Five or six years ago, Australian retail pundits who’d visited the 50,000sqf Eataly Italian “food emporium” in New York (which opened in 2010), were breathlessly rhapsodising about it in presentations back home.
My visit to its Munich outpost two years ago was pleasant but not earth-shattering. Still, the enterprise continues to march across the globe, currently with 40 locations across its core countries of Italy and the US, as well as Japan, Korea, Germany, Sweden, Russia, Brazil, Turkey and the Middle East, with further sites planned for Belgium, Hong Kong, South Africa, France, Canada, the UK and Australia in the “near future”.
Eataly executive chairman Andrea Guerra told the Financial Times at the end of 2017 that the company was planning major expansion over the next decade and wanted to “have a store in every world capital”. Or maybe he was just talking the company up in advance of a theoretical IPO, which a potential overreach into theme parks may have derailed. Let’s take a look.
Authentic or dumbed-down?
For those not familiar with it – or somehow immune to past hype – Eataly is a large format/footprint Italian marketplace or food hall comprising a variety of upscale restaurants, food and beverage counters and delicatessens, bakery and other specialty food counters, a supermarket, other retail such as homewares and kitchen utensils, and a cooking school.
Guerra defined its concept as “a complete emotional food experience where customers shop, eat and learn all about Italian food, all in a cross-selling approach”. Its strapline, Alti Cibi, translates literally as “high food” – which perhaps may go some way to explaining its perceived high prices, a continual source of aggravation on its Tripadvisor reviews.
Eataly originally showcased a number of small and artisan companies operating in the food and wine sector, such as durum wheat pasta from Gragnano, mineral water from the Maritime Alps, Veneto and Piedmont wines, Ponente Riviera Ligure oil, Piedmont fassone meat, and traditional Italian cheese and cold cuts. In theory, Eataly offers “the best artisan products at reasonable prices” and says it creates a “direct relation between producers and distributors, focusing on sustainability, responsibility and sharing”.
Despite its pun-in-English name, Eataly is not a US franchise. It’s actually Italian, and therefore in theory “authentic” although some Italians think it’s dumbed-down. It was founded in 2004 in Italy’s northern Piedmont region by Oscar Farinetti, an entrepreneur formerly involved in the consumer electronics business. In 2007 he converted a closed vermouth factory in Turin into the first location of Eataly.
Fast forward to 2018 and Eataly has 40+ locations in the northern hemisphere and a 2017 revenue of €465 million ($737 million), a 20 per cent revenue increase on the previous year (7 per cent up in Italy, 48 per cent up in the US but primarily through lateral growth via new store openings) although its profits are negligible and variable. Like-for-like store growth statistics are hard to come by.
Eataly was theoretically due to list on the Italian stock exchange in mid-2018 with a 33 per cent floating capital and a huge valuation (more than €2 billion). However it does not yet appear to have done so, and has been suspiciously “quiet” in new store openings in any market since early 2018.
An educational dinner at the farm
It appears ambition may have strangled the golden goose. In advance of a theoretical mid-2018 IPO, in November 2017 Farinetti and Guerra launched Fico Eataly World in the northern Italian city of Bologna, with at best mixed results and feedback.
Dubbed the Disneyland of Pasta, Fico Eataly World was inaugurated by prime minister Paolo Gentiloni and claimed to be the world’s largest agri-food park. Its 20 acres contains three dozen restaurants, a gigantic market, farms and factories enabling visitors to see how products are made and processed, and a variety of “multimedia experiences”. It is intended to “unify Italy’s diverse food culture under one roof”. There is a multitude of pop-up-style stores selling Italian produce and kitchenware; six experiential educational pavilions; several classrooms, sports and play areas as well as a cinema and a 1000-capacity congress space. It is surrounded by several hectares of farm animals and vegetable plots. The project took four years to complete, at a cost of €120 million. It works with over 150 Italian companies, from relatively small to very large, and has created more than 3000 jobs.
But inevitably it has its detractors, who denounce it as an American concept in search of an Italian home, and has had patchy performance.
Forecast to bring in three million visitors a year, in 2018 in its first five months of operation it had brought in just 1.5 million. And only 1.8 per cent of them were foreigners versus a projection of 30 per cent. Reports suggested that on those initial numbers, it won’t meet the required breakeven of four million visitors a year.
The site has been plagued by claims of isolation – the “culinary cathedral in the desert” is not readily accessible by public transport. It is now, apparently, investigating hotel and resort development to cater to the conference market. According to reports, it has laid off substantial numbers of staff.
Where are the tourists?
Either way, the question remains whether an American-style retail idea can work in Italy unless it’s substantially marketed to foreign visitors as a tourism (not retail) destination, and made readily accessible.
It appears the substantial capital required for Fico Eataly World and its mixed performance have stalled its IPO.
And regarding its Australian visions, it’s not as if the nation is bereft of Italian restaurants. Due to its sizeable Italian-heritage population, there are Italian eateries everywhere, both alti and not-so-alti. If and when Eataly’s food emporium returns to its retail roots and comes to Australia, it will be interesting to see how it caters to this market.