The return of the ultra-gourmet food store

The Lempert Report
May 27, 2013

The latest Pew analysis of U.S Census Bureau data emphasizes a dramatic wealth inequality.

The latest Pew analysis of U.S Census Bureau data emphasizes a dramatic wealth inequality. Between the post-recession years of 2009 and 2011, the wealthiest 7% of U.S. households grew net worth by 28% to $3.17 million. In contrast, the rest of U.S. households slid by 4% to $133,817. By 2011, this 7% group of wealthy households owned 63% of the nation’s aggregate household wealth—up from 56% in 2009. According to Pew, this is almost 24x the wealth of the less affluent group, on an individual household basis. So, with such large scale, which America should food retailers sell to? Those enjoying the wealth, or the masses who are looking for ways to stretch their paychecks? The Lempert Report says the promise of “easier money” could provide impetus for the return of the ultra-gourmet store. Target the right zip codes—New York City’s Upper East Side, Chicago’s Magnificent Mile, Long Island’s Gold Coast, and Beverly Hills for example— and with the right foods, services and design, appeal to a high-end, economically freer, clientele. Take, for example, Draeger’s, the upscale San Francisco icon that is approaching its 90th anniversary. Founder Gustave Draeger opened the city’s first post-repeal liquor store adjacent to his full-service market in 1933 and was able to retire a decade later, due partly to this strategy—until the boom of the World War II economy drew him back into the business. The chain today operates four stores with a distinctive style most supermarkets couldn’t touch. A two-story atrium in the Menlo Park store has four oak Corinthian columns, a black marble coffee and wine bar, and black ceramic tile. Draeger’s sources food globally, carries 2,500 wine labels, 500 varieties of fresh produce, aged Midwestern beef, 250 varieties of cheese, scratch bakeries, a year-round cooking school, more than 5,000 cookbooks, and a bridal registry with fine housewares and linens. A high-end business isn’t for everyone—but for operators seeking room at the top, the economy we’re in provides a timely opportunity.