Posted by Matt Register

Outstanding article about HEB during Hurricane Harvey and the efforts it takes to keep running in a disaster. Original article by Chip Cutter at LinkedIn. You can see the original HERE.

In Texas, a grocery chain is now inspiring memes.

One goes like this: “State and federal resources are struggling to get into impacted areas. H.E.B. — outta the way, we’re coming.”

Another adds: “I’ll see your FEMA and Red Cross and raise you my Texas grocery store chain.”

The images refer to the largest grocer in the state, H-E-B, with about 350 stores scattered throughout Texas and Mexico. At a time when retail watchers question the future of brick-and-mortar stores due to Amazon’s continued ascendance, the 112-year-old retailer is drawing widespread praise after managing to open 60 of its 83 stores in Houston last Sunday, hours after Hurricane Harvey slammed into the city as a Category 4 storm. (At this point, 79 of the 83 stores are now open.)

When employees couldn’t get to work, some stores still operated with as few as five people: one stationed at the door as crowd control and four working the registers, trying to get people out as quickly as possible.

On Saturday morning, I spoke with Scott McClelland, a 27-year H-E-B veteran who is president of the chain’s Houston division. For much of the week, he had worked from 5 a.m. to 9:30 p.m., with days blurring together.

The behind-the-scenes operation, as he told me, is a complicated dance involving multiple command centers, a helicopter, private planes, military style vehicles and frequent calls to suppliers, urging them to send toilet paper — and to skip the Funyuns.

McClelland, in his own words:

One thing about a hurricane is you never know exactly where it’s going to hit. They call them spaghetti models. They make their best guesstimate.

Historically, hurricanes hit one city. A hurricane is going to hit Houston. Or a hurricane is going to hit Corpus Christi. But because of the size of this one and the uncertainty of the route it was going to take, every area had to prep. That meant the drawdown on our distribution centers was huge. It really made it challenging for us.

We first knew the storm was coming last Tuesday. You begin to put plans into motion. We began shipping water and bread into the effected areas. Those are the two categories people buy first.

When you go into a hurricane, nobody buys frozen food. You want milk, bread, water. You want batteries, you want canned meat. You want tuna.

Coming out of a hurricane, if there’s been flooding, they’re going to want stick goods: mops and bleach. I’ll take all the bread I can possibly get right now. Then you’re going to start to get produce. The guy who runs floral at H-E-B calls everyday: Can I start to ship floral? We don’t care about floral. People do not buy flowers in the middle of a hurricane. You only have so many trucks and so much space.

I’ve been through a number of natural disasters, whether they’ve been hurricanes or tornadoes or floods. I’ve never seen anything like this. This takes calamity and disaster to a whole new level.

One of my stores, we had 300 employees; 140 of them were displaced by the floodingSo how do you put your store back together quickly? We asked for volunteers in the rest of the company. We brought over 2,000 partners from Austin, San Antonio, the Rio Grande Valley. They hopped into cars and they just drove to Houston. They said, we’re here to help. It’s shitty work. For 18 hours a day, they’re going to help us restock and then they’ll go sleep on the couch at somebody’s house.

Scott McClelland with Houston residents displaced by this week’s storm.

Texas is the only place where you’re a Texan first and an American second. The state pride is so great. The people are in love with the state. People who work for us were going to find a way to get to work because they knew they were the first line of defense for people to eat. It didn’t matter if you were a clerk making $12.50 an hour.

We used helicopters to fly truck drivers over from San Antonio, where our headquarters is based. Many of our drivers [in Houston] were stuck in their homes or lost their homes. The neck in the funnel, really in our capacity, was to get enough drivers to be able to get our trucks out of the yard and get them delivered.

We had trouble getting from Houston to Beaumont, Tex. yesterday because the water level was so high. We sent 10 trucks of water over because the city water is tainted. It took 18 hours for a trip that would normally take 90 minutes. So we’re contracting with Army troop carriers to get people through the high water. Then we said we’d use our corporate plane to get people over, but we couldn’t do that today because President Trump is coming over. The airspace is closed.

Folks are volunteering to do it because they want to be part of the process. The last hurricane we had, Hurricane Ike in 2008, when it was all over, we asked folks: What can we do to thank you? They said: Can you make a pin that can we put onto our badge to commemorate that we were part of this? I said, I think we can make a pin.

We’ve been talking to suppliers right and left about what we need. How can you move us up on the allocation list? And, maybe along the way, I might have told suppliers I talked to Walmart and Kroger and I heard they didn’t need anything. (Laughs.) They are in the same boat. I’m just trying to get more than my fair share.

If you think about toilet paper, we’ve called Procter & Gamble and Kimberly-Clark, and we said: Send entire trailer loads directly to our stores. One store will take half a trailer, and the other store will take the other half. You can just bypass our warehouse, so you can just get it to us. In doing that, I create more capacity in my distribution chain. So, you send direct trucks — here are the stores you can go to — and split the truck: make it half paper towels and half toilet tissue.

I called Frito-Lay and said, rather than manufacturing your entire product line, manufacture your bestsellers. I need Lay’s, I need Doritos, I need Fritos. I need a variety pack. I don’t need Funyons and I don’t need Munchos. Just make your best sellers. I won’t turn down any delivery. We’ll take it as fast as we can.

We have our own bread manufacturing plant. We normally make 50 different bread items; this week we’re making three. We’re making white. We’re making wheat. We’re making hotdog buns. Having access to product is more important than variety. Every time we have to changeover to a different product [in the bakery], we have to stop the machines. If we can just keep running the machines, then we can make more product and get more product out to the stores.

We have a command center in San Antonio. We have someone who heads up the command center, and people from distribution, gasoline, grocery, warehousing — they’re all there. And, in Houston, I have a command center with five people here. The other thing the command center works on is our relief efforts to the community.

We have these mobile kitchens: full-blown, self-contained kitchens on wheels. They can feed 2,000 people an hour. We send them right into the hurricane areas. We feed first responders and evacuees — people who wouldn’t have access to food. It’s just something H-E-B is known for doing in crisis, when there are fires, tornadoes. Oftentimes, we’ll get there before the Red Cross.

All rules are off when you have a hurricane. In 2005, my first hurricane was Hurricane Rita in Beaumont, Tex. FEMA closed the city; they wanted everybody to leave and they wouldn’t let anybody in. I had 70 stores without power. I needed to get my perishable product out because it starts to rot. FEMA wouldn’t meet with me. So, after two days, I got three busses and filled them with people and I typed up a letter that said, “To whom it may concern, these people are authorized by me to clean out the H-E-B stores and get them ready for business.” I got a Cadillac Escalade and put a flashing blue light on top. The police stopped them and said, “You can’t come in.” They handed them the letter from me on my letterhead and the policeman read it and said, “I guess you can come in.” We kind of coined the phrase fake it ’til you make it. That’s the way we go about handling natural disasters. We’ll do whatever it takes.

On Tuesday, we changed our strategy to say, let’s get product to the stores that are closest to the distribution centers because we knew we have the greatest likelihood of getting the trucks to and from them. Then, we’ll work out in concentric circles and we’ll send cars out to see: Can we get there and can we get back and what are the routes? The number of deliveries we’ve made everyday have just gone up exponentially.

I think I said on Thursday of this week, I don’t even know what day it is. Someone told me, hey, the Astros signed Justin Verlander. I had no idea. I really don’t know too much of what’s going on in the world, but I can tell you what’s happening area-by-area on flooding. Yesterday, they put a water ban on one part of Houston. Within five minutes, we had a truck rolling to that area. Once they put a water ban on, people go crazy. Like they have to get water immediately. If you can’t get water into a city, you’re going to have civil unrest.

A flooded H-E-B store in Kingwood, Tex. Three of the chain’s 83 stores in Houston will need to be rebuilt.

The interior of the Kingwood store.

I’m five days into this week, and my sales are down 4 percent versus a year ago.And that’s with a number of stores not being open at all some days. I’ll take that. I’ll end up the week with sales up from a year ago; frankly, sales are the least of my worries.

I do the commercials for H-E-B in Houston, so people know who I am. So, as I walked in the store, people would come up and hug me and thank us for making the effort to open because the Kroger across the street wasn’t open. The Walmart down the street wasn’t open. One woman walked up and started crying and she hugged me to thank us for being open.

You’re amazed at the innate good in people. People will rally to a cause to help out their fellow human beings. This time, maybe even more so than ever before.

Recovery’s not going to be measured in terms of days or weeks but really months. But, you know, Houston will rise. You come back in a year, you aren’t going to see a bunch of homes and buildings boarded up. This thing will get rebuilt.

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About the Author
Matt Register

Matt Register

In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.

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