2019 H-E-B ROY, Butt HOF

The Shelby Report of the Southwest • SEPTEMBER 2019

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The Shelby Report of the Southwest’s Retailer of the Year True to Texas, Devoted to People, Everything Really Is Better at H-E-B H-E-B is flat-out hard to describe. It lives and breathes everything Texas. It is generous almost beyond measure. It is loving, meaning it is strong when hearts are broken (Sutherland Springs) and tough when no one else can get the job done (Hurricane Harvey).

“Here Everything’s Better” is more than a slogan. It is what H-E-B strives for every single day not just in its stores, food, offerings and services, but for everyone it touches—veterans who lost limbs but not hope, teachers who are underpaid but dedicated, and entrepreneurial dreamers who just need that one shot at success.

H-E-B’s model for success is built on its strong commitment to people and the more than 300 communities it serves. The company’s stores, offerings and, above all, its Partners represent not just what makes Texas strong, but also the tremendous success that comes from embracing diversity.

We are proud to recognize H-E-B as The Shelby Report of the Southwest’s Retailer of the Year.

Great companies are run by exceptional people, and in this issue we also celebrate H-E-B Chairman and CEO Charles Butt as he is named to Shelby’s Food Industry Hall of Fame.

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H-E-B’s Philosophy: No Store Does More

Heart

People matter. Here, people are at the heart of every decision made and everything H-E-B does.

No store cares more.

Service

H-E-B Partners believe grocery shopping is more than an errand. That’s why H-E-B pledges to always go above and beyond. Here, it thinks like the customer, not about the customer.

Drive

Competition drives H-E-B, but collaboration defines it. A shared spirit drives H-E-B Partners to work together and build a company that doesn’t just meet the customer’s needs, it exceeds them.

Innovation

H-E-B continuously searches for ways to serve Partners, customers and communities better and make their lives easier. Here, it is relentlessly dissatisfied with the present.

Commitment

Here, H-E-B doesn’t need an audience to act with integrity. Because H-E-B believes you don’t need permission to do the right thing.

Spirit of Giving

At H-E-B, the Spirit of Giving is a tradition that spans more than a century. It is happy to invest in the communities it serves because it is from here, too.

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Hunger relief has been a key focus for H-E-B since the first store opened in 1905. Its commitment to and involvement in the communities it serves have been an important part of the way the company does business.

Since 1982, the H-E-B Food Bank Assistance Program has surpassed more than 1 billion pounds of food donated to 5,500 nonprofit organizations in Texas and Mexico. The H-E-B Food Bank Assistance Program works year-round to raise awareness and battle hunger in Texas and Mexico.

In 2018 alone, H-E-B donated more than 32 million pounds of food to Texas and Mexico food banks, equal to more than 25 million meals.

Started in 1990, the H-E-B Help End Hunger tearpad campaign is a component of H-E-B’s Food Bank

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Assistance Program that gives customers the opportunity to help their local food bank in the fight against hunger and malnutrition among thousands of children, elderly and needy families in communities throughout Texas and Mexico. Last year, H-E-B customers across Texas raised $700,000—or 3 million meals—for 18 Texas food banks.

H-E-B made other significant donations to food banks across the state in 2018, including a summertime gift of 1.5 million apples and holiday donations of 1.2 million sweet potatoes and more than 450,000 pounds of turkey and ham.

Also, 2018 marked the 30th anniversary of the H-E-B Feast of Sharing dinners, which serve more than 250,000 meals during the holidays. H-E-B hosts 33 Feast of Sharing dinners each year in Texas and Mexico.

H-E-B hosts 33 Feast of Sharing dinners each year.

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CONGRATULATE

2019 SOUTHWEST RETAILER OF THE YEAR

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H-E-B Operation Appreciation is a companywide campaign created to honor the brave men and women of the U.S. Armed Forces—men and women who are H-E-B Partners, customers and members of the communities it serves.

Operation Appreciation partners with organizations that support U.S. troops and their families. In contributing time, talent and financial support, H-E-B recognizes and appreciates the dedication and sacrifices service members make on behalf of the nation.

H-E-B and the H-E-B Tournament of Champions have gifted nearly 30 homes to wounded military service members, a figure that will continue to grow in 2019.

“H-E-B Operation Appreciation is critical in helping members of the U.S. military and their families during these difficult times. It reaches out to all those in the State of Texas who have served or are serving to protect our freedoms and our way of life,” said Lt. Gen. Rick Lynch, a retired U.S. Army member who served as the Commanding General of III Corps and Fort Hood, Texas.

In celebration of National Military Spouse Appreciation Day, H-E-B stores across Texas celebrated and honored several thousand military spouses.

Each year, H-E-B’s statewide tear-pad donation campaign raises funds for homes in partnership with Operation Finally Home, Homes for Our Troops and the Gary Sinise Foundation, along with other militaryserving nonprofits, including the Military Child Education Coalition, Tragedy Assistance Program for Survivors and the USO.

H-E-B has gifted nearly 30 homes to wounded military service members, including a home in New Braunfels for the family of U.S. Army Sgt. Ricardo PerezRamos, who lost both legs in Afghanistan.

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Providing aid to its communities in times of need is the cornerstone of H-E-B’s Helping Here philosophy.

For more than 100 years, the company has demonstrated its commitment to communities in crisis by donating financial support, emergency supplies, drinking water and food, as well as providing efficient ways for customers to assist those affected by a natural disaster.

After Hurricane Harvey in 2017, H-E-B brought 2,000 Partners to the Houston area from Austin, San Antonio and the Rio Grande Valley. Hundreds of them went to Houston to volunteer and cover for area store personnel who were dealing with their own losses after the storm. Volunteer employees worked long hours each day to help restock stores.

From its headquarters in San Antonio, H-E-B helicoptered truck drivers and sent its Mobile Kitchens and Disaster Relief Units to remote areas.

During Hurricane Harvey alone, H-E-B’s total giving to disaster relief efforts exceeded $6 million in monetary commitments, support of emergency shelters, food bank donations, volunteer hours and the deployment of H-E-B’s Mobile Kitchens and Disaster Relief Units.

H-E-B Disaster Relief Units and Mobile Kitchens efforts and donations included: • 60,000 hot meals served by H-E-B Mobile Kitchens • 75 truckloads of water, or 150,000 cases • 21 truckloads or 75,600 bags of ice • 4,000 bags of cat and dog food H-E-B also made a $1 million donation to the Hurricane Harvey Relief Fund, and H-E-B Chairman and CEO Charles Butt made a personal $5 million donation to the Justin J. Watt Foundation to further help with relief efforts in Houston and another $100,000 to Prairie View A&M students affected by the storm.

H-E-B also helps fellow grocery companies in times of need. After Hurricane Irma in 2017, H-E-B donated 10 truckloads of product to Florida-based Publix to help with its relief efforts.

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Food Industry Hall of Fame

H-E-B Chairman and CEO Charles C. Butt was born into a family business that has become a Texas icon. He succeeded his father, Howard E. Butt Sr., as president of the San Antonio-based grocery chain in 1971 when the company had 6,000 Partners (employees), roughly 120 stores and $221 million in annual sales.

Since he took the helm, the company has grown to operate more than 400 stores in Texas and Mexico, employ more than 116,000 Partners and post annual sales of more than $26 billion.

It was the Partners’ opinion of Butt that earned him the No. 2 spot out of 100 chief executives across Charles Butt the country on Glassdoor’s Top CEO list for 2019. The annual rankings are based entirely on employee feedback shared anonymously on the Glassdoor website. Butt received a 99 percent approval rating from H-E-B Partners.

Under his leadership, the desire to constantly innovate has led to new store concepts, the creation of one of the most successful private label programs in the country and the commitment to build out state-of-the-art digital products and services to complement H-E-B’s world-class stores.

As part of its philanthropic mission, Butt displays his commitment to the Partners and communities H-E-B serves. As the largest privately held employer in Texas, H-E-B granted company stock in 2015 to more than 63,000 Partners, rewarding their hard work, dedication and loyalty.

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A champion for public education and literacy, Butt has developed several initiatives, including Raise Your Hand Texas, a nonprofit advocacy organization that works to strengthen public education in Texas. In 2017, he established The Holdsworth Center, investing $100 million of his personal wealth to create a nonprofit leadership institute for Texas public school administrators. It is named for his mother, Mary Elizabeth Holdsworth, who taught school in the 1920s in Center Point, Texas, a town near Kerrville, where H-E-B was founded.

In addition, the Charles Butt Scholarship for Aspiring Teachers provides annual funding for up to four years as well as training and development opportunities with established public educators. Along with H-E-B, Butt also is investing heavily in the development of Centers for Applied Science and Technology (CAST) schools.

Please see page 34

George Kelemen

On behalf of the Texas Retailers Association, I congratulate Charles Butt on being inducted into the Food Industry Hall of Fame. Charles, the Butt family and H-E-B have a deep and rich history in the grocery industry in Texas and this honor is well deserved. H-E-B’s engagement in the Texas Retailers Association is equally as deep and rich, and we take great pride in celebrating this achievement with one of our homegrown, Texas‑based and longest‑tenured members. Congratulations!

—George Kelemen, president and CEO, Texas Retailers Association

8/19/19 2:36 PM

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SEPTEMBER 2019 • The Shelby Report of the Southwest

H-E-B has a key, dynamic presence in the growing, bustling economy of Houston. Its 26,500 employees in the Houston area follow the motto, “We’re in the people business. We just happen to Sylvester sell groceries.” But H-E-B Turner also goes well beyond being a good corporate presence in our ever-expanding city. It also puts the “H” in “heart.” During and after Hurricane Harvey, H-E-B’s total giving to disaster relief efforts exceeded $6 million in monetary contributions, support of emergency shelters, food bank donations, volunteer hours and the deployment of H-E-B’s Mobile Kitchens and Disaster Relief Units. H-E-B has Houston’s thanks and admiration for doing a job well.

—Houston Mayor Sylvester Turner

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H-E-B is unrivaled in its commitment to caring for those in need that goes back to its founding Bo in 1905.

Soderbergh For Tarrant Area Food Bank, this translates to approximately a million pounds of product as well extremely generous financial support. For Texas food banks, H-E-B’s support is also a vital part of the service we provide every day as well as in times of disaster relief.

—Bo Soderbergh, executive director, Tarrant Area Food Bank

Brian Greene

For nearly 20 years, H-E-B has been one of Houston Food Bank’s most loyal and valued Partners by supporting our efforts to address hunger and the root causes of poverty.

Through their financial contributions, employee volunteers and product donations, H-E-B’s impact on the Houston community has been widespread and significant, and thousands of families, seniors and children have benefited from their contributions of time, food and funds. H-E-B was there to support the Houston community in the aftermath of Hurricane Harvey and stepped up with a contribution and volunteers as the Food Bank ramped up its disaster response efforts. We wish to congratulate H-E-B and Charles Butt on this very deserving and distinguished honor, and we thank this amazing company for the difference it has made in local communities throughout Texas.

—Brian Greene, president and CEO, Houston Food Bank

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From page 30

Educating all children

No store does more for public education than H-E-B and its chairman and CEO Charles Butt.

Butt has taken the Giving Pledge, a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to giving back. It was created by Bill and Melinda Gates and Warren Buffet and more than 200 people have signed on.

Butt wrote about taking the pledge in 2018. He said the roots of H-E-B’s Spirit of Giving (part of the company’s philosophy) can be traced back to his parents’ decision in 1933 to contribute 5 percent of the company’s pre-tax income to charitable causes. H-E-B does it because, in his words: • It’s our civic obligation.

• The income gap between top and bottom earners is too great for the nation’s future stability.

• It’s the right thing to do.

“I believe that a quality education for every child should be a preeminent national goal. I believe that achieving this goal is critical to securing our nation’s future,” he wrote.

In the Giving Pledge statement, he also wrote, “Other causes are more glamorous, but public education is foundational for the United States.”

What Butt has done for education in Texas will continue to shape the state’s future long after he is gone.

At the most recent H-E-B Excellence in Education Awards event in May, Butt personally handed out hundreds of thousands of dollars in cash awards and grants. Created in 2002, the awards are designed to honor outstanding public school professionals and to thank them for their dedication and commitment. Through the program, H-E-B seeks to pay tribute to those educators who go the extra mile each and every day to serve their students and their communities and who inspire others to do the same.

When he received the HistoryMaking Texas award from the Texas State History Museum Foundation earlier this year, Butt said, “My life story has been uniquely shaped by Texas, and I have a strong love for this state, its history and its people. With deep Texas roots, it is my honor to give back, working to provide a more hopeful future for our children through strengthening our public education system.”

H-E-B Partners with United Way for the Write Start Project school supply drive to support teachers and children. Shoppers can donate school supplies or make monetary donations and participate in “Stuff the Bus Day” events at H-E-B stores.

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Each year, H-E-B gives $10 million in support of education in Texas. From honoring teachers and principals to teaching anti-bullying techniques, H-E-B puts its money to work for young Texans.

H-E-B’s Excellence in Education Awards were created in 2002 to honor outstanding public school professionals and to thank them for their dedication and commitment. It is the largest monetary award program for teachers in Texas. Referred to as the “Oscars for Educators,” the 18th Annual Excellence in Education Awards awarded more than $700,000 in winnings to teachers and school administrators in Texas this year alone.

In 2011, H-E-B established the Read 3 program and, to date, it has given 4 million books to children. The Read 3 program provides books so that parents and caregivers can read to children at least three times a week.

H-E-B and the Charles Butt Foundation continue to support Centers for Applied Science and Technology (CAST) high schools —a career-focused network of high schools that train the next generation with technologybased knowledge and skills—by donating $2 million for the development of CAST Med High School in San Antonio. The latest investment brings the overall support of H-E-B and the Charles Butt Foundation to more than $8 million.

The H-E-B Tournament of Champions is one of the largest charitable events of its kind in the nation. Created to provide an opportunity for H-E-B’s suppliers to partner with the company to support nonprofit organizations focused on providing initiatives important to children and families across Texas, it raised more than $10 million in 2019, bringing the total raised over 34 years to more than $118 million.

In 2015, H-E-B introduced the H-E-B Buddy League, an antibullying classroom initiative for school-aged children that aims to promote diversity and inclusion by inspiring kindness and respect over negative behavior such as teasing, excluding from play and bullying.

Using song and animation, the live show takes students through five training tasks that demonstrate bullying behaviors and show ways to stand up to bullying and promote unity.

In addition, first- through third-grade students are eligible for the H-E-B Buddy League Student Advocate Award, which recognizes children who demonstrate acts of kindness, respect, courage and inclusion.

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H-E-B’s commitment to the communities it serves includes finding greener ways to do business. Its pledge to “always go above and beyond” includes efforts to care for the environment. It has won numerous awards and recognition since 1997 for its work in that area.

Each year, H-E-B gives away 250,000 bags made from recycled plastic bottles to celebrate Earth Day. Since 2008, H-E-B has given out more than 2 million reusable bags.

On top of the free bag giveaway, H-E-B stores across the state hold family-friendly events, tree plantings and community cleanups. Additionally, stores have teamed with local schools on a recycling initiative to see who can collect the most plastic bags.

In 2018, more than 1 million pounds of plastic bags and film were collected from store recycling bins, an effort H-E-B plans to expand.

Since 2009, many H-E-B stores have been awarded LEED (Leadership in Energy & Environmental Design) green building certifications, and it has incorporated many of the same

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sustainable design strategies into new stores.

As a company, H-E-B diverted more than 473 million pounds of waste from landfills in 2018 by recycling materials including cardboard, plastics, office paper, food waste, metals and truck tires.

Its Organic Diversion Programs have diverted more than 47 million pounds of organics from landfills to compost, animal feed and landscaping applications.

Over the past decade, shoppers have raised $1 million through the donation campaign EarthShare of Texas, a nonprofit that supports more than 70 respected environmental and conservation groups.

Additionally, H-E-B provides year-round support to several environmental organizations such as Keep

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Texas Beautiful and its Keep Texas Waterways Clean and Green Bag Grant programs.

Due to its fuel-saving strategies, H-E-B was the only Texas-based company invited to serve as a charter partner in the Environmental Protection Agency SmartWay Transport Partners, which was formed to reduce the greenhouse gas and other harmful emissions from the heavy-duty sector.

H-E-B improved its fuel economy by more than 41 percent over the past nine years by continually tweaking new technologies made available to custom-fit loads and the terrain in its area of Texas.

It uses wide-based single tires on its big rigs that are lighter weight, more fuel-efficient and use less oil in the manufacturing process compared to two standard dual tires. Used tires are recycled into rubber mulch.

Its in-store offerings reflect its care for the environment as well. H-E-B is the largest retailer offering cage-free eggs in Texas.

All H-E-B branded eggs, including H-E-B Liquid Egg Whites, are cage-free and third-party certified to ensure artificial growth hormones or antibiotics are never used. Additionally, all Central Market brand eggs are pasture raised.

In 2019, in Partnership with Environmental Defense Fund (EDF), an international conservation organization, H-E-B strengthened its commitment to creating an industry-leading sustainability program dedicated to sourcing top-quality seafood from socially and environmentally responsible fisheries and farms.

It also supports the Texasbased Coastal Restoration Program, which was able to purchase a 24-ft. aluminum boat in 2017 specifically built for its ongoing fieldwork and research.

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H-E-B on Path to Become Technology Leader in Texas H-E-B has made preliminary plans to construct a state-of-the-art tech center at its San Antonio headquarters that will house up to 1,000 H-E-B Partners.

Starting next year, the company will begin construction on an approximately 150,000s.f., five-story building in the heart of its Arsenal campus in downtown San Antonio, further expanding its technology base in the Alamo City. Construction is scheduled to begin by summer 2020 and is tentatively set for completion by summer 2022.

As part of this expansion, H-E-B will add 500 new jobs in San Antonio and relocate its digital Partners from other locations in the city to house its digital teams closer together. With the growth of H-E-B Digital, which includes its product, design, technology and e-commerce teams, the company strengthens its position as a leading digital retailer and brick-and-mortar business.

“Our success starts with our people, who provide exceptional hospitality to deliver world-class shopping and digital experiences,” said H-E-B President Craig Boyan.

“We’re committed to hiring more people, adding the necessary skills to become both a better tech company and even stronger brick-and-mortar retailer.”

For the H-E-B Digital team, there are currently more than 1,000 Partners in San Antonio and another several hundred at its Eastside Tech Hub in Austin, which opened in June. To commemorate the opening of the Eastside Tech Hub, H-E-B and Favor will make $100,000 in charitable gifts to support hundreds of students in Austin and San Antonio via STEM-based summer camps and programs, such as Code2College in Central Texas, the Austin Prefreshman Engineering Program at Huston-Tillotson University, Video Game Camp at Austin Community College and Youth Code Jam in San Antonio and Austin.

Companywide, there are more than 5,500 e-commerce Partners who are part of the retailer’s H-E-B Curbside and Home Delivery teams.

Like its sister facility in Austin, the new workspace will offer a variety of dynamic work areas spread throughout the floor plan, including open collaboration areas, individual workspaces and meeting rooms equipped with advanced technology and video conferencing capabilities.

San Antonio-based Lake Flato Architects will design the project, which will boast modern amenities and cutting-edge features while incorporating design elements found throughout the Arsenal campus.

“The San Antonio tech center will become part of the new front door to our Arsenal campus, just as H-E-B Digital is creating a new front door for our customers online and via mobile shopping experiences,” said Jag Bath, H-E-B chief digital officer.

As the company accelerates its path toward becoming a technology leader in Texas, these efforts support H-E-B’s commitment to growing its digital team in San Antonio while it continues to invest in the city, state and its overall workforce.

“H-E-B’s service to customers, commitment to community and drive for innovation are why they are so much more than a store, and why the City of San Antonio is honored and proud of this incredible growth of 500 highlyskilled jobs,” said San Antonio Mayor Ron Nirenberg. “Just as no store does more than our H-E-B, no city achieves more than San Antonio because of H-E-B.” For H-E-B, this growth is part of a companywide push to integrate more innovative technology-based services into its digital lineup. Along with the acquisition of Favor, H-E-B continues to expand its e-commerce offerings such as H-E-B Curbside and H-E-B Home Delivery, which are expected to be at more than 200 locations by year’s end, and H-E-B Go, a mobile solution that allows people to scan and pay for their items with their phones.