CHARLES BUTT'S LEADERSHIP

DAVID ORGEL

SAN ANTONIO -- Charles Butt, chairman and chief executive officer of H.E. Butt Grocery here, has spent a lifetime around the family business started by his grandmother. He began working in the stores in the 1940s at age 8, and later joined his father in the business after college. He assumed his current titles in 1971. He is a member of numerous business and civic associations, and has received a large number of honors for his leadership of the company. SN interviewed Butt recently about his leadership, the company's history and culture, the company's 100th anniversary celebration, and H-E-B's future.

SN: What does achieving 100 years of operation mean to you? To the company?

CB: Texas was an unpopulated area of the American West when we started -- a frontier. Now it's one of the larger states and is industrialized with major cities. There's a lot of pride here at H-E-B in the continuity of our business over time. Some of our customers are in the fourth or fifth generation of families that shopped with us. Their great grandmother may have shopped with us.

SN: How has H-E-B's overall approach to business changed since the early days? In what ways has it remained the same?

CB: When our company was launched, Texas was a very poor state. As a result, we started with a value proposition. Over time, as our state urbanized and attracted people from all over the nation and became more diverse, we changed with it. We broadened our selections. In recent years, we developed our Central Market concept. We are differentiating our stores. Some of our stores are based on price and value, while others are more cutting edge in their specialty merchandise. Some things have remained the same over the years. These include our fundamental dedication to employees and their welfare, and being part of the communities we serve.

SN: What did you learn from your family that you carried into your leadership of H-E-B?

CB: My dad built the business up. He took over a little store from his mother. When he returned from the military, he took over the little business. He taught me how to go through tough times. Four different times he had tried to expand the first store to build a second store. Each time it failed because of factors ranging from competition to a town not being large enough. It was discouraging. But he hung in there and finally got that second store going. I only learned about all this later, but I understood his frustration in those early years, and his exhilaration and pride when he got things moving. That's been valuable learning for me. The lesson is that you have to hang in there. Eventually, things go in a good direction. My mother always had great concern for social issues in our community. She was a great advocate of improvements in health care, education, recreation, etc. So, thanks to my father and mother, I developed an appreciation for both business and community.

SN: What are your goals for the year-long anniversary celebration?

CB: We started planning about a year ago for the celebration. I wanted to focus on our partners, customers and communities. However, I want to focus more on the future than the past. What we can do better and what the year ahead will hold.

SN: How has the drive to differentiate through local marketing figured in the recent growth of the company?

CB: We are more and more focused on differentiated product. Texas is a large state. It has distinct and differentiated areas in terms of who the customers are. For instance, Houston is more international, with people from other countries and states. We focus on diversity. We pursue diversity programs in employment and supplier relations. We are proud of our work with minority businesses, and those headed by women. We have increased our procurement from those types of companies.

SN: What is the outlook for the future of H-E-B? What kinds of initiatives will be relied upon to ensure H-E-B maintains its strong position in its markets?

CB: We are developing larger stores. Forty thousand square feet used to be large years ago. Then 60,000. Then 100,000. We are well past that in the coming year. We will have more general merchandise and broaden our nonfoods, while continuing to have strong food departments. We are continuing to refine our own-label program with wonderful products.