Panera Bread has entered the online grocery business. With its large number of storefronts and the advertising clout it could put behind the move, the chain could quickly take some market share from the COVID-19-fueled market. For Panera, it provides a revenue stream at a time when restaurant traffic has taken a huge hit.
Announced this morning, the service will offer what it calls “high-demand” items like milk, bread and fresh produce, in addition to standard menu items like their favorite Panera soups, salads or sandwiches. The company listed its value proposition clearly: secure and clean supply chain, mobile app, contactless delivery, curbside pickup, drive-through and home delivery via Grubhub.
"From limited choices on grocery shelves to the growing need to limit the number of trips outside of the home, it is an incredibly stressful time when it comes to putting wholesome food on the table, and we knew Panera could help," said Niren Chaudhary, Panera CEO, in a statement. "With this new service, we can help deliver good food and fresh ingredients from our pantry to yours, helping to provide better access to essential items that are increasingly harder to come by."
As it did with its recent coffee subscription that was announced in mid-March, the company has integrated the grocery capability into its MyPanera rewards program. The company also took the occasion to highlight its safety accommodations, including a to-go model at all locations.
Chaudhary told CNBC that the chain lost half its business once its physical locations were shuttered due to lockdown restrictions. The COVID-19 crisis has forced restaurants to shutter their dining rooms temporarily. Restaurant transactions plunged 42 percent during the week ended March 29 compared to a year ago, according to the NPD Group. The grocery initiative was devised two weeks ago as a way to address consumers’ needs for groceries and to help Panera’s sales.
According to the National Restaurant Association, the restaurant industry experienced its largest one-month employment decline in March. The report said that “eating and drinking places – which employ nearly 80 percent of the total 15.6 million restaurant workforce – lost a net 417,000 jobs in March on a seasonally adjusted basis, according to preliminary data from the Bureau of Labor Statistics (BLS). This was more than six times larger than the previous record decline of 67,000 jobs in October 2000.”
“While a monthly drop of 417,000 jobs is truly astounding in historical terms, it is only a fraction of the restaurant job losses that will be reported in April,” according to the association. “When the April employment report is released by BLS on May 8, eating and drinking place job losses are expected to number in the millions. A single-month employment decline of more than one million has never happened for the overall U.S. economy in the post-World War II era – let alone a single industry. Both records will most certainly fall in April.”
Panera’s competition will be fierce. An analysis from RBC Capital Markets showed that Amazon’s online grocery arm could produce $70 billion in gross merchandise volume by 2023 – more than three times that of 2019 – becoming a material portion of its total revenue.
“We view Amazon as one of the largest structural beneficiaries of this accelerated secular shift to online grocery shopping, along with Walmart and Instacart,” wrote RBC Analyst Mark Mahaney in the report.
The survey found that 42 percent of respondents purchase groceries online at least once a week, up from 22 percent in 2018. Amazon, it found, is the most frequent destination for groceries, with 60 percent of respondents using it to buy groceries online, compared to 47 percent for Walmart.