers quickly."​ 

This transaction is the latest in a series of strategic investments in technology and partnerships that H-E-B has forged to enhance its digital and delivery offerings in Texas. The retailer currently offers grocery delivery via its H-E-B To You service, as well as curbside pickup at more than 100 stores.