Mar 10, 2020 | Report Announcements

Panera is the largest fast casual player with a well-established cafe-bakery positioning around “food that tastes good & is good for you” with a menu featuring fresh/healthful ingredients, “foodie offers” and seasonal options/flavors. The brand seeks to move in front of the curve as it relates to a shift in diet preferences away from a culture of “shame & guilt” to “food positivity” in which consumers add more healthful ingredients (like leafy greens) to their meals, and, to this end, Panera will make plant-based options available in every menu category. The chain’s “food as it should be” marketing highlights its core brand equity which easily contrasts with some competitors that leverage processed ingredients to provide an abundance of lower quality, lower priced food. Panera’s ongoing menu evolution includes the addition of: improved breakfast offerings; “heartier” dinner options; non-carbonated & moderately sweetened beverage choices; and an upgraded coffee/espresso platform consistent with its parent company (JAB holdings) portfolio of specialty coffee chains. The goal is to expand beyond its core lunch daypart with menu items better suited for breakfast & dinner. Notably, while Panera offers a dine-in environment well-suited to hang-out, efforts to better appeal to those time-starved and on-the-go include advancements in its digital order & access platforms that are driving the chain’s e-commerce sales mix towards the level enjoyed by the national pizza chains. The brand also benefits from the development of what has become the industry’s largest loyalty program which drives substantially higher frequency among its members. Delivery has been attributed with driving recent comp growth and Panera recently boosted its positioning by adding DSP origination partnerships to its own in-house delivery platform. Having said all this, Panera’s sales are challenged by a sharp increase in industry discounting and while its business model may appeal to its core customers, it is less appealing to value seeking consumers at the margin. Panera’s positioning is also challenged by strong competition from other fast casual players and QSR+ as well as casual players providing greater value and faster service speeds at lunch. Further, the chain faces increasing competition from VC and private equity funded “better food” restaurant start-ups which target the urban, millennial crowd with cutting-edge culinary trends. Another notable challenge comes from operational complexities driven by a very large menu, a very high level of new product innovation and a plethora of new business initiatives. In conclusion, while Panera has a sound long-term strategy, there are many moving parts that challenge its operations and a value-oriented business environment that challenge its upscale positioning.

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