May, 1999

From the Editor

Brave New World

There is an old joke in the New York food trade that, had Zabar’s been downtown and Balducci’s uptown, they would have both failed. It is worth a thought, because today, Balducci’s, the quintessential and most widely known specialty food store, is being sold to Sutton Place Gourmet.

In a sense, the sale of Balducci’s means nothing. Businesses come and go. Expansion in New York is difficult and expensive. Generations fight and have different commitment levels to the operation. Businesses are sold and bought.

But the fact that the sale is going through, not to another family business or to a local New York company, but to a chain with an ambition of being to the specialty food industry what Whole Foods is to the natural foods arena, has real significance.

Indeed, what this acquisition really tells us is something about America. This country has become so wealthy and so sophisticated about food that credible people believe there is a national market for stores devoted to the high-end specialty food market.

Now it is hard to know anyone’s true motivations. Maybe the whole thing is geared at a public offering and raising a fortune on Wall Street. Balducci’s name would have a lot of sex appeal on a prospectus. Is an IPO in the offering?

If, however, the goal is operating food stores, Sutton Place Gourmet is going to have its work cut out for it. To start, operating in Manhattan is a world unto itself. Sutton Place Gourmet may find more challenges operating in Manhattan than it imagined. Perhaps the biggest problem is the almost inevitable quality decline in perishables of a chain operation.

Balducci’s, large as it is, is still just one store. The company can look for the best of the best. Sutton Place Gourmet has 18 stores now and intends to have 32 in two years. It is simply impossible to maintain the same quality criteria if the goal is to buy jointly in the perishable arena.

More than that, though, it means a homogenization of taste. The justification for a chain has to be that it can do things better than independents and, indeed, in some arenas, chains can. If you want a prime location in a new shopping center, it really helps to have a big company credit rating. But when it comes to specialty food purchasing, the traditional viewpoint has been that regionalization is important. The joke about Zabar’s and Balducci’s is a way of saying that to be neighborhoods apart in New York City is like being two states somewhere else in the country. That different foods have different appeals in different parts of the country has been a defining notion about specialty foods.

The ambitions of Sutton Place Gourmet are clearly an affront to that notion. They are telling us, without saying so, in a country that shares fast food chains, hotels and clothing stores from coast to coast, the differences in taste from area to area are now less important than the similarities.

Put another way, national media and travel have eased regional distinctions and created new distinctions based on income and psychographics. In this, Sutton Place Gourmet is firmly aligned with Wal-Mart, the warehouse clubs, Whole Foods and Wild Oats. What all these food retailers are saying is that the old distinctions with different food chains in different areas no longer serves consumer needs. The consumers of Salt Lake City and Sin City on the Hudson are now very similar. The distinction is the degree to which each area has consumers of different incomes and psychic draws.

It’s a redefinition of community that is a manifestation of the Internet world writ large. Once upon a time, one’s friends and relations were defined geographically. Today, travel, telephone, and finally e-mail and web sites have created new opportunities for community building. So today we have a virtual community of people tied together by belief or industry, but separated geographically.

Sutton Place Gourmet is telling us that geography is now merely a barrier to be overcome and no longer the beginning nature of community. It is a brave new world and not just for the specialty food industry.  FDM