Why Panera thrived as competitors struggled
Casual-fast chain found a cozy niche others couldn’t fill
In the hyper-competitive restaurant industry, Panera won by eating everyone else’s lunch.
The St. Louis-based company’s focus on “clean” eating and embrace of technology made it into a success story, underscored by this week’s news that JAB — which controls the Krispy Kreme doughnut chain and coffee brands like Keurig Green Mountain and Caribou Coffee — will buy Panera for more than $7 billion.
Panera found a cozy niche that bypassed both fast-food titans, like McDonald’s and KFC, and fast-casual chains, such as Olive Garden and Applebee’s. It blends the pace of the former with the more sophisticated menus of the latter, with a dash of aspiration tossed in. Instead of a hamburger and fries, Panera won fans with upscale, distinctive lunch offerings like roast turkey and caramelized kale paninis, vegetarian summer corn chowder and frozen agave lemonade.
“Our complete focus is on where the world is going,” CEO Ron Shaich told USA TODAY hours after the JAB deal was announced. “We have continued to evolve our customers’ experience.”
Shaich, who is also chairman and co-founder, pointed to how Panera moved ahead of rivals with what it terms its “2.0 plan,” launched in 2014. It included advanced technology for customer ordering and payment; the chain’s commitment to “100% clean” food, meaning no weird preservatives, artificial flavors or other additives; and its delivery system. Now, 24% of Panera’s sales are digital.
“In this space, there’s only one thing that matters, and that is competitive advantage — being a place where people want to walk past your competitors to come in,” Shaich said.
Two years ago, Panera made a list of 150 ingredients, such as artificial smoke flavor and highfructose corn syrup, that it would no longer allow in its bakery-cafes and grocery products. The chain has adopted policies related to animal welfare, such as no gestation crates for pregnant sows and no antibiotics for chickens and turkeys. In January, it declared its menu “100% clean.”
Panera has so far avoided some of the mistakes that tripped up competitors. Chipotle, for instance, reeled from an E. coli outbreak that sickened 55 people in 11 states in 2015.
Bob Derrington, managing director and senior research analyst at Telsey Advisory Group, pointed to how Panera created a brand that customers seem to crave that has remained on solid financial footing with good cash flow. “They can serve consumers well and keep them coming back,” he says.
“Our complete focus is on where the world is going,” says CEO Ron Shaich, above.