This rendering shows H-E-B's forthcoming tech facility in East Austin. Credit: Courtesy / H-E-B

H-E-B is planting its digital flag in Austin with the grocer announcing Wednesday it is building a facility there to house its delivery subsidiary Favor and expanding digital departments.

The 81,000-square-foot building, currently a warehouse near one of its stores in East Austin, is set to be completed next spring and will become home to hundreds of H-E-B’s tech workers.

Despite some recent progress, H-E-B’s intention to add hundreds of new tech positions in Austin is a reminder of the work San Antonio needs to do to catch up in regards to developing its tech ecosystem, said David Heard, CEO of local advocacy group Tech Bloc.

“[H-E-B is] racing into the new world of digital largely accelerated by Amazon’s entry into their market,” he said, referencing Amazon’s 2017 purchase of Austin-based Whole Foods. “Then you have a wonderful investment in that new part of their business heading to Austin and not here in San Antonio.

“There are a lot of super smart people at H-E-B who are entrusted with making the right decisions for their company. I’m sure they’re making choices that are right for them, but this underscores the challenge and the opportunity for San Antonio. The onus is on us to up our game and make sure we’re the more obvious choice [for new tech facilities] in the future. Today we aren’t.”

The East Austin facility will include an innovation lab and collaborative workspace for H-E-B digital team employees and will serve as Favor’s corporate headquarters. “Bringing H-E-B and Favor closer together will allow us to promote collaboration between our two companies as we strengthen our commitment to building out H-E-B’s omnichannel services,” Jag Bath, chief digital officer of H-E-B and president and CEO of Favor, stated in a press release.

The company’s San Antonio-based tech workers will stay at H-E-B’s South Flores Street headquarters, spokeswoman Julie Bedingfield said. Among the tech-centric positions officing in San Antonio are software developers, data scientists, and network administrators.

“H-E-B has a well-established technology and digital presence in San Antonio that will remain in San Antonio,” Bedingfield said. “This new building is in addition to the office spaces we already occupy in San Antonio and Austin. H-E-B will use the workspace for Austin-based H-E-B Digital Partners and Favor’s team members. With this expanded Austin footprint, H-E-B and Favor plan to add several hundred jobs and are actively hiring across all areas of expertise, including product management, product design, and software engineering.”

The announcement is a signal of intent by the grocer to grow its expanding suite of digital products – including its e-commerce pickup and delivery services H-E-B Curbside and H-E-B Delivery, respectively – but a blow to San Antonio’s ambitions of going toe-to-toe with its neighbor to the north, an established tech hub.

High-tech industries employ tens of thousands more workers in the greater Austin area than in San Antonio.

H-E-B’s new footprint in Austin is the latest in a series of moves by some of San Antonio’s largest employers to establish outposts in the state capital to take advantage of its deep talent pool. Last February, USAA launched its digital design studio in downtown Austin. Managed cloud provider Rackspace has hundreds of workers in its Austin office.

Austin was tabbed in July as the site of the forthcoming U.S. Army Futures Command, where new technologies will be developed for wartime needs.

One of Tech Bloc’s main goals is to draw more technical talent to San Antonio. Heard and other tech leaders have said the city suffers from a negative perception that makes recruiting and retaining tech talent difficult. That was an impetus behind hiring – thanks in part to local government subsidies – Chief Talent Recruitment Officer Jeannine Wild, whose job description entails placing top information technology talent in positions at local companies.

H-E-B has ramped up its digital offerings since Amazon scooped up Whole Foods last year. After the acquisition, Whole Foods began marking down much of its product line and providing free grocery delivery to members of the discounted-shipping service Amazon Prime.

Jenna Saucedo-Herrera, president and CEO of the San Antonio Economic Development Foundation, said H-E-B’s decision to build a tech facility in Austin was part of the company’s consolidation of its existing staff in Austin as well as its subsidiary Favor. Therefore, there was no competitive process for the project, she said.

“H-E-B will continue to grow substantially in San Antonio where they maintain a strong digital presence that has the potential to grow in the years to come,” Saucedo-Herrera said. “We are confident that San Antonio’s favorable business environment, skilled workforce and competitive cost of doing business will continue to support H-E-B’s success in this community.”

H-E-B acquired Austin-based delivery service Favor in February. Bath, its CEO, splits his time between Austin and San Antonio, Bedingfield said.

The company last month snapped up Mike Georgoff to be its chief product officer. Georgoff had been working in the same position at Main Street Hub, an Austin-based digital marketing firm.

H-E-B’s delivery and curbside services are available in more than 145 locations in Texas and will climb to 165 stores this year.

JJ Velasquez

JJ Velasquez

JJ Velasquez is a columnist at the San Antonio Report. A former reporter and editor at the SA Report, he currently works as a project manager for New York City-based Advance Local.