Panera is Making Dough During Recession


A quick Wall Street Journal read on the subway ride home (the actual paper not the iPhone app) revealed the secret of a company baking a profit during the Recession. Panera Bread is focusing on the 90% of people who are currently employed, and Panera continues to bake with quality ingredients. According to the article, Panera's second quarter profit rose 28% from a year earlier, and its revenue rose 3% (this all helped by a drop in commodity costs). Rival bakery cafes are not doing as well. Cosi reported a loss of $969,000 for its second quarter, and a 14% decline in revenue. What is Panera doing right?

By focusing on the people who do have money to pay for their baked goods, Panera has kept the customers it had, and gained some more. Panera is a large hub for wireless workers, some of whom are home office workers, and some of whom conduct meetings out of their company offices or are on the road. The quality of their food has not declined to cut cost, in fact, it has increased. The article points out that Panera is baking loaves later in the morning so that they are fresher, and it will soon offer a breakfast sandwich made with fresh eggs versus processed eggs. They already have an egg sandwich pastry made with your choice of cheeses, spinach, artichoke hearts, and more, which creates something of a craving for the average morning worker who needs a good dose of wireless access (ahem...yours truly).

Panera decided against cutting prices and offering Recession Specials. In fact, last year, it debuted a "strawberry poppyseed salad with colorful signs." The salad was a hit because of the fresh ingredients, but the profit margins were slim due to the high cost of quality ingredients. The next summer they raised the prices, and changed how they marketed the salad. The Wall Street Journal quoted Robert Derrington, an analyst at Morgan Keegan, as observing: "They redesigned their menu boards to prominently display only those items with higher margins."

Another smart decision cited by the article was to not heavily expand stores and take on debt while the economy was good. In fact, Panera is debt-less, and has $100 million in cash. Read more about these details here.

This summer, Panera is releasing a $16.99 lobster salad sandwich. While it's not for everyone, it is a good treat for that home office worker on a Friday, and a great reason to come in, plug in, and get to work.

Read the full article from the Wall Street Journal, as reported by Julie Jargon. It will give you great insight and confidence to keep going with the vision for your brand.