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H-E-B announced yesterday that it has acquired Favor, described as an Austin, Texas-based “innovative on demand delivery service,” and will run it as a wholly owned subsidiary.

Terms of the deal were not disclosed.

H-E-B said this acquisition would create a “powerful partnership” that will accelerate “its path to become a digital retail industry leader in Texas, enabling customers to choose how they shop, pay for and receive products. The partnership also complements H E B's brick and mortar operations by growing its online presence to meet customers' evolving needs and expectations … With Favor, H E B gains access to best in class consumer facing technology and the on demand company's advanced delivery system. H E B will also leverage Favor's data driven approach to capture valuable insights to deliver the best customer experience possible.”
KC's View:
H-E-B also works with other delivery services such as Instacart, but I wouldn’t expect that to last for too much longer. Its outsourcing of this critical part of the customer experience will only last as long as it takes to ramp up Favor and make it work for the entire chain.

I think this is smart. If you’re going to be in this business - and I think you need to be in this business - you have to own it. Not outsource it and offer up the occasional prayer that there won’t be glitches.

I’m not surprised that H-E-B has done this. I always thought that it only did business with Instacart because that company was going into its stores, shopping for customers, and marking up the items it was procuring - which screwed up H-E-B’s carefully cultivated price image. It made sense to strike a deal with Instacart so H-E-B could exert some control and then, once an in-house alternative was found, dump Instacart and, in the words of one person with knowledge of the company, “crush it like a bug.”