Panera Bread: A Restaurant for the Recession
by Jason Jenkins, Investment U Research
Monday, October 17, 2011
A new Technomic report found that bakery-café chains are stealing market share from quick-service and casual-dining brands at a feverish pace.
The Bakery Café Consumer Trend Report reported that in 2008, only 43 percent of consumers had visited a bakery café, such as Panera Bread (Nasdaq: PNRA). This year, that figure shot up to 71 percent. Among that 71 percent, 72 percent visit at least once a month.
About the Technomic Report
Operators and suppliers use these types of reports to understand consumption behavior, identify purchase and traffic drivers, explore catering usage and size up the competition, which allows them to take advantage of growth and better compete.
Bakery-café patronage is increasing as consumers take a pass on traditional full-service restaurants to save a few bucks. On the other hand, they spend a little more money and trade up from fast-food restaurants for higher quality and healthier options.
The report also hints at the growth in sales over the last three years. How much? The bakery-café segment has grown to $5 billion in annual sales and about 3,600 restaurant locations. Since 2008, total units have increased 4.2 percent and total bakery-café sales have risen 12 percent.
Panera Leading the Growth
According to Darren Tristano, Executive Vice President of Technomic, “Bakery-café chains continue gaining market share in a zero-growth environment. More consumers are visiting these restaurants and gaining familiarity, but nearly one in three consumers surveyed still say they have never been to a bakery-café concept.”
According to Tristano, problems with location and unfamiliarity are the most common reasons given by consumers who have not yet visited bakery-cafés. This means it’s easy to assume that as more stores open and awareness increases, growth and success in the segment should be sustained.
Technomic also reported that 69 percent of the polled bakery-café consumers said they visit Panera occasionally, if not more often. Further, 69 percent of those customers said they go to Panera at least once a month.
According to the Nation’s Restaurant News’ Top 200 census, Panera had U.S. system wide sales of $2.9 billion and 1,324 domestic locations last year. That number far exceeds its closest competitor, Tim Hortons, which only had $443 million in annual U.S. system wide sales last year.
Panera and The Bakery-Café Concept’s Bottom Line
So here is the outlook: The segment has positioned itself between the over $10-per-person eating experience that most Americans no longer think they can afford and the $5-to-$6-per-person eating experience that most of us are told to avoid for health and nutritional reasons.
The bakery-café experience also gives a different aesthetic atmosphere that’s not exactly fine dining, but isn’t a drive thru, either. According to the numbers, the more that people are exposed to the experience, the more they go back. Expect Panera to keep expanding in this uncertain economic landscape that’s going to be around for some time.
Good investing,
Jason Jenkins
Article by Investment U