While chains such as Whole Foods have spread gourmet food shopping across the United States, Manhattan has been a tough market because incumbents such as Balducci's, Fairway and Zabar's are so strong.

But that could be changing. Whole Foods Market, the Austin, Texas-based chain that opened a 40,000-square-foot store in Chelsea two years ago, plans to open a 50,000-square-foot store at Columbus Centre, the site of the new AOL-Time Warner headquarters, this year, and another 40,000-square-foot store in Greenwich Village in 2004. “We have received thousands of inquiries from New Yorkers interested in additional sites,” says John Mackey, Whole Foods CEO.

On the other hand, Maryland supermarket chain Sutton Place Gourmet has suffered a setback in its Manhattan strategy. Last month, Sutton Place closed Balducci's, the Greenwich Village food mecca it acquired in 1999.

Sutton failed to renegotiate a sale-leaseback agreement with Vornado Realty Trust, which bought the building — Balducci's home for 30 years — from Sutton Place in July.

“It was a lot of money to have invested in property,” says Sutton Place spokeswoman Katherine Newell Smith. “It made sense to sell it and lease it back.” But negotiations to renew a temporary six-month lease failed and now the cramped store where renowned chef James Beard bought French garlic and Italian truffles, is shuttered. Newell Smith says it will reopen in a suitable 18,000-square foot to 21,000-square-foot site in Manhattan.

Balducci's second store, a smaller space on the Upper West Side, hasn't caught on like the original, perhaps because of its out-of-the-way location and its proximity to competitors Fairway, Zabar's and Citarella. The arrival of the giant Columbus Centre Whole Foods won't help.

No new location for the flagship store is likely to satisfy Balducci's fans. The family-run store opened shortly after World War II and helped introduce New Yorkers to exotic foods. Even before the closing, purists questioned Sutton Place's management, which made changes in some merchandise.

“Balducci's has changed dramatically,” says New York realtor Faith Hope Consolo, vice chairman of Garrick-Aug Worldwide.

“It's possible Sutton Place is going to pull out of New York altogether,” she predicts.

Not true, says Newell. “We changed some prepared-food recipes that needed to be updated,” she says. “It's not like we're going to change the Balducci family's lasagna recipe, but we may change the mozzarella we use.”

A third specialty food chain, Wild Oats, has decided not to enter Manhattan in the near future, even as it plans to open about 60 new stores around the country by 2005.

Study Confirms Wal-Mart's Aggressive Food Pricing

There's more evidence that Wal-Mart undercuts grocery competitors. A study by A.G. Edwards, which compares prices at Wal-Mart Supercenters, Kroger and Super Kmarts in Memphis, revealed that Kmart's prices were on average 12 percent higher than Wal-Mart's; Kroger's were 23 percent higher. “Food is Wal-Mart's chosen area of growth for the next several years, as it vies for overall sales and earnings gains of about 12 percent” annually, says A.G. Edwards analyst Robert Buchanan, who in December compared the prices of 175 items in four merchandise categories.

Comparing individual items
Dole Pineapple Chunks $0.98 $1.59 $0.92
Tide Liquid Detergent $7.45 $7.45 $5.22
Oscer Mayer Jumbo Weiners $2.59 $2.99 $1.50
Old El Paso Taco Shells $1.50 $1.89 $1.00