Pace plans restructuring of Dean & DeLuca to stem losses
SET-listed Pace Development Corporation Plc, the Bangkok-based owner of Dean & DeLuca, is set to revamp the ailing gourmet grocer business by splitting operations in Asia and the US for business restructuring.
The US chain of Dean & DeLuca is undergoing a "rightsize" strategy through cost control and merging of chain operations to minimise losses from unprofitable branches, said Pace chief executive Sorapoj Techakraisri.
The strategy aims to stop losses for the US chain by the end of this year, Mr Sorapoj said.
"We expect this strategy to stop losses, aiming to break even as soon as year-end," he said.
US operations of Dean & DeLuca cost about 40 million baht a month, with 25% attributed to fixed-cost operations from the head office, Mr Sorapoj said.
The luxury food and grocery chain confirmed recently that it was closing three of its nine stores in the US, as the company is saddled with debt to some of its suppliers, the New York Times reported.
Agri Exotic Trading Inc and Four Seasons Produce Inc were among the suppliers demanding payment worth a combined US$300,000 (9.3 million baht) from Dean & DeLuca, Bloomberg reported. Those claims were settled earlier this month.
"Trade account receivables that we have to pay to our [suppliers] are worth around tens of thousands of dollars," Mr Sorapoj said.
In 2014, Pace purchased the global business and assets of Dean & DeLuca for $140 million. Funding for the acquisition came from the company's internal cash flow and loans from Siam Commercial Bank.
Dean & DeLuca was founded in New York in 1977 by Joel Dean and Giorgio DeLuca and currently operates in 12 countries, with 77 stores worldwide as of July 2019. Pace owns five stores in the US and 11 stores in Thailand.
Changes in consumer behaviour and food delivery via mobile app are factors taking a big chunk out of Dean & DeLuca's profit margins. But more importantly, the once-trend-setting business model of upscale gourmets has been superseded by bigger rivals with deeper pockets such as Amazon's Whole Foods.
If the US chain of Dean & DeLuca manages to break even by next year, the company would be open to expanding opportunities through a franchise network, Mr Sorapoj said.