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Premium grocers like Dean & DeLuca are biting the dust

Gourmet retailer closing stores, failing to pay landlords and vendors

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The flagship store of Dean & DeLuca in SoHo, known for introducing Americans to rare ingredients and artisanal food, in New York. In recent years, speciality shops and online retailers have taken a big bite of the super-premium foods sector to the chagrin of upscale grocers.

New York

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-area store. It abruptly closed all four of its Charlotte, North Carolina, locations in April 2018, and shortly after that its Maryland and Wichita, Kansas, locations.

The Upper East Side location on Manhattan's Madison Avenue ceased operation June 30, and the St Helena, California, store was shuttered on Thursday; both were considered flagship stores.

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

In May 2018, 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 in 2014 for US$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. Which prompts the question: Is there too much competition for the gourmet'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 speciality 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, North Carolina-based Earth Fare, swiftly expanding Sprouts Farmers Market and more upscale Lucky's out of Colorado.

Other relative newcomers have chiselled from the ultra-luxury grocers, the kinds of places where you can taste a little French cheese and chatter 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 Mr 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 commoditised. The competitive landscape has really changed," he notes.

Seven Dean & DeLuca stores remain in the US.

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 purportedly sparsely stocked. BLOOMBERG