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The decline of Dean & DeLuca: Why premium grocers are biting the dust

libadmin July 10, 2019
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A Dean & DeLuca store in New York in October 2017. (Theo Wargo/Getty Images/NYCWFF)
July 10 at 7:05 PM

Synonymous with gastronomic luxury and excess for 42 years, the Dean & DeLuca high-end grocery chain is in trouble. In 2018, it backed out of three leases in Manhattan and pulled the plug on a second Washington, D.C.-area store. It abruptly closed all four of its Charlotte locations in April 2018, and shortly after that its Maryland and Wichita locations.

The Upper East Side location on Madison Avenue in New York ceased operation this June 30 and the St. Helena, Calif., store was shuttered on July 4, both considered flagship stores.

This could herald hard times for other fabled ultra-premium grocers.

Last May, the New York Post reported that the gourmet grocer has not only been quietly closing stores, but also failing to pay landlords and vendors, embroiled in battles with suppliers big and small.

Founded by Giorgio DeLuca and Joel Dean, the company was bought by Thailand-based Pace Development Corp. in 2014 for $140 million.

As recently as 2018, owner and real estate tycoon Sorapoj Techakraisri announced plans to expand the brands by hundreds of stores within two years, dramatically expanding the company’s presence in Asia and the Middle East.

Other similar super-premium grocery brands such as Balducci’s have closed underperforming stores — although Zabar’s remains stalwart, Lobster Salad-Gate notwithstanding. Which prompts the question: Is there too much competition for the gourmand’s affections?

“There are a couple things at play,” says David Henkes, a senior principal at food service industry analyst firm Technomic. “When you look at the grocery space, even Whole Foods has slowed. You look at the little (chains) that are coming in from other places, many of them are much more discount grocers. That’s where a lot of the growth has been on the retail side.”

The proliferation of specialty grocery stores has been fierce, confounding predictions that grocery sales would pivot to online sales. Amazon has bet big. Whole Foods and Trader Joe’s have been joined by Germany-based discount chain Aldi, “healthy food” chains like Asheville, N.C.-based Earth Fare, swiftly expanding Sprouts Farmers Market and more upscale Lucky’s out of Colorado.

(Amazon founder and chief executive Jeff Bezos owns The Washington Post).

Other relative newcomers have chiseled from the ultraluxury grocers, the kinds of places where you can taste a little French cheese and kibitz about precisely which piece of wild sockeye looks just right.

Food halls and markets like Grand Central Market in Los Angeles, Ponce City Market in Atlanta or Eataly in New York were one of the biggest food trends of the past couple years, whittling market share from fine casual restaurants as well as upscale grocers.

And Henkes says that for the kinds of ultra-premium fancy foods Dean & DeLuca built its reputation on — aged balsamic vinegars and fancy pink salts from the Himalayas — much of it is now available online at the touch of a couple buttons.

“And for prepared foods, that niche of their business is a much more competitive space, as well. Those areas where they were differentiated has become much more commoditized. The competitive landscape has really changed,” Henkes notes.

Only seven Dean & DeLuca stores remain in the United States. According to the New York Times, small vendors in New York are owed hundreds of thousands of dollars, while larger vendors have discontinued credit. Store shelves in remaining stores are reportedly sparsely stocked.

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