Even in Recession, Bread Co. Continues To Take Over the World

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The St. Louis Bread Co. -- known to the outside world as Panera -- is the subject of a story in today's Wall Street Journal, which explains how the chain managed to increase its profits in the second quarter by 28 percent, or $20 million.

It's actually quite a novel strategy:

"Most of the world seems to be focused on the Americans who are unemployed," says Panera Chief Executive Ron Shaich. "We're focused on the 90% that are still employed."

Ah.

Is that why Bread Co. won't cut us a break with recession specials or extra value meals?

In a word, yes.

Bread Co. doesn't offer discounts like its "fast-casual" competitors -- Cosi or Corner Bakery or Applebee's or Chili's -- because it wants to maintain its profit margins. In some cases, the company is even increasing the cost of its menu items.

Two years ago, Bread Co. introduced a strawberry poppyseed salad. It sold well, but the profit margin was thin because the ingredients were so expensive. So last summer Bread Co. quietly raised the price. People continued -- and continue -- to order it.
"They clearly went to school on that," says Robert Derrington, an analyst at Morgan Keegan. "They redesigned their menu boards to prominently display only those items with higher margins."
"Every chain is cutting something -- portion size, quality, hours of labor," Shaich told the Journal. "The result is that ultimately the customer feels it."

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flickr.com/photos/somebunnyslovedotcom
Would you pay $16.99 for this?
Bread Co. instead says it is increasing the quality of its offerings: baking bread in the mornings and planning to sell a breakfast sandwich with fresh, instead of processed, eggs. (Is it a sad commentary that restaurants seem to believe that fresh eggs are a special treat now?)

It has also introduced a lobster sandwich. Said lobster sandwich contains a half-pound of meat. (No word on whether it's fresh lobster.) It costs $16.99. Sadly -- or maybe happily -- it's available only in New England. and Shaich declined to tell the Journal exactly how it was performing.

Based on casual observation, as long as Bread Co. continues to offer halfway-decent bagels and free WiFi, it should be fine, at least here in St. Louis.


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