Panera: Marketing efforts boosted 2Q sales

Panera Bread Co. plans to continue its increased advertising and expansion of its drive-thru units, executives said Wednesday in discussing positive second-quarter income and sales trends.

The company is in the midst of its first national cable-television media purchase and is supplementing with traditional marketing efforts, Ron Shaich, chairman and co-CEO, told analysts on a conference call. “We classify the national cable buy as a test that we expect will help us determine the best mix of media as we go forward,” he said.

William Moreton, president and co-chief executive of Panera, said the marketing message was altered in the current promotion, the “Summer Celebration,” which started about five weeks earlier than usual. Panera breaks its promotional year into five such “celebration” segments.

The shift, Moreton said, helped Panera’s second-quarter same-store sales. “We adjusted our internal calendar to better match the desires of our customers,” he said. “We believe this timing shift drove approximately 100 basis points of the comp increase in the quarter.”

Another program that had a positive impact for Panera in the second quarter, according to executives, was its "meal upgrade program," which has been in effect for several quarters. By offering guests a 99-cent bakery item with the purchase of a beverage, Moreton said, the program drove about 50 basis points of positive mixed growth in the quarter.

In addition, Shaich said that supply chain enhancements have helped Panera get items such as fresh avocados into almost all its bakery-cafes, which has increased sales of its Signature Salad by 22 percent in the second quarter.

Blended same-store sales for franchised and company-owned stores were up 5.9 percent in the quarter, the company said. Moreton added that as of Tuesday, third-quarter same-store sales continued to trend upward, with company units’ same-store sales up 5.9 percent over last year.

Looking ahead

Panera has increased its marketing this fiscal year, increasing the percentage of sales on direct media expenses to 1.5 percent in 2012 from 1.3 percent last year. “Although this is a relatively minor increase as a percent of sales," said Shaich, "this increased level of spending gives us approximately 26 percent more immediate dollars this year to improve our share voice."

He noted that Panera switched its lead creative agency to Chicago-based Cramer-Krasselt, and the company expects to roll out a new campaign next year.

Executives said that beyond focusing on marketing efforts, Panera will continue to increase drive-thru expansion. The company is planning for 40 percent of the new units this year to include drive-thrus, which are aimed at convenience as well as the increasing catering business.

“Drive-thrus remain a tool that we’re using to increase customer convenience for those people that are tied to a car at certain meal occasions,” Moreton said. “Development of drive-thrus continues on pace to end the year with 200 units systemwide.”

In addition, Panera will roll out later this year a new “conversational ordering system,” Shaich said, which is a “less-structured process” designed to improve order accuracy and guest interactions.

Executives said they will also look at opportunities for more Panera urban cafes such as the ones opened in Boston, New York and Toronto.

“I should note that with our urban bakery cafes, our average weekly sales are higher than our suburban units, but so are the rents and the capital costs,” said Moreton. “So our expectation is that once we’re at steady state, the urban bakery cafes will have a very similar return on investment as our suburban cafes do."

The St. Louis-based company on Tuesday reported that income rose 24 percent in the quarter ended June 26, to $44.1 million, or $1.50 a share, from $35.7 million, or $1.18 a share, in the year-earlier period. Revenue was up about 18 percent, to $530.6 million, in the quarter.

Contact Ron Ruggless at ronald.ruggless@penton.com.
Follow him on Twitter: @RonRuggless