H-E-B and Favor have partnered to bring deliverable groceries to Texas.
H-E-B and Favor have added express delivery options for shoppers who need items quickly. Credit: Courtesy / H-E-B

In a move that propels H-E-B further into the digital retail arena, the local grocery company announced Thursday it has acquired the on-demand delivery service Favor Delivery as a wholly owned subsidiary. The terms of the transaction were not disclosed.

Favor delivers orders from restaurants and grocery stores directly to users. With the acquisition, H-E-B gains access to Favor’s technology and advanced delivery system. H-E-B will also use the company’s data-driven approach to capture customer insights.

“We could not be more excited to be part of H-E-B,” said Jag Bath, Favor’s president and CEO. “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.”

Founded in Austin in 2013, Favor has expanded its presence to 50 cities across Texas. Last year, the company doubled the number of cities it serves across the state and, according to H-E-B’s statement, became the first U.S. on-demand delivery company to achieve profitability at scale. To date, Favor’s runners have made more than 8 million deliveries.

As a wholly owned subsidiary, Favor will continue to operate independently as a separate brand led by Bath. H-E-B will retain all of Favor’s 145 employees, who will now be H-E-B “partners,” and its 50,000 runners, who operate as contract delivery drivers.

H-E-B, which first began testing delivery service in November, is one of the nation’s leading independent food retailers, with annual sales of more than $23 billion and more than 370 stores. It is the largest private employer in Texas.

“I am thrilled to have H-E-B join forces with another well-respected and innovative Texas company,” stated Martin Otto, H-E-B’s chief operating officer. “Over the past two years, we have established a strong working relationship with Favor that has proven to be immensely successful for both companies. We see a unique opportunity with this partnership to support and accelerate each other’s growth through the sharing of experience, insight, and resources.”

The transaction is the latest in a series of investments in technology and partnerships H-E-B has made to develop its digital and delivery offerings in its home state.

Home grocery delivery is already offered through HEBtoYou and via delivery services like Shipt and Instacart. Those will continue to be available, an H-E-B spokesperson said.

Curbside pickup is also offered at more than 100 stores, and through H-E-B’s website customers can order and ship grocery, drugstore, and general merchandise products to 48 states and military bases worldwide.

Last week, online retail giant Amazon introduced free two-hour delivery of Whole Foods Market items through its Prime Now service in four select cities, including Austin.

On Wednesday, Walmart announced a plan to offer free delivery on items sold through its membership service Sam’s Club, a move to help Walmart compete with Amazon and others entering the grocery wars. It closed a number of Sam’s Club stores around the country and plans to convert some to distribution centers.

German grocery chain Aldi has launched a delivery service in partnership with Instacart in Dallas and other cities, and the other growing German chain, Lidl, is currently building a store on San Antonio’s far Northwest side, in Alamo Ranch.

On Wednesday, Austin-based Royal Blue Grocery announced its first San Antonio store, to be located at the corner of Houston and Soledad streets on the ground level of the historic Savoy Building.

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Shari Biediger

Shari Biediger is the development beat reporter for the San Antonio Report.