Why NYC restaurants are starting DTC brands

When iconic New York City restaurants such as Momofuku and Carbone began packaging and selling some of their signature menu items, it wasn’t exactly a huge surprise. The sales, which began picking up steam during the pandemic and included items such as pasta sauce, added a line of businesses that isn’t as dependent on people cozying into restaurant booths as Covid-19 wreaked havoc on the city’s dining scene. But more than two years after the pandemic’s peak, the direct-to-consumer spin-offs continue to multiply, with restaurant operators increasingly relying on the packaged goods to boost awareness and diversify revenue streams. Check out the latest Ad Age events and award programs Momofuku’s DTC arm, for instance, raised $17.5 million in a Series A funding round this month led by Siddhi Capital, which previously invested in DTC brands such as Magic Spoon cereal and Recess canned drinks. “It kind of feels like … everyone's doing this,” said Chris Crowley, a senior editor at GrubStreet covering NYC’s restaurant industry. He described the phenomenon as a “gold rush” of “millennial restaurants” heading the DTC route. “Everyone who can either wants to do this or is doing this,” he said, adding that the trend has accelerated since 2021. From outdoor dining sheds to post offices Carbone not only is a classic New York Italian restaurant but also the inspiration behind a jarred pasta sauce brand called Carbone Fine Food, which started about two years ago, according to Eric Skae, who is the brand’s CEO. Currently, the sauces are the brand’s only product. While they started out only being sold DTC, the company has expanded its retail footprint—Cabone jars can now be found on grocery store shelves across the U.S. at places such as Whole Foods. “This wasn’t pandemic driven,” Skae explained, adding that he was in talks with the company well before 2020’s U.S. lockdowns began. It’d make sense if it was. Out of more than 400 New York City restaurants surveyed, 75% stated their 2020 revenue declined by half compared to 2019, according to the NYC Hospitality Alliance. By September 2022, the city’s restaurants had seen a degree of healing—on average, sales had returned to about 76% of pre-pandemic volume, according to research from dining industry software TouchBistro. But profit margins weren’t as positive, falling from 11% pre-pandemic to 10.1% in September, slightly behind the national average at the time (10.6%). The primary goal of the sauces is to capitalize on the awareness Carbone has well beyond the city’s borders, said Tracy Garbowski, executive VP of marketing at Carbone Fine Food. After all, many of NYC’s most well-known eateries have positive reputations that extend far beyond the East River. Take Momofuku, for instance. The restaurant group, which got its start with Momofuku Noodle Bar in Manhattan’s East Village neighborhood, started hiring for its DTC arm (which sells some of its ingredients, including its seasonings and air-dried noodles) in 2019. Although the brand started out as DTC, its products are now sold in national retail locations such as Whole Foods, Target and Publix, according to Momofuku CEO Marguerite Mariscal. A stat that “really kicked off” the brand’s DTC efforts, Mariscal said, was that 90% of its social media followers didn’t live in cities where Momofuku operates restaurants. When Momofuku began the DTC business, it counted more than 2 million followers, stemming from its brand accounts and the social media following of celebrity chef founder David Chang. “There was this captive audience that we didn’t really have anything to offer. And so for us, doing direct-to-consumer home cooking products was the best way to capture that community,” she explained. Downtown Manhattan restaurant Via Carota is playing the DTC game. In January it rolled out a line of bottled alcoholic drinks called Via Carota Craft Cocktails. The drinks started as a way to bring the exclusive Via Carota experience to people who can’t make their way to New York at the drop of a hat, said Kendall Dickieson, social media consultant for Via Carota Craft Cocktails. “It’s an experience that people want to get into because it’s very exclusive. If you go to the restaurant, you don’t know if you're going to get in or not,” Dickieson explained, describing the long lines of people who wait outside Via Carota hoping to get a table. Although Via Carota Craft Cocktails don’t ship to every state, Dickieson said that social media commenters outside New York say they are happy to have the Via Carota experience at their fingertips. The marketing recipe Many of these restaurants were frequented by celebrities and influencers long before they were DTC brands, which seems to have inspired some of their DTC marketing strategies. “Because of the success of the Carbone restaurant, we have greatly benefited from the celebrity and social influencer optimism, loyalty and favoritism towards the brand,” Garbowski said. Since Carbone Fine Foods rolled out with “little paid investment from a PR perspective,” the brand has generated 3 billion media impressions, according to Garbowski. Influencers such as Danielle Caminiti (17,000 Instagram followers) and Gabby Eniclerico (2.8 million TikTok followers) have posted about the brand. Actress Shay Mitchell even mentioned Carbone’s sauce in a video for Women’s Health magazine that generated more than 4,000 views on the Carbone Fine Foods Instagram account alone. View this post on Instagram A post shared by Danielle Caminiti (@haveucoveredinthekitchen) Carbone also recently began a partnership with Supernatural Creative Agency, with which it will work on marketing campaigns going forward. Although Skae, the CEO, couldn’t provide exact figures, he said that the brand's revenue “quadrupled" from the end of 2021 to the end of 2022. Momofuku also attributes some of its DTC success to the power of influence—specifically that of its founder, Chang, who is a celebrity chef in his own right. “I think Momofuku has always had an outsized presence to their physical footprint,” Mariscal said. In her opinion, that presence stemmed from Chang appearing on TV shows such as “Mind of a Chef” and “Ugly Delicious,” as well as the brand’s cookbook. “That created this broader community that was interested in what we were doing,” even if not all of them could head to a Momofuku restaurant, she said. That “community” now has a rather engaged Facebook group, “where they discuss recipes [and] new product launches. We can utilize them for feedback on new things we’re launching,” Mariscal said. Mariscal did not provide exact revenue figures but said that Momofuku’s goods business has seen 100% year-over-year growth. Meanwhile, numerous restaurants located in New York and elsewhere ship their goods through companies such as Goldbelly. Via Carota Craft Cocktails is less than six months old, so it doesn’t have much of a marketing and advertising history. But Dickieson said that increasing influencer marketing efforts is one of her goals for the brand. That includes paying “cocktail content creators who know what they’re talking about”to create content that would be shared on the brand's social channels. Sign up for Ad Age newsletters From influencer marketing to agencies, get the latest news and analysis delivered to your inbox Click here

Why NYC restaurants are starting DTC brands

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