Panera Bread enters the breakfast wars with new strategy

Key Points
  • Panera Bread is changing its breakfast strategy to target customers looking for convenience and quality.
  • The company is trying to compete with McDonald's, Dunkin' and Taco Bell with its new breakfast wraps.
  • The sandwich chain is also upgrading its coffee, tapping the expertise of its owner, JAB Holding, a major player in the coffee industry.
Panera Breakfast Wraps and Coffee
Source: Panera

Panera Bread has long been associated with bagels and pastries, but the company is finally trying to make breakfast a bigger chunk of sales.

The breakfast wars have been heating up for five years as chains like McDonald's, Dunkin' and Taco Bell have pushed early morning offerings as a way to attract consumers who are juggling busy schedules and long commutes.

In 2014, Panera founder Ron Shaich said his chain was competing for a different customer than those restaurants. "We're focused in a different niche, which is a higher-quality experience and a less time-sensitive experience," he said.

But Shaich stepped down as chief executive in 2017, and his relationship with the company he founded has soured. A judge recently dismissed a lawsuit from Panera against Shaich regarding the hiring of top tech executives.

Panera CEO Blaine Hurst talks the company's new breakfast strategy
Panera CEO Blaine Hurst talks the company's new breakfast strategy

Now, Panera is switching its breakfast strategy. Historically, more than three-quarters of its business happens after 11 a.m., the company said, but it wants to change that.

This time, Panera is trying to appeal to time-sensitive customers. Off-premise breakfast dining offers more growth opportunity, especially as Panera sees the competitions' early-morning options offering speed and convenience but light on quality.

"We believe that we have an opportunity to fill that void," said Dan Wegiel, Panera's chief growth and strategy officer.

The company has offered breakfast sandwiches since last year, but it unveiled new breakfast wraps Monday. Sara Burnett, Panera's vice president of wellness and food policy, called the wraps "the ultimate portable on-the-go breakfast."

Wegiel expects that the menu changes could also unlock more opportunities for its catering business, 30% of which is already breakfast. More menu diversity means more selection for catering customers, who tend to hit a menu fatigue point and stop ordering as often.

Panera has also been investing in its coffee offerings. For a long time, its most visible java drinks have been its self-serve drip coffee.

"We weren't putting forward the best coffee experience," Burnett said.

The company is now paying more attention. This spring, it is rolling out cold brew products, following in the footsteps of more established coffee names like Starbucks and Dunkin'. It will also upgrade its drip coffee options with new light and dark roasts. Wegiel said Panera hopes to formulate unique blends to attract the customer looking for quality coffee.

To further emphasize quality, employees will start grinding whole beans in house, and customers will be able to see more of the coffee-making process as Panera's coffee stations get their own remodel.

Along the way, Panera has leaned on the coffee expertise of its owner, JAB Holding, which bought Panera two years ago. Its coffee empire includes Peet's Coffee, Caribou Coffee, Espresso House, Stumptown Coffee Roasters and Jacobs Douwe Egberts. JAB also holds a roughly 71.5% stake in Keurig Dr Pepper.

Wegiel said the first thing that Panera discussed with JAB when the two began working together was the branding of Panera's coffee. Rather than agreeing to a licensing deal with one of its many coffee brands, JAB said Panera would be crazy not to lead with its own brand, according to Wegiel.

"They think that we haven't been using and leveraging the brand as we could," he said.

The menu changes come as Panera has been rolling out breakfast delivery nationwide. Customers can now order coffee and their favorite breakfast food from 624 of its stores.

Panera at first decided to focus on offering delivery after breakfast because initial tests found that early-morning delivery did not have enough demand or drivers. But the company kept it as an option in test markets. Over time, Wegiel said, it became worth the effort as awareness and delivery volumes grew.

And Panera has even more digital plans to increase convenience for its customers.

The company has already rolled out a function on its app that lets customers reorder past orders. Breakfast, more than other meals, tends to habit-driven, and customers short of time will be able to place their orders more quickly.

The company will start testing Panera Tap in May in Raleigh-Durham, North Carolina. Customers buying self-serve coffee will just need to open Panera's mobile app and tap their phones against an NFC smart poster to pay.