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Dean & DeLuca closes US stores as debts pile up

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Julia Moskin, The New York Times

<div class="embed-wrap"><figure data-feedback="fb:likes,fb:comments"><img src="http://sa.kapamilya.com/absnews/abscbnnews/media/2019/reuters/07/11/store.jpg"/><figcaption>The flagship store of Dean &amp; DeLuca in SoHo, known for introducing Americans to rare ingredients and artisanal food, in New York, April 21, 2016. In mid-2019, The luxury food chain, which has closed locations in New York and California and let shelves in remaining stores grow bare, has stopped paying many of its vendors. Yeong-Ung Yang, The New York Times</figcaption></figure></div>Dean &amp; DeLuca, the luxury food chain, began life in 1977 as a downtown Manhattan destination for mascarpone, balsamic vinegar, radicchio and other specialties most Americans had never heard of, much less tasted.Based on the reputation built by the store’s founders, Giorgio DeLuca and Joel Dean, who curated fine food at their airy shop in SoHo, Dean &amp; DeLuca has become a global brand since its first offshoot opened in Tokyo in 2003. As of today, there are more than 60 Dean &amp; DeLuca cafes and markets operating in Asia, and three more in the Middle East.But in the United States, the chain, now owned by a Thai real estate magnate, is foundering. Since it was bought by Pace Development in 2014, Dean &amp; DeLuca has pulled out of lease agreements, promised and revoked sponsorships, closed its stores in North Carolina, Kansas and Maryland, and consistently withheld payment from vendors, who are increasingly vocal in their outrage.Small vendors in New York City alone said they are owed hundreds of thousands of dollars. Bien Cuit, a bakery in Brooklyn known for its burnished croissants: $75,000. Colson Patisserie, purveyor of French macarons and other sweets: $24,000. Amy’s Bread, which allowed the company to stock its famous layer cakes: $51,000.“It stings because so many of us bakers grew up alongside Dean &amp; DeLuca,” said Eleni Gianopulos of Eleni’s Cookies, who sued the company last year for $86,000 and ultimately settled for 50 cents on the dollar: an overall loss. Dean &amp; DeLuca carved its niche with artisanal food products like hers, she said, and now the creators are treated as disposable.“Getting your product into their store was an honor, like a golden ticket, and now it’s a nightmare,” she said.The company has also incurred large debts to industry suppliers like Imperial Dade, the Chefs’ Warehouse and Baldor, some of whom are no longer extending credit to the chain at all. Documents shared with The New York Times show that the Fulton Fish Market was owed $46,588.74 as of June 4 and had not been paid by Dean &amp; DeLuca since February.Last week, after months of noticeably sparse shelves and staff, two more Dean &amp; DeLuca stores quietly closed, one in California’s Napa Valley and the other on Manhattan’s Upper East Side. The remaining seven stores in the United States are increasingly stocked with Coca-Cola and Chobani yogurt instead of their craft-made equivalents.All stores here in the United States and around the world are owned or licensed by Pace Development, a Thai company whose chief executive is Sorapoj Techakraisri, the scion of a wealthy real estate family.Pace was the developer behind the audacious Mahanakhon tower in Bangkok, a $1 billion stack of high-end residential units and retail spaces that is also the tallest building in Thailand. It opened in 2016, two years after Techakraisri bought Dean &amp; DeLuca from a group of American investors for $140 million.In an interview in response to the store closings and vendors’ complaints, Techakraisri said that Pace has spent more than $100 million in the United States on top of the purchase price to revitalize the brand. He said that Pace had undergone a “liquidity crisis” since the acquisition but remains committed to Dean &amp; DeLuca and has recently restructured to raise capital.“We are going to inject additional funds to fix the business and meet our obligations,” he said, with plans to start paying vendors next month. However, he said, “we may have to downsize to stay true to what the brand has been.”Techakraisri promised that the flagship store in SoHo and STAGE, a new prototype in Manhattan’s meatpacking district that is supposed to reinvent fast food in the image of the brand, would remain open.When Pace bought the chain in 2014, Techakraisri said he intended to open hundreds of stores around the world, with some of them acting as anchors for Pace’s luxury real estate and hotel projects. With fanfare, the company signed sponsorship deals, later revoked, with the PGA golf tournament in Fort Worth, Texas, and the U.S. Open tennis championship in New York. In 2017, he told the Nikkei Asian Review that he bought Dean &amp; DeLuca not only to fill slots in his real estate holdings but because the prestige food business was a stable sector — with one caveat.“As long as you don’t damage the brand,” he said.But the brand has been damaged, at least in the United States. Dean &amp; DeLuca has pulled out of its high-profile sponsorships, been sued for nonpayment of rent and seems to be sinking under the weight of Pace’s debt.In 2014, the year Pace acquired Dean &amp; DeLuca, Pace was operating at a net loss of $11 million, according to the company’s filings on the Thai stock exchange. In 2018, the company’s net loss had risen to $158 million. In its last financial statement in March, the company acknowledged “persistent operating losses,” that its liabilities currently exceed its assets and that the holders of its debt doubt whether Pace will be able to continue operations as a “going concern.”The cash crisis seems to have begun soon after Mahanakhon tower opened, in 2017. That year, Techakraisri sold part of his stake in the tower for about $450 million to the wealthy King Power group. (The tower was subsequently renamed “King Power Mahanakhon.”)For a time, Pace poured more money into refinishing the existing US stores and launching STAGE. Prestigious German architect Ole Scheeren was brought on to design the sleek meatpacking district cafe, which cost millions to open. (Pace declined to give an exact figure, but the rent alone, according to sources in the real estate industry, is likely over $250,000 per month.)Pace also hired restructuring firm Emerald Capital Advisors to manage Dean &amp; DeLuca’s financial operations in the United States; some debts to vendors were paid in 2018.But now the vendors are again being “stonewalled,” according to Keith Cohen, owner of Orwashers, a longtime bread supplier who said he cut the chain off in April with an outstanding balance of $20,000.In this situation, he said small businesses like his are unfairly used as banks by large companies with liquidity problems. “I didn’t ask them to sink hundreds of millions of dollars in cash into expanding the chain,” he said. “But their decision is costing me money.”Sandy Lee of Leckerlee bakery supplied Dean &amp; DeLuca with holiday cookies each year starting in 2011. She said that after months of negotiation over $7,000 in outstanding debt for 2017, her sales representative offered to pay $1,500 toward that debt if she would agree to fill a new order for 2018. She said that the tiny amount of money offered by a company that markets high-end hotels, private country clubs and luxury condominiums felt insulting.“As a small business we understand cash-flow problems, but dishonesty and broken promises ruin relationships,” she said.Giorgio DeLuca, who is no longer directly involved in Dean &amp; DeLuca (Joel Dean died in 2004), said he has been consulted by Techakraisri since the acquisition and believes that he appreciates the brand’s history and identity.“I’m rooting for him to restore the grandeur of the better days,” he said. “Why keep it open if only to sell Coca-Cola?”<div>2019 New York Times News Service</div>

Dean & DeLuca has pulled out of lease agreements, promised and revoked sponsorships, closed its stores in North Carolina, Kansas and Maryland, and consistently withheld payment from vendors, who are increasingly vocal in their outrage.

Dean & DeLuca has pulled out of lease agreements, promised and revoked sponsorships, closed its stores in North Carolina, Kansas and Maryland, and consistently withheld payment from vendors, who are increasingly vocal in their outrage.

Dean & DeLuca closes US stores as debts pile up

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Dean & DeLuca closes US stores as debts pile up

Julia Moskin,

The New York Times

Published Jul 11, 2019 09:08 AM PHT

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