Kroger, H.E.B. Race for Gourmet Favor on Houston's Buffalo Speedway

(MoneyWatch)  Kroger is exploring a wider range of operational niches as it develops new formats, but those retailers who already operate in the sectors tested aren't letting their rival take business away unopposed, as H.E.B. and Meijer are proving

Meijer, which competes across its Ohio-to-Illinois market range with Kroger, recently announced a new, smaller concept that will allow it to expand more readily in dense urban metropolitan areas and provide a similar range of products and services as does Kroger's marketplace and food & drug format stores. In Texas, it's H.E.B. and Kroger squaring off. While its marketplace and food and drug stores expand product categories such as general merchandise, over the counter drugs and health & beauty products, Kroger's fresh fare concept has driven development of enhanced perishables and prepared foods in departments such as deli and dairy first in California, then Michigan and more recently in Ohio and Georgia. Those are the very same product areas that H.E.B. has augmented over the years both in standard configurations and, more dramatically, in its perishables and prepared food specialty operations, Central Market.

On Friday, the Houston Business Journal reported, H.E.B. opened an upscale, urban concept store just down the street from a newly renovated Kroger, one the publication identifies as the supermarket chain's best-performing grocery store in the state. The renovated Kroger only opened a week earlier. Cyndy Roberts Garza, an H.E.B. spokesperson, said the new store took perishables and prepared foods as developed in Central Market but translates them into a full-line supermarket. Central Market only carries a limited assortment of groceries, frozen food and consumables such as paper products. The new store offers 500 varieties of specialty and imported cheese, said Garza, adding, "Our produce section has a large selection of organic fruits and vegetables, and it has a fresh fruit bar with fresh-cut fruit every day. We also have sushi, and our seafood department delivers from all over world seven days a week."

The two stores face off across Buffalo Speedway in Houston's West University area, and, the Journal reported, a Kroger spokesperson admitted that the company timed its renovation to coincide with the construction of the H.E.B., even if it was a week behind in the opening schedule. Kroger spokesperson Rebecca King told Bnet that the new Kroger offers 300 varieties of specialty cheese and well as 35 to 40 kinds of artisan bread baked daily and sampled for customers. In the renovation, Kroger added a Seattle's Best café on a mezzanine overlooking the store where shoppers can relax over a cup of Joe, or perhaps Joseph in this case. Other specialty departments include a tortillaria, and party center where customer can conceive and concoct their own cupcakes. "We also have a desert destination where we have hand dipped chocolate covered treats such as chocolate covered strawberries," she said.

Having established what it regards as a satisfactory competitive stance versus Wal-Mart, it seems as if Kroger wants to take on more upscale rivals. Clearly, though, it will have a fight on its hands.

Coming soon: A closer look at the Buffalo Speedway Kroger.