Panera: an America's Hottest Brands Case Study

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Not everyone wants a value meal. And not everyone is unemployed. These insights informed an impressive year at Panera Bread Co., in which the chain outperformed much of the fast-casual category. To do so, the chain focused on quality, innovation and marketing.

"A bunch of folks have been cutting quality to cut price to go after the marginal customer," said Exec VP-Chief Operating Officer Rick Vanzura, who added that Panera donates about $100 million in bread each year. "We said a better strategy that addresses a bigger group of people is providing better value."

Among other improvements, Panera worked on lettuce, now managing production from field to plate, and using only the hearts of romaine in their salads. "We use much less of the lettuce than we used to," Mr. Vanzura said. Panera also introduced china for dine-in customers.

In 2008, Panera grew sales 16%, to $2.6 billion, and added 158 locations. At the end of the year, they had a total of 1,325 locations, compared with about 1,120 at Panda Express, the next-largest chain in the category. Sales growth has continued in 2009. The chain posted flat to positive same-store sales all year, while the restaurant industry overall has suffered. The chain's third-quarter same-store sales grew 3%.

Rick Vanzura
Rick Vanzura, exec VP-chief operating officer, Panera Bread Company
This year Panera also made its first concerted TV advertising push, with test markets of Chicago, Richmond and Dayton, airing spots from Mullen, its creative agency. While Mr. Vanzura declined to discuss specific results, he said Panera has seen an impact, and TV will be part of the chain's media program going forward. Some of that will be up to Panera's chief marketing officer, Michael Simons, who joined the company from Pepperidge Farm last month. According to TNS Media Intelligence, Panera spent $24 million on measured media during 2008.

Panera is by far the largest player in the fast-casual category, which has generally benefited from the recession. The limited-service, but high-quality offerings have appealed to consumers as they pare back on meals out at casual dining chains such as Chili's and the Cheesecake Factory, where they have to leave a tip. That's been a real boon for Panera's dinner-time business, as consumers have searched out alternatives.

And while Panera is known for its gourmet coffee and sinful cinnamon-crunch bagels, the chain does the bulk of its business at lunch. Its broccoli cheddar soup is its most popular item system-wide. Having a real presence in each day part, Mr. Vanzura said, "has been a key part of our success."

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