Sutton Place Gourmet Inc., a Bethesda specialty food retailer, has purchased Balducci's, an institution among New York's gourmet markets, in a deal valued at more than $25 million.
Balducci's has three key assets that Sutton Place craves: a successful mail-order business, a booming Internet specialty store and a huge kitchen that can support even more growth.
"They have an infrastructure that's amazing," said Thomas Johnston, chief executive of Sutton Place, which has already completed the transaction. "It really is a tremendous growth opportunity for us."
Eight stores operate under the Sutton Place banner -- seven in the Washington area and one in Woodbury, N.Y. The closely held retailer, which generated $105 million in sales last year, also operates four Hay Day Farm Markets in Connecticut and New York.
Located on Long Island, Balducci's 20,000-square-foot kitchen will serve as a springboard for expansion in Sutton Place's existing markets as well as possible new markets such as Philadelphia.
Balducci's kitchen can prepare everything from goat cheese ravioli to stuffed veal roast, and then ship it anywhere in the nation in just 24 hours. That's one reason the company's mail-order and online sales have grown so dramatically. Johnston said Balducci's Internet orders have risen 250 percent over the last year, while mail-order sales climbed 25 percent.
Unlike many online stores, Balducci's cybershop is actually profitable, he added.
"When you look at many Internet companies, they're telling you that they will make money," Johnston said. "But balducci.com has revenue and profits today."
As a result of the acquisition, local consumers will soon see more of Balducci's products in Sutton Place stores. But the reverse -- adding some Sutton to Balducci -- isn't likely to happen as quickly. Balducci's shoppers are notoriously loyal to the 53-year-old store, a New York institution owned by Andy and Nina Balducci.
"We won't force our products in Balducci's," Johnston said. "They'll have to earn their way in."
The Balduccis, both in their seventies, had been frustrated in their attempts to expand the company. At the same time, they had been reluctant to sell the company to an outsider who didn't share their attention to detail in picking out vegetables, cooking pasta or shipping meals across the country.