Is Starbucks going after Panera?
The company is spending $100 million on a San Francisco chain of casual restaurants serving sandwiches and salads.
The company is shelling out $100 million in cash for Bay Bread, the parent company of the La Boulange brand. Starbucks said it will start adding croissants and other French pastries to its menu early next year.
Why would Starbucks spend that kind of cash on better croissants? For the answer to that question, you only have to look at shares of Panera Bread (PNRA), which fell more than 1% Monday and were down another 1.6% in after-hours trading.
Starbucks didn't explicitly say it was making a run at Panera's business, but investors made that leap pretty easily. La Boulange has 19 locations in the Bay Area, selling ham and cheese croissants, sandwiches, salads, soups and desserts.
Starbucks has never shied away from huge ambitions, and this buyout of La Boulange hints at a broad rollout of restaurants with fresh salads and sandwiches. Panera has enjoyed a long run at the top of this sector, growing to 1,500 locations from 1,000 five years ago, according to the Associated Press. Its sales rose by 73% over the same period.
"We'll take it one store at a time, starting in metropolitan areas around the U.S. where there's demand," said Cliff Burrows, president of Starbucks Americas, according to the AP.
Starbucks has been toying with this idea for a while. It has tested beer and wine sales at some of its locations, and has experimented with adding healthier items to its menu. But it has never ventured into food sales to this extent before.
About a third of the transactions at Starbucks stores include a food item, the AP reports.
It's unclear whether Starbucks will simply add an expanded menu to its current locations or open a completely new restaurant with food as the focus.
Don't forget one other important possibility: Starbucks may begin selling La Boulange products at grocery stores -- an area the company is desperate to cultivate.
Investors didn't seem too thrilled with the purchase, or the fact that it will cut full-year profit by about 2 cents a share. Starbucks' shares were down 2% Monday in after-hours trading.
Also they would have to actually serve food, not pastries. The pastries department at Panera is not the money maker, it's the soups, salads, sandwiches, and paninis.
How nice we can eat a $10 sandwich while drinking a $5 cup of coffee.....
Thats progress for you, for some.....anyway.
I prefer to go to my local coffee shop, owned by the neighbor down the street. Keep your money out of these franchises. The last thing we need is ANOTHER Starbucks or Panera, for that matter. Keep your money at home, where it belongs.
Why is it Walmart is consitently trashed for "taking over", yet Starbucks' lines only get longer when they are doing much the same thing? Starbucks is on just about every damn corner, and they've taken over every worthy competitor that comes along. They're also selective liars - when Starbucks receive inquiries from regular everyday people looking to open a location themselves, they proudly and boldy claim they don't franchise - the thing is, they DO franchise (or license; much the same thing) to Marriott, Magic Johnson, etc. Nothing against Magic and Marriott, but what a bunch of elitist BS.
Funny how the Occupiers bitch about the 1%, and about how they have no money while the 1% got filthy rich off of the efforts of the 99%. Hmm - so why is it you can find so many Occupiers in line at Starbucks, paying $4.50 for a cup of freakin' coffee, and making part of their dreaded 1% even richer?
Copyright © 2014 Microsoft. All rights reserved.
Excitement is growing about the company's new iPhone, expected this fall.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.