Anera Marketing in Evaluating Panera

anera Marketing

In evaluating Panera Bread's current marketing strategies, their effectiveness, and in making recommendations as to the future growth, an assessment of strengths, weaknesses, opportunities and threats (SWOT) analysis is provided first to evaluate the marketing strategies Panera has used to this point. Recommendations for future growth are also provided based on the SWOT analysis completed, which serves as the foundation of this report. Marketing Strengths Continued proven expertise in managing sophisticated franchising programs for both independent and investor-level programs. Panera Bread's franchising operations focus both on independent third-party franchisees and Area Development Agreements (ADA), which has delivered over 40 franchise groups signing ADAP agreements. As of the end of the end of Q2- 06, Panera had franchisee commitments to open an additional 433 units, representing about 5 years of growth. The company has maintained a steady backlog of franchised locations in recent years, including 409 at the end of 2003, 418 after 2004, 416 after 2005, and 400 after Q3-06.

Leadership in an emerging specialty breadcaf? category of combined stores and eat-in light restaurant locations - Operating combined stores and small eat-in restaurants or caf?s with both the names of Panera Bread and Saint Louis Bread Company continues to differentiate this company's retail strategies. Both of these names, Panera Bread and Saint Louis Bread Company, are given to franchised and company-owned stores. Panera Breads have been able to accomplish this leadership through their unique series of breads, many of them unavailable anywhere else, and their casual dining experience that includes free WiFi in many locations. As of 2006, the company's retail operations consisted of 311 company-owned bakery-cafes and 566 franchise-operated bakery-caf?s. At that date, there were commitments to open an additional 416 franchise-operated bakery-caf?s. The company's bakery-caf?s were principally located in suburban, strip mall, and regional mall locations and operated in 36 states. As of 2006, the company's fresh dough operations, which supply fresh dough items daily to both company- owned and franchise-operated bakery-cafes, consisted of 16 company-owned fresh dough facilities. Exceptionally strong revenue growth in their specific food category - Panera Breads continue to deliver above industry-average financial performance as is illustrated in the continual growth in sales shown in Appendix A. Best-in-class customer listening and focus - One of the company's core strengths is also its ability to change direction and menu items specifically in response to the changing preferences of customers. Panera Bread was ranked the number one concept in customer satisfaction among 118 chains in a survey of over 70,000 consumers conducted by Sandelman & Associates in 2004 for example, and in a survey of customer loyalty by TNS Intersearch, Panera Bread enjoyed the highest consumer loyalty of any concept in the restaurant industry. Emerging strength in product innovation - With the launch of their lite pizza line, Panera Bread's marketing teams are looking into moving into the evening dinner segment and capture more of this lucrative market. Panera needs more business during dinner hours is needed to support long-term unit volume growth, since traffic during lunch is already very strong and approaching capacity in some cases. The evening business currently represents about 20% of revenue even though the post-5 p.m. time slot comprises roughly 25% of store operating hours. The first major step designed to build traffic in the evening is the rollout of Crispani pizza. Weaknesses High levels of selling, general and administrative expenses - Despite the meteoric revenue growth as is shown in Appendix A, there continues to be the weakness of having high levels of SG&A expenses. For example, the company has at times experienced over 19% growth in these expenses, as was the case between 2000 and the end of fiscal year 2005. A lack of variety and reason to eat other meals besides breakfast at Panera Bread outlets - This is a major weakness and one the company is looking for resolve, as internally there are discussions today of moving into thin- crust pizzas based on their bread expertise, and also opening up a larger dinner menu. Concentration in specific markets to the exclusion of others - Today Panera Bread is concentrated in several larger cities and needs to break out into other smaller metro areas and look to diffuse economic risk by being in as many other economic zones of the nation as possible. Opportunities Moving into other meal options - With 75% of American families not knowing what they will have for dinner at 4:30pm any evening, Panera Bread has the potential to move into offering dinner meals. The discussions within the company center on a thin-crust pizza they have labeled Crispani, the company is moving through test markets of this concept today and hopes to generate greater customer in-store sales as a result. Panera Bread is predicting that Crispani will generate a higher in-store check and is also assuming 75% of the Crispanis will be ordered with salad or soup. Finally, Crispani is expected to generate high margins, as many say the company with its internal efficiencies can generate an 80% gross margin on the sales of Crispani. Continued build-out of the bakeries - The continued growth of the Panera Bread chain of stores is also a significant business opportunity, and a necessary one as the company looks to equalize its economic risk across regions. Going international - To date, Panera Bread only operates in the US. It is clear that for their growth to continue, they need to move into international markets, starting with Canada and progressing to the UK and other westernized, English-speaking nations. More people are eating out than ever before - According to the National Restaurant Association's index of restaurant activity, the outlook for restaurant industry growth appears strong for the year 2006. An increase in this index indicates that future sales are likely to increase. Introduction of hybrid meals stressing low carbohydrates - Panera Bread continues to battle the diet focus on many consumer's minds with meals that stress both nutrition and a focus on good tasting food that is less fattening. The company is planning to move into low-calorie children's dinners in 2006, and back in 2004 the company announced the addition of six new, lower-carb items to its menu. The new items include: golden original bread, Italian herb bread, rosemary walnut bread, plain bagel, asiago cheese bagel and Italian herb breadsticks. More focus on making ADA penetration into franchising groups globally - Panera's Area Development Agreements are the most cost-effective approach to generating high levels of metro coverage efficiently with a single business partner. The company needs to consider these for global expansion as well. Continue connecting with and creating meals for the two dominant customer groups the company serves - The company needs to focus on locking up the loyalty of their two target customer groups, the "bread loving trend setters" and the "bread loving traditionalists" as well. The continued focus on these two customer groups is critical for the success of Panera Bread, and getting their opinions reflected in future product directions are critical. Threats Diets get re-born in America - This has negatively affected some food categories including breads and especially pizzas in the past. While the low-carb and high-fat diet has drawn an estimated 20 million people since the 1970s, or just slightly above 6% of the US population. Rising fuel and as a result food prices - The run-up in fuel costs throughout 2006 and their continued escalation over the first years of the 21rst century are contributing to the growth of SG&A expenses in Panera today and as a result is forcing the company's margins to flat-line at 6%, even with revenues growing significantly. Competition is intensifying - Many restaurants including the quick-serve restaurant segment (QSR) specifically are looking to expand their share of the dinner meal marketplace. For Panera Bread to increase its revenue growth it will need to quickly move into dinner meals and also re-vamp their stores to focus more on the dining experience. The unforeseen impacts of government regulation - Federal agencies require all fresh dough manufacturing facilities to meet federal, state, and local health, sanitation, safety, fire regulations. A significant change to any of these levels of governments' requirements will significantly impact the company's ability to compete profitably. Recommendations for Panera Bread Marketing For Panera Marketing the challenges are keeping a highly profitable business on track for exceptional growth opportunities, by both building greater efficiencies into the delivery of bakery items, striving to make these efficiencies a competitive advantage, and expanding the network of stores to increase market share. Here are the specific recommendations for Panera Bread's Marketing to pursue based on the SWOT analysis completed: . Aggressively launch into the evening dining market with Crispani and follow-on foods. The rollout of Crispani pizza is the first major step specifically intended to grow the lower-volume evening business (about 20% of revenue). Based on successful tests, the Q3-06 introduction of Crispani is expected to fuel near-term results by adding 2-4% to sales in the 75% of stores participating in the launch. . Panera Bread needs to move away from word-of-mouth advertising and embrace more effective means of advertising and awareness building strategies. Panera has relied largely on word-of-mouth communication of positive customer experiences to build awareness of the concept. Advertising spending (as a percent of bakery-caf? sales) has been relatively modest, including 2.2% in 2003, 2.1% in 2004, and 2.1% in 2005. Marketing efforts have been mostly focused on the use of in- store promotional signage (e.g., point-of-purchase materials, hanging signs) and limited-time offers. A 2005 consumer survey conducted by Panera Bread highlighted opportunity for Panera to use more advertising to build awareness. Study results indicated Panera's brand awareness is only moderately developed. Interestingly, findings revealed that 85% of people made aware of the brand ultimately became a customer, suggesting a strong link between awareness and trial. Based on the study, management appears to have increased emphasis on using marketing as a means to grow trial, particularly for under- penetrated day dining periods (e.g., dinner). Accordingly, Panera expanded its local marketing staff by roughly 50% in 2006. Panera Bread boosted marketing efforts for the introduction of Crispani, offering free samples within bakery-caf?s (encouraging trial) and utilizing direct mail to distribute limited-time offers. . Panera Bread needs to compete from their strengths in emerging fast- growth geographic markets they are not currently in. Panera needs to be aggressive about marketing leading growth in the most attractive mid markets, as the company leads the fast-casual segment with a concept that offers fresh food (made with premium ingredients) at reasonable prices (average check near $7) in an appealing setting. Caf?s feature displays of freshly-baked goods, food served on china plates, comfortable seating, warm d?cor, and free Wi-Fi access to encourage longer visits in non-peak hours.