Panera Bread Marketing Plan
Panera Bread Co. (NASDAQ: PNRA) operates a chain of restaurants under the name of Panera Bread. Panera bread sells freshly made artisan breads, sandwiches, soup, salads, and drinks. Panera Bread bakery cafes are may be associated easily with the concept of fast casual dining. Panera is a mix of fast food and more up sale casual dining. Customers pay for their food at the counter as in traditional fast food restaurant. In keeping with the theme of a more upscale dining establishment Panera offers seating that can be easily converted for group meetings or luncheons.
Panera Bread bakery cafes bring back the old time bakery feel and customers enjoy a great tasting fresh loaf of bread. Panera makes their made to order sandwiches from their own freshly made bread. They offer options of soups separately or in a hollowed out bowl and tossed-to-order salads as a healthier option.
Panera Bread is recognized for bringing back specialty breads in a big way nationwide ”The Wall Street Journal, Panera Bread scored the highest level of customer loyalty among quick-casual restaurants, according to research conducted by TNS Intersearch. For the eight consecutive year, customers rated Panera Bread tops among chain restaurants in the 2009 Sandelman & Associates Quick-Track® "Awards of Excellence." Additionally, Zagat named Panera Bread Most Popular and No. 1 for Best Facilities, Best Healthy Options and Best Salads (for chain restaurants with less than 5,000 outlets) in 2009. Recently, Panera Bread was named to BusinessWeek’s 2010 list of top 25 “Customer Service Champs,” and has also won numerous Awards and Recognition in nearly every market across states.” (About Us, 2010)
Panera Bread also offers other bakery products such as cookies and pastries’. They are made of top quality ingredients using no preservatives. They have revived the tradition of the "Neighborhood Bakery" feel that is offered in the Neighborhood in the city and suburbs. Panera bakes their bread hourly and not daily which is reminiscent of European neighborhood bakeries. They offer sourdough breads made with real San Francisco starter, almost four days before the bread is baked. Panera is dedicated to being a socially conscious company. Anything not sold that day is donated to be distributed to the needy. This is one of our ways of helping the less fortunate. Panera Bread.
Panera has also given back to the community in other ways Ron Shaich Panera Bread former CEO purchased a Panera franchise and created the Non-Profit Panera Foundation. “A sign at the entrance says: "Take what you need, leave your fair share." Customers who can't pay are asked to donate their time. The cafe opened Sunday and will operate seven days a week from 7 a.m. to 4 p.m.
While the store does have cashiers, they don't collect money. They simply hand each customer a receipt that says what their food would cost at a conventional Panera. The receipt directs customers with cash to donation boxes (there are five in the store). Cashiers do accept credit cards.” (Horovitz, 2010) (Panera’s Rosenthal cashes in, 2010)
Highlights of the firm’s historical and recent operations
“Ken Rosenthal opened the first Saint Louis Bread Company in Missouri in 1987. St. Louis Bread Company became a publicly held company in 1993 and changed the name of all bakery cafés outside St. Louis to Panera Bread in 1998. Breads of the World, L.L.C. was formed in December 1995 by Doron Berger, Ken Rosenthal and Jeff Rains to open Panera Bread Bakery/Cafés in Ohio, Kentucky and Colorado. “ (Panera’s Rosenthal cashes in, 2010)
Panera's history goes back to 1981, when it was founded under the name of Au Bon Pain Co. In May 1999, Au Bon Pain Co., Inc. and its holdings were sold, with the exception of Panera Bread. The company kept the name and created the brand Panera Bread. As Au Bon Pain the company brought artisan breads and to the busy yuppie crowd of the 80’s in coffee shops close to subway access points in major cities giving it greater exposure. The Panera Bread Company had the history and knowledge to capitalize on an opportunity to capture market share and create increase shareholder wealth.
Strategic Focus and Plan
Mission- A loaf of bread in every arm
“Our mission is to provide high quality products and exceptional service to our customers. We will conduct our business by reaffirming daily our commitment to:
Neighborhood … maintaining our position as the neighborhood bakery in our markets.
Service … always exceed our customers' expectations
Added value … offers our customers healthy, natural, premium quality breads and specialty foods at a fair price.
Community … engages in a working partnership with civic and charitable activities.
Opportunities … associates will be given equal employment and advancement opportunities with our company.
Entrepreneurism … empowers our associates with a challenging and rewarding work environment that allows them to do their best work.
Innovation … be receptive to new ideas for conducting our business.
Integrity … maintains mutually beneficial relationships with our suppliers.”
(About Us, 2010)
Make great bread broadly available to consumers across America, Panera Bread. Freshly bakes more bread each day than any bakery-cafe concept in the country. Every day, at every location, trained bakers handcraft and bake each loaf from scratch, using the best ingredients to ensure the highest quality breads. (Press Kit)
Core competency and sustainable competitive advantage
At Panera, baking the best bread in America requires:
A commitment to specialization
Focusing simply on creating the highest quality breads as a platform for our bakery-cafe menu.
A commitment to tradition
Training our bakers in the time-honored techniques of artisan masters.
A commitment to quality
Using only the freshest ingredients and never adding chemicals or preservatives.
A commitment to leadership
Consistently finding ways to enjoy handcrafted bread by combining traditional techniques with innovative thinking.
Panera Bread, in keeping with current trends began responsible purchasing. A large portion of the coffee Panera serves comes from organic, responsible sources. Panera also has some organic and natural menu options. Panera uses washable flatware for dining in patrons. Also considered a green option is their sour dough bread bowl. Soup is served in the hollowed out bread eliminating the need for a bowl.
Higher wheat prices leading to increased fresh dough prices, labor costs, rent, and other input costs have made operating expenses higher Panera Bread. Inflation and drops in consumer spending have created a challenge to the company. Raising prices could cost the company sales. Panera faces a tough competition in the fast food industry with capitalized competitors like Mc Donald’s and Starbucks. Both of these companies have strong international brand image.
Panera opened a total of 69 new bakery-cafes in 2009. 30 of them were company owned and 39 franchises operated. The company plans to have 80-90 new openings in 2010. Company management seeks to expand into new markets. Western states, Canada and bakery-cafes in pre-existing markets. Although this strategy could increase Panera Bread’s penetration, market saturation may limit gains.
Companies like Panera are competing in the new fast-casual market segment. Panera is operating in a market that is a combination of the quick service, traditional fast-food with higher quality food products of sit-down restaurants. It is a $6 billion industry growing at 15% -20% yearly.
Panera is meeting growing customer demands and they have equipped their restaurants with free wireless internet in keeping with the coffee shop atmosphere. By offering this feature they can fully meet the needs of our on technical, sophisticated on demand society. Panera Bread has strong customer loyalty and customer appeal. Their menu selection appeal to a diverse group of customers.
Panera Bread’s completion is with traditional fast food chains and specialty food cafes and restaurant. Street vendors, pizza parlors, bakeries, boutique restaurants found in supermarkets like whole foods; The Company’s competitors have greater financial resources with greater advertising resources. These competitors include:
McDonald's—is the biggest player in the fast food industry, McDonalds is the most saturated and recognizable fast food restaurant globally.
Starbucks—is one of the biggest names in specialty overpriced beverages. Its products compete with the drinks offered by Panera Bread. Starbucks outlets are used by many consumers as casual meeting spaces also offering WIFI.
The table below shows fiscal 2009 data for the largest publicly traded food service competitors.
By revenues: (in Millions)
Company Revenues Net Income Net Margin Restaurants Franchised %
McDonald's $22,745 $4,551 20.0% 32,478 81%
Starbuck’s $9,775 $391 4.0% 16,635 47%
Panera Bread $1,353 $87 6.4% 1,380 58%
Panera targets consumers who seek meals with better quality and value than those of traditional fast food chains. Panera bread offers the option of fast food and casual upscale dining. They cater to consumers who do not have the time to dine in or have a sit-down meal in a restaurant. Other restaurants that also offer this mixture tend to be local don’t have the benefit from a national brand name and a large advertising budget. This is important when operating during times of recession. Panera’s structure is such that customers pay before they receive their food, giving them the freedom to finish their meal and leave without having to ask for the bill and pay gratuity.
Fast food restaurants chains are notoriously criticized for offering unhealthy and even addictive food with low nutritional value. The higher nutritional value found in Panera Bread’s products make it immune to negative nutrition campaigns that have targeted chains such as McDonald’s. In 2010 the new healthcare bill included provisions that will require chain restaurants to publish the caloric content of their menu items. Panera management have gotten ahead of the crowd by becoming the first major restaurant chain to voluntarily publish its food items’ calorie counts; Panera’s lower-calorie hearty fare and word of mouth advertising may help it grab health-conscious consumer market share Dine in restaurants have been experiencing drops in consumer spending making Panera’s cheaper items an attractive alternative to traditional eateries.
Panera Bread Company PNRA is a small cap stock that sells on the NASDAQ. Panera Bread Company operates in the of the restaurant industry in the retail bakery-café segment services sector. Panera’s CEO is Ronald Shaich. Panera operates in 38 states with stores located mostly in suburban areas near malls and other shopping centers. Panera has 173 bakery cafes and 429 franchises owned and operated stores. Panera’s ability to increase sales of franchises has enabled Panera to grow rapidly. Panera does not sell single-unit franchises but rather sells franchise agreements of generally 15 stores in 6 years. Panera has strict criteria that must be met to buy a franchise including a certain amount of capital.
Panera posted net income of $27 million ($0.85 per diluted share) for the second quarter ending June 29, 2010. This figure resulted to a 31% year-over-year increase compared to net income of $20 million ($0.65 per diluted share) in Q2 FY2009.
Operating margins for PNRA during the second quarter improved about 230 basis points compared to Q2 FY2009.This was driven mostly by leverage from comparable store sales increases, purchasing efficiencies and category management initiatives. This is also the ninth consecutive quarter of YOY operating margin expansion of 100 bp or more. For example, comparable bakery-cafe sales increased 9.9% in the second quarter FY2010 compared to Q2 FY2009, and franchise-operated comparable bakery-cafe sales increased 10.1%.
(Panera Bread Reports Q2 2010 Diluted EPS of $0.85, Up 31% Over Q2 2009, on 9.9% Growth in System-Wide Comparable Bakery-Cafe Sales, 2010)
“Strong Corporate Performance (EPS) Earnings per share
CAGR of unit growth 17% over last 5 years
2003 EPS growth of 42% to $0.94 per share
2004 EPS growth of 22% to $1.15 per share
2005 EPS growth of 32% to $1.52 per share
2006 EPS growth of 24% to $1.88 per share
2007 EPS decline of 5% to $1.79 per share
2008 EPS growth of 24% to $2.22 per share
2009 EPS growth of 25% to $2.78 per share “
“Reach annual sales of $500,000 the first year.
Increase annual sales by 7.5 % growth in sales each subsequent year.
Generate 50 % brand awareness during the first year of operation.
Promote the incorporation of “signature” breads in surrounding restaurants’ menus, supplied by Great Harvest.” (About Us, 2010)
Panera invests 2.6% of its total revenues in its marketing campaigns. Each restaurant gives 0.7% of its sales to the national advertising fund. They are required to spend 2% of their individual sales on local advertising. The company’s marketing strategies focus on product merchandising instead of product prices. Panera also sponsors charitable events as another marketing tool.
Panera Bread currently operates in 38 states. The chain is not very well known in the Western and Southwestern regions. This makes these two regions attractive markets for future expansion. Panera’s management plans to expand into the rest of North America specifically Canada, Toronto and locations in Ontario, through franchising agreements.
Panera Bread's Geographic Distribution
Region Percent of Total Restaurants
New England 6%
Points of difference
Panera's greatest point of difference the fresh dough and bread that is made every single day by skilled artisan bakers. Panera’s created filled a product niche for consumers. This gives them the flexibility to raise menu prices because consumers perceive its products as having high quality. The company markets its brand name to associate it with the concept of fast, casual, upscale dining. They market themselves as an alternative to traditional fast food.
Panera Bread Company generates revenue through sales through sales of company held stores and fees and royalties from their global franchise operations. By the end of 2009, the Panera Bread Company owned 585 restaurants that generated $1,152 million in revenues. Franchisee groups owned 795 additional, restaurants. The franchises grossed $1,376.4M in sales. Panera operates 23 fresh dough facilities that supply dough to both company-operated restaurants and its franchises these facilities generated $121 million in sales in 2009.
Most Panera Bread restaurants are located in suburban strip malls and regional malls. Panera had over 1,000 stores in 38 states, as well as some in Canada. Specialty companies like Panera have suffered in past recessions Customers eat out at restaurants less to save money. Panera’s strategy during this recent recession has been do business a usual and to not to react to the recession noticeably. Menu prices have remained constant and offering new salads and sandwiches. As a result, Panera’s positioned them to avoid then discounting wars and maintain its margins by attracting customers with a higher quality product perceived to be a good value for the money.
Management believes that getting first-time diners into Panera would boost store traffic and weekly sales per store. Panera only uses the highest-quality ingredients, with only fresh dough and preservatives and the bread is baked fresh every day. Panera Bread has a strong presence in the bakery-cafe segment. They have high quality food, including the award winning sourdough bread. Panera’s menu offerings are attractive to the hearty eater and the health conscious consumer. Panera’s offers catering and take out that make it easy to stop by and pick up a decent breakfast, lunch or dinner. Panera is striving by word of mouth. Once you have been to Panera bread or had Panera’s bread you are likely to go back for more. They have been listed as Business Week’s “100 Hot Growth companies” in 2004 coming in at number 37 on the list. By 2010 they were number 27 in customer service (Customer Service Champs 2010, 2010)
Price strategy Price Average lunch costs $6.41 Average breakfast costs $3.76 Average purchase costs $5.44. This is a lower price than sit-down dining. It avoids price competition through brand equity. Customers view Panera as good value that translates to high-quality food at reasonable prices. Panera’s Management perceives that getting first-time customers into Panera was a viable way to improve store traffic and weekly sales per store. Panera competes by providing a complete dining experience and not just by attracting customers with a low price.
Panera promotes themselves through good will in the community and their public relations department. Panera donates to various causes such as Walk for Diabetes and giving leftovers to the homeless and shelters. Panera also has an excellent word of mouth advertising campaign. Their ads are attractive and eye catching. The menu prices are reasonable. Panera signature product offerings are varied and have the air of a boutique artisan food product. Their bread made by carefully-trained bakers throughout every work day. Panera reviews their menu offerings were regularly reviewed and revised it to satisfy customer preferences and seasonal availability of fresh produce. Panera used their appeals to healthy eaters when developing new menu items. Along with its eateries, Panera introduced a catering program option for their customers.
Panera is broadly available to urban dweller as well suburban homeowner. Panera has positioned themselves to become one of the leading fast and casual restaurant chains in the nation. Panera’s provides a aesthetically pleasing dining experience than that offered by traditional fast-food restaurants. “By the end of 1997, Panera had 96 bakery-cafes outside the United States, in Chile, the Philippines, Indonesia, Thailand, Brazil, and the United Kingdom. Panera could focus on the competition and ignore quality or maintain their quality and build a strong brand”. (Press Kit)
Financial Data and Projections
Historical sales revenues
Share (EPS) (1)
FY 2003: $363.7 mil
2003: $30.4 mil
Dec. 27, 2003: $1,185.0 mil
FY 2004: $479.1 mil
2004: $38.6 mil
Dec. 25, 2004: $1,153.0 mil
FY 2005: $640.3 mil
2005: $52.2 mil
Dec. 27, 2005: $2,003.1 mil
FY 2006: $829.0 mil
2006: $58.8 mil
Dec. 26, 2006: $1,678.0 mil
FY 2007: $1,066.7 mil
2007: $57.5 mil
Dec. 25, 2007: $1,094.7 mil
FY 2008: $1,298.9 mil
2008: $67.4 mil
Dec. 30, 2008: $1,539.4 mil
FY 2009: $1,353.5 mil
2009: $86.1 mil
Dec. 29, 2009: $2,144.4 mil
2003: 1.7% increase
2003: 0.4% decline
2004: 2.9% increase
2004: 2.6% increase
2005: 7.4% increase
2005: 8.0% increase
2006: 3.9% increase
2006: 4.1% increase
2007: 1.9% increase
2007: 1.5% increase
FY 2008: 1,325
FY 2008 (2): 3.6% increase
FY 2008 (2): 3.4% increase
Q1 2009: 1,335
Q1 2009: 0.3% increase
Q1 2009: 1.0% increase
Q2 2009: 1,345
Q2 2009: (0.7)% decrease
Q2 2009: (0.2)% decrease
Q3 2009: 1,362
Q3 2009: 3.3% increase
Q3 2009: 2.5% increase
Q4 2009: 1,380
Q4 2009(3): 5.9% increase
Q4 2009(3): 5.1% increase
FY 2009: 1,380
FY 2009 (3): 2.3% increase
FY 2009(3): 2.2% increase
Q1 2010: 1,388
Q1 2010: 10.0% increase
Q1 2010: 9.2% increase
Q2 2010: 1,399
Q2 2010: 9.6% increase
Q2 2010: 10.1% increase
The increases in 2010 sales in single stores as well as franchise operations indicates that Panera is on the right track offering specialty items at affordable prices in a casual dining environment.
“Panera Bread Company (NASDAQ: PNRA) today reported that in the first quarter of fiscal 2010 Company-owned comparable bakery-cafe sales increased 10%. Franchise-operated comparable bakery-cafe sales increased 9% for the same period.
The Company is today increasing its full year 2010 EPS target to $3.40 to $3.44 from $3.26 to $3.34 and establishing an initial target range for its second quarter of fiscal 2010 of $0.81 to $0.83. Today's increases in targets are based on an increase in the fiscal year Company-owned comparable bakery-cafe sales target to 6.5% to 7.5% and do not assume any impact from potential shares repurchased under the existing share buyback authorization.” (Panera Bread Reports Q2 2010 Diluted EPS of $0.85, Up 31% Over Q2 2009, on 9.9% Growth in System-Wide Comparable Bakery-Cafe Sales, 2010)
“Chairman and Chief Executive Officer Ron Shaich concluded, "Our 10% growth in comparable bakery-cafe sales in Q1 and our anticipated 42% to 44% increase in EPS in Q1 2010, on top of the 39% year-over-year growth in EPS we generated Q1 2009, validates our commitment to invest in our business to benefit the customer in the face of the recession. Simply put, our strategy is working and our customers are responding to Panera with enthusiasm."
The Company will provide additional information on its first quarter performance and fiscal 2010 targets in its press release on April 27, 2010 after the market closes.” (Press Kit)
Organization of the firm
Bill Moreton Chairman and Chief Executive Officer (May 13, 2010)
Domenic Colasacco Director
Fred K. Foulkes Director
Larry J. Franklin Director
Charles J. Chapman Iii Director
Jeffrey W. Kip Senior Vice President, Chief Financial Officer
Amy L. Kuzdowicz Vice President, Controller
Mark D. Wooldridge Assistant Controller, Chief Accounting Officer
(About Us, 2010)
Plan to implement the strategies
Evaluation and Control
Plan to evaluate and control the strategies
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