Dean & DeLuca chief bullish about Asia as US business nears collapse
The CEO of embattled food retailer Dean & DeLuca is promising a massive store rollout in Asia at the same time as unpaid suppliers suspend deliveries to the brand’s remaining US stores.
Sorapoj Techakraisri, CEO of Dean & DeLuca’s Thai owner Pace Development, said this week US losses will stop by the end of this year, but it is hard to see the iconic New York-founded delicatessen brand surviving.
The brand is being operated in three completely different formats currently: an upscale, gourmet deli-cafe concept in the US where its store count is now down to just four; a restaurant-cafe concept in Asian cities such as Bangkok and Manila; and a trimmed-down takeaway or dine-in format in airports, most through a joint venture with Lagardere Travel Retail announced last October, selling coffee, drinks and takeaway food for consumption on planes from tiny footprints like the one at Hong Kong International Airport.
There is no similarity beyond the brand name between the New York stores and the Asian businesses, which are now operated as separate units.
Techakraisri admitted in a phone interview with Bloomberg that there were delays in payments to suppliers.
“The lack of financial resources makes it very difficult for us to maintain the necessary investments to improve and keep our franchise competitive and attractive,” he said. He promised creditors would be paid and that he planned to invest more capital.
Later, in Bangkok, he said: “We are adjusting the Dean & DeLuca [US] business to a more appropriate size by controlling expenditures both at its office and stores.” These measures have cut costs by 25 per cent he said, and would see overall losses halted by the end of this year.
Techakraisri said the US stores would be revamped to improve sales.
Visitors to the New York flagship store on Tuesday of this week were greeted by the sight of empty shelves and a sign apologising to customers for the store’s appearance and inconvenience to customers. Fresh-food shelves were mostly empty, covered in long black sheets made of cloth, according to Bloomberg.
The company has also closed its futuristic Stage fast-food concept in Manhattan opened in 2017.
Pace bought the company for US$140 million in 2014, including a network which at one point reached more than 30 stores in the US, and licensing agreements in 31 countries including South Korea, the Philippines, Singapore, Thailand and Middle Eastern markets. By May last year the US network was down to just nine stores and there are now just four remaining.
The original store opened in Soho in 1977, earned the nickname “museum of fine food” It claimed to be the first retailer in the US to sell radicchio, balsamic vinegar and sun-dried tomatoes. But over time its exclusivity has waned – as one food writer observed this month: “You can buy extra virgin olive oil on Amazon now”.
The New York Post reported last May that suppliers were chasing large debts. New York bakery Elenis claimed it was owed $86,000 for the custom-designed cookies shipped to Dean & Deluca over the holiday period. It ended a 15 years of supplies in December 2017 over unpaid bills and after suing settled on a 50 cents in the dollar payment.
“They told me repeatedly that the funds would be in my account the next day or that the check was in the mail and I was never paid,” said owner Eleni Gianopulos. “As a small vendor, it’s crushing.”
Another creditor, Ceci Cela Patisserie of Manhattan, was offered settlement of 50 cents in the dollar before deciding to sue for more than $70,000 it claimed was owed.
Many suppliers this month have shared documents with US journalists showing they are owed hundreds of thousands of dollars collectively and some have not been paid since February.
An Asian renaissance?
In Bangkok this week, Techakraisri was painting a very different picture of Dean & DeLuca’s prospects despite the ongoing challenges in the US.
“We [have] set plans for Dean & DeLuca’s expansion in Thailand over the next three-to-five years, when about 100 stores will be opened, up from 11 currently,” he said in a press conference for Thai media, reported by The Nation. “About five new Dean & DeLuca stores will be opened locally this year.”
The Dean & DeLuca Asia operations now comprise 65 per cent of the brand’s total turnover, the four remaining US stores accounting for just 35 per cent.
Dean & DeLuca Asia (Thailand) reported sales of Bt630 million (US$21 million) in the year to May, and Bt115.23 million ($3.84 million) in profit before interest, taxes, depreciation and amortisation. That was an improvement of 13.3 per cent over the previous year. Those sales figures, however, appear to be a mix of company-owned store sales (in Thailand) and franchise revenues from overseas operators.
Dean & DeLuca Inc (which runs the US business) has been losing an estimated $1.3 million a month – far more than the Asian business profits can cover.
Techakraisri says despite the US woes, the company has boosted its global store network from 42 store in six markets at the time of the purchase in 2014 to 77 today in 11 markets outside the US.
He says the company plans to launch Dean & DeLuca stores in five more “major Asian markets” during the next two years or so: China, India, Indonesia, Hong Kong and Taiwan.
It is not clear how many of those will be airport stores operated under the Lagardere partnership, which at the time of the announcement promised 150 stores within five years.
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