May 4, 2009
Gourmet Retailer Balducci’s Leaves Manhattan
By Tom Ryan
Balducci’s,
a longtime mecca for Manhattan’s epicures, recently
closed its last two flagship New York City stores in Chelsea
and the Upper West Side in the face of the recession and heightened competition
from newcomers like Whole Foods, Fresh Direct and Trader Joe’s. Balducci’s private
equity owner, Irving Place Capital, formerly Bear Stearns Merchant Banking,
is also closing stores in Washington D.C. and Ridgefield, Conn.
“It’s economic,” Irving
Capital spokesman Michael Doppelt, told thedeal.com. “We’re
in a tough environment, and gourmet foods are not necessarily what people
are flocking to.”
Six other Balducci stores,
including one in Scarsdale, N.Y., remain open.
Started in 1946, Balducci’s earned
its foodie reputation after opening its flagship location in Greenwich
Village on Sixth Avenue in 1972 and began introducing New Yorkers to what
were then considered exotic foodstuffs like virgin olive oil and buffalo
mozzarella.
An article The New
York Times on the closings said a woman who worked at the Upper West
Side location deli claimed,
“diehard customers had been bursting into tears in recent days, and
even yelling at the staff.”
But the same article
implied that many of its upscale offerings – including Pomodoro Basilico dipping oil,
goose foie gras, and
Tasmanian rainwater – were even too much for snobby New Yorkers.
Said Barbara Colasanti, a 45-year-old teacher
who lives in the West Village, “Do you really need chipotle raspberry
finishing sauce? People don’t need all this stuff. It’s a lesson.”
An article on its exit
in the Village Voice also noted that prices were jacked up after
its legendary Sixth Avenue store was relocated to the bank building on
14th Street.
“The quality was
always choice, but in the age of Whole Foods and Fresh Direct, it would
seem most shoppers who wanted to scale up a little had enough other options,
and there just aren’t enough discerning rich left in New York to keep the
stores open,” summed up the Village Voice.
An article in the alternative
weekly, The New York Press, entitled Most Beautiful (and Absurd)
Grocery Store Says Farewell stated, “We used to bring wide-eyed
tourists into the Chelsea Balducci’s just to
gawk at the excess. The vaulted ceilings of the former bank in Chelsea
was incredible, not just for the obscure foodie finds, but simply because
such a grand structure was being used to hawk produce and bottled drinks.
We never bought anything there, and few others did either – after
Whole Foods and Trader Joe’s delivered the one-two punch to the gourmet
grocery.”
Discussion Questions:
Do you think the recession or new competitors were more responsible for Balducci’s exit from Manhattan? What are the lessons to be
learned from this story?
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Surely Whole Food’s entry into Manhattan had something to do with Balducci’s demise; it was the gourmet equivalent of Walmart entering into a market, particularly as Whole Foods has shifted its focus to private label and opening price point options. Whole Foods in Columbus Circle continues to be that rare out-of-neighborhood grocery destination for New Yorkers. Balducci’s did not have the same scale or flexibility and seems to have stubbornly held on to fringe items that support the original premise, even during tough economic times, and at the expense of volume.
Not being able to adapt to changing retail tastes? Luxury goods are available at non-luxury retailers? A decline in readership for in-flight magazines? The list is numerous but it boils down to Balducci’s not adapting their business model to current trends. Yeah, Whole Foods is here. Yeah, groceries are going upscale on their prepared stuff. Are those not signals or red flags that something must be done to alter the business model?
No matter what the concept the consumer is looking for Price, Quality and Service. Balducci’s offered quality, and service. Now you have Whole Foods and Trader Joe’s offering Price, Quality, Service and even a larger selection. In today’s market, that formula is going to win.
First off, I’m very sad to see them go. My dad used to take us to the store in the Village when we were kids and point out what they were doing right and wrong. When I was in grad school at NYU I would occasionally splurge with a lunch from the store. And, when I really wanted to impress a girlfriend with my cooking, I’d get all of the fresh ingredients from Balducci’s.
The key lesson from the story is that as much as a retailer can try to emulate an intimate, neighborhood shopping experience, tradeoffs have to be made when the concept is extended to other locations or franchised. Only rarely can a retailer maintain the atmosphere of the original store after those tradeoffs, as in Ukrop’s. Most often, the new stores are only a shadow of the originals and fade like Balducci’s.
BTW, if anyone wants that old Balducci’s shopping experience, albeit more ethnic and actually affordable, visit Sahadi’s on Atlantic Ave in Brooklyn. Other than friends and Coney Island, it’s the one thing I miss about living there.
The truth is, Balducci’s lost its way. In fact, I don’t consider Whole Foods, and Trader Joe’s the businesses that took Balducci’s trade away, but rather local New York based upscale food stores that started to do it FAR better than Balducci’s. Agata & Valentina, Citarella, and Gourmet Garage are all perfect examples here, as well as the Fairway Markets. All 4 businesses were simply doing it better, and are all staying on top of changing buying habits.
It is worth noting that of all the businesses noted, only A&V operates a single location. The rest all have multiple locations that also keep them in the right areas. Citarella has a leg up here with 2 locations in The Hamptons, and Fairway has perfected the concept of carrying gourmet items and everyday items in locations just as large (if not larger) than Whole Foods.
Like Ron, I have a personal connection and affection for Balducci’s–a fresh prosciutto bread, a hunk of cheese and a bottle of red wine for a great meal under the arch at Washington Square Park. Then later, over to the Village Vanguard to catch the late set.
Everyone is right–there’s far more competition today than in 1972. And it’s hard to believe that Whole Foods was reasonable compared to Balducci’s–but it was. The bank building Balducci’s simply didn’t have the same sense of adventure offered by the old Sixth Avenue store which, in its heyday, was packed with merchandise in every nook and cranny. It was inner-city retailing at its best.
But somewhere they lost their way. It wasn’t just the emergence of other gourmet retailers. There was a big family battle at Balducci’s for years with one faction wanting to go in new directions. The lesson? Never do business with relatives.
Let’s not forget too, that the Balducci’s that are closing are not the old, family-controlled stores…they were taken over about a decade ago by Sutton Place Gourmet of Washington, DC. In addition to buying Balducci’s, Sutton Place also bought the Hay Day Markets of Westchester County, NY, and Connecticut, and cobbled the three concepts into a single chain (similar to the Wild Oats strategy of the late 1990s, which didn’t work for them either).
Unless there is a retailer at the helm with a singular vision of how to make something more than the sum of its parts, such an amalgamation has a hard time succeeding. The current owners are wise to stick to their profitable DC-area and suburban NY locations, and leave Manhattan to Whole Foods and the other retailers mentioned.
This is another chapter in the evolution of great food retailing in New York. Sadly, Balducci’s story is ending here. But it is more about the need to stay current with selection and value as time changes the game. The leading edge of high-end food retailing means continuing moves to raise the bar, or competitors gain and move ahead.
As Jim Collins rightly stated, if you are passionate about it, can be best in the world at it, and make money doing it…great. If not, revisit the model.
I am not familiar with this store, but to me it sounds like their demise is just another sign of the times. Consumers are no longer willing to spend ‘over-the-top’ for high-end products or frivolities where other lower-priced items will easily fill the gap. We’re seeing signs of this everywhere from a drop in exorbitant corporate spending on parties, marketing, and entertainment, to a constant frugal and vigilant style spending of consumers’ discretionary income.
Just another sign of the times….
“There just aren’t enough discerning rich left in New York to keep the stores open.” …Wow, the End-of-the-World really IS here!
Like most of RW’s readers who don’t live in NYC, I have no knowledge of this chain, but in reading the article, a number of things stood out:
1) the store had no fewer than 2 “flagships” (in the same city, no less)…to me, use of a cliched term like this suggests a company has lost the connection to its roots;
2) “Private Equity” owner: not to pile it on–and PE ownership probably does many things right–but this sounds like a classic case of a bad management fit;
3) How and why are the company’s other stores still open? Is the competition less is Scarsdale? Is the market for Chipotle Rasberry Finishing Sauce really stronger there?
I don’t know, but I suspect therein lies the answer to the reason for the Manhattan branches’ demise.
The survivors like Food Emporium will benefit from Balducci’s departure. Newcomers, and those with market share, are pushing the weaker food retailers out of high rent Manhattan. Sharper pricing from Food Emporium just magnifies the reality that even in Manhattan, there can be a gourmet food fight.
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Surely Whole Food’s entry into Manhattan had something to do with Balducci’s demise; it was the gourmet equivalent of Walmart entering into a market, particularly as Whole Foods has shifted its focus to private label and opening price point options. Whole Foods in Columbus Circle continues to be that rare out-of-neighborhood grocery destination for New Yorkers. Balducci’s did not have the same scale or flexibility and seems to have stubbornly held on to fringe items that support the original premise, even during tough economic times, and at the expense of volume.
Not being able to adapt to changing retail tastes? Luxury goods are available at non-luxury retailers? A decline in readership for in-flight magazines? The list is numerous but it boils down to Balducci’s not adapting their business model to current trends. Yeah, Whole Foods is here. Yeah, groceries are going upscale on their prepared stuff. Are those not signals or red flags that something must be done to alter the business model?
No matter what the concept the consumer is looking for Price, Quality and Service. Balducci’s offered quality, and service. Now you have Whole Foods and Trader Joe’s offering Price, Quality, Service and even a larger selection. In today’s market, that formula is going to win.
First off, I’m very sad to see them go. My dad used to take us to the store in the Village when we were kids and point out what they were doing right and wrong. When I was in grad school at NYU I would occasionally splurge with a lunch from the store. And, when I really wanted to impress a girlfriend with my cooking, I’d get all of the fresh ingredients from Balducci’s.
The key lesson from the story is that as much as a retailer can try to emulate an intimate, neighborhood shopping experience, tradeoffs have to be made when the concept is extended to other locations or franchised. Only rarely can a retailer maintain the atmosphere of the original store after those tradeoffs, as in Ukrop’s. Most often, the new stores are only a shadow of the originals and fade like Balducci’s.
BTW, if anyone wants that old Balducci’s shopping experience, albeit more ethnic and actually affordable, visit Sahadi’s on Atlantic Ave in Brooklyn. Other than friends and Coney Island, it’s the one thing I miss about living there.
The truth is, Balducci’s lost its way. In fact, I don’t consider Whole Foods, and Trader Joe’s the businesses that took Balducci’s trade away, but rather local New York based upscale food stores that started to do it FAR better than Balducci’s. Agata & Valentina, Citarella, and Gourmet Garage are all perfect examples here, as well as the Fairway Markets. All 4 businesses were simply doing it better, and are all staying on top of changing buying habits.
It is worth noting that of all the businesses noted, only A&V operates a single location. The rest all have multiple locations that also keep them in the right areas. Citarella has a leg up here with 2 locations in The Hamptons, and Fairway has perfected the concept of carrying gourmet items and everyday items in locations just as large (if not larger) than Whole Foods.
Like Ron, I have a personal connection and affection for Balducci’s–a fresh prosciutto bread, a hunk of cheese and a bottle of red wine for a great meal under the arch at Washington Square Park. Then later, over to the Village Vanguard to catch the late set.
Everyone is right–there’s far more competition today than in 1972. And it’s hard to believe that Whole Foods was reasonable compared to Balducci’s–but it was. The bank building Balducci’s simply didn’t have the same sense of adventure offered by the old Sixth Avenue store which, in its heyday, was packed with merchandise in every nook and cranny. It was inner-city retailing at its best.
But somewhere they lost their way. It wasn’t just the emergence of other gourmet retailers. There was a big family battle at Balducci’s for years with one faction wanting to go in new directions. The lesson? Never do business with relatives.
Let’s not forget too, that the Balducci’s that are closing are not the old, family-controlled stores…they were taken over about a decade ago by Sutton Place Gourmet of Washington, DC. In addition to buying Balducci’s, Sutton Place also bought the Hay Day Markets of Westchester County, NY, and Connecticut, and cobbled the three concepts into a single chain (similar to the Wild Oats strategy of the late 1990s, which didn’t work for them either).
Unless there is a retailer at the helm with a singular vision of how to make something more than the sum of its parts, such an amalgamation has a hard time succeeding. The current owners are wise to stick to their profitable DC-area and suburban NY locations, and leave Manhattan to Whole Foods and the other retailers mentioned.
This is another chapter in the evolution of great food retailing in New York. Sadly, Balducci’s story is ending here. But it is more about the need to stay current with selection and value as time changes the game. The leading edge of high-end food retailing means continuing moves to raise the bar, or competitors gain and move ahead.
As Jim Collins rightly stated, if you are passionate about it, can be best in the world at it, and make money doing it…great. If not, revisit the model.
I am not familiar with this store, but to me it sounds like their demise is just another sign of the times. Consumers are no longer willing to spend ‘over-the-top’ for high-end products or frivolities where other lower-priced items will easily fill the gap. We’re seeing signs of this everywhere from a drop in exorbitant corporate spending on parties, marketing, and entertainment, to a constant frugal and vigilant style spending of consumers’ discretionary income.
Just another sign of the times….
“There just aren’t enough discerning rich left in New York to keep the stores open.” …Wow, the End-of-the-World really IS here!
Like most of RW’s readers who don’t live in NYC, I have no knowledge of this chain, but in reading the article, a number of things stood out:
1) the store had no fewer than 2 “flagships” (in the same city, no less)…to me, use of a cliched term like this suggests a company has lost the connection to its roots;
2) “Private Equity” owner: not to pile it on–and PE ownership probably does many things right–but this sounds like a classic case of a bad management fit;
3) How and why are the company’s other stores still open? Is the competition less is Scarsdale? Is the market for Chipotle Rasberry Finishing Sauce really stronger there?
I don’t know, but I suspect therein lies the answer to the reason for the Manhattan branches’ demise.
The survivors like Food Emporium will benefit from Balducci’s departure. Newcomers, and those with market share, are pushing the weaker food retailers out of high rent Manhattan. Sharper pricing from Food Emporium just magnifies the reality that even in Manhattan, there can be a gourmet food fight.