Pace pours in Bt7 bn for growth of Dean & DeLuca
PACE Development Corporation, a developer of luxury property and hospitality projects, plans to invest between Bt6 billion and Bt7 billion in the global expansion of its new diversified food-retail business, Dean & DeLuca, in the next five years or less.
Sorapoj Techakraisri, chief executive of Pace Development, said recently that the company also planned to list Dean & DeLuca on the US stock market within the next two or three years.
“There is a huge demand for premium brands in the US, and such brands have good potential to receive good responses from the stock market,” he said.
According to the plan, the number of Dean & DeLuca stores around the world will increase significantly to between 300 and 500 in the next three to five years, up from about 40 today.
Dean & DeLuca is a well-known chain of upscale coffee houses and grocery stores. The first outlet was established by Joel Dean, Giorgio DeLuca and Jack Ceglic in September 1977 in New York City’s SoHo district. There are currently 40 Dean & DeLuca stores in seven markets around the world, namely the United States, Kuwait, South Korea, Japan, Thailand, the Philippines and Singapore.
Pace, which listed on the Stock Exchange of Thailand in July 2013, acquired the Dean & DeLuca business from its founders last November for US$140 million (Bt4.7 billion).
“With its strong historical record for almost 35 years in New York, we saw Dean & DeLuca as a brand with great potential,” Sorapoj said.
“Coffee has been realized [recognised] as a basic commodity for all nationalities and religions,” he said.
Sorapoj said he wanted the number of Dean & DeLuca stores to reach between 1,500 and 3,000 in the next 10 years, about 10 per cent of the number of Starbucks outlets.
The total number of Starbucks coffee houses in many markets around the world is projected to increase significantly, from about 21,536 currently to more than 30,000 in the next 10 years. Half of them will be in the United States. In Thailand alone, there are more than 250 Starbucks coffee houses today.
Sorapoj said Pace itself would invest in the expansion of Dean & DeLuca stores in the US and Thailand, while the expansion in other markets would be conducted through the appointment of local licensees. However, Pace is considering making its own investments in some selected markets that are sizeable, such as China, India and Brazil.
“In Thailand, we plan to open our fifth Dean & DeLuca store at the EmQuartier complex on Sukhumvit Road by the end of this month. We want to open two or three Dean & DeLuca stores every year in Thailand for a total of 25-30 within the next three to five years,” Sorapoj said.
“We want to make Dean & DeLuca the keen a leader in the global gourmet food and beverage market,” he said.
Sorapoj said that in Japan, the local licensee planned to increase the number of Dean & DeLuca stores from 21 currently to about 100 within the next five or six years.
“We expect the revenue from the Dean & DeLuca business to reach $103 million this year, up from over $90 million posted last year. We also expect the revenues from our food retail and property businesses to be equal in 2018.”
He said the company would maintain annual revenue of Bt10 billion from its property projects, including Maha Nakhon, a luxury mixed-use skyscraper project on Narathiwat Ratchanakharin Road in Bangkok, MahaSamutr, Hua Hin’s first private country club and exclusive luxury-villa development, and Nimit Langsuan, a luxury condominium on Bangkok’s Langsuan Road.
Sorapoj said Pace currently held a backlog worth about Bt14 billion from its MahaNakhon and Namit Langsuan developments. The company will develop one or two new property projects every year, focusing on prime locations in Bangkok, major cities and tourist destinations. Each new project will require about Bt5 billion of capital investment on average.
About 20 per cent of its condominium units, worth totally Bt14 billion, at the MahaNakhon project will be transferred to clients this year. About 20 of the 80 villa units at the MahaSamutr project will be also transferred this year.
“With the same amount of investment, the food-retail business will be able to provide sustainable income to the company as compared with the property business,” Sorapoj said.
Jiro Nakai, general manager of the market department at Dean & DeLuca Japan, said the company planned to open four or five new Dean & DeLuca stores in that country every year, focusing on offering different retail formats, including “Market Table”, “Cafe Restaurant”, “Cafe Lounge”, and “Express”.
He said the total coffee-house market in Japan was worth about $250 billion per year. Starbucks, Doutor, and Sanmarc Cafe are the top three players, with market share of about 48, 28 and 9 per cent respectively. “We [Dean & DeLuca] have a 1-per-cent share of the coffee-house market in Japan today. We aim to raise our share to about 5 per cent within the next six years,” Nakai said.
He said that compared with other coffee segments such as coffee vending machines and canned coffee sold at convenience stores, the coffee-house market in Japan was still enjoying stable growth of 3-4 per cent per year.
