Balducci’s spins off direct division

What started as a little gourmet grocery store in New York’s Greenwich Village 85 years ago is becoming a multichannel marketing phenomenon. Balducci’s retail store now does about $20 million dollars in annual revenue – that’s $5,000 per square foot. The catalog, launched 16 years ago, has become a $10 million business, while the Website, which went live in September 1999, is now generating $2 million in annual sales.

To capitalize on Balducci’s direct marketing success, in November parent company Sutton Place Gourmet spun off the catalog, Website, and food warehouse and fulfillment operation into a separate financial and legal entity called Balducci.com. Sutton Place, a $140 million specialty foods retailer that acquired Balducci’s in June ’99, retains the retail store, the Balducci’s kitchens, and an ownership share in Balducci.com. “We have trademark arrangements, where we procure our products at a cost advantage,” says Ken Romanzi, president/ CEO of Balducci.com. “Otherwise, it’s an arm’s length relationship.”

Romanzi has big plans for overhauling the Balducci.com Website. The initial site was hastily put together in about eight weeks with a minimal investment. “We basically put catalog photos on the Internet,” he says. “It was functional – and actually did a nice business over the holidays last year.” The redesigned site will launch in the fourth quarter in time for this year’s holiday sales. “My charge to the programmers is that it must be `dripping’ with appetite appeal,” he says, so that visitors feel like they’re in the Balducci’s store.

Romanzi also plans to add more products to the current site offering of about 600 items, increasing the number of products to several thousand within the next 18 months. And Balducci’s will add its own gift baskets to the site, which now account for about 20% of its business. “We think there’s a lot of growth there,” he adds.

The sales goal for Balducci.com is several hundred million dollars per year, which Romanzi feels is doable. Forrester Research values the online food and beverage market at more than $1.1 billion, while Jupiter Communications predicts that the online grocery category will reach $3.5 billion by 2002.

“Specialty foods are not easy to find outside major metropolitan areas,” Romanzi says. “Plus, consumers are becoming more interested in learning about these foods. The Web lends itself perfectly to that.”

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