Is Starbucks going after Panera?

The company is spending $100 million on a San Francisco chain of casual restaurants serving sandwiches and salads.

By Kim Peterson Jun 4, 2012 6:28PM
Image: Starbucks © Bloomberg, Getty ImagesStarbucks (SBUX) is spending a whole lot of money on a new baker.

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.

Tags: PNRASBUX
58Comments
Jun 5, 2012 2:39AM
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I drive by Starbucks on my way to Panera's all the time . 

     

Jun 4, 2012 8:22PM
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For Starbucks to go after Panera they would have to stop serving food that is crap. 

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.
Jun 5, 2012 9:15AM
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How nice we can eat a $10 sandwich while drinking a $5 cup of coffee.....

Thats progress for you, for some.....anyway.

Jun 5, 2012 8:53AM
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Starbucks have too fewd tables, over-priced coffee, loud surroundings, and too small a space to do anything much more than put cream or sugar in your coffee. With its imperfections, Panera is a far better value for the food/ beverage dollar and its surroundings are calmer than Starbucks.
Jun 4, 2012 11:18PM
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Won't matter what SB does, PB is and will always be the better choice for their outstanding customer service first and foremost, more family oriented atmosphere and excellent food choices.  SB became too big, too aggressive, customer unfriendly not to mention their distasteful coffee.
Jun 5, 2012 10:00AM
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If they bring over the Starbucks pricing, maybe you can order an iceberg lettuce sandwich on white bread with some salt for $6.
Jun 5, 2012 9:37AM
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French pastries? More processed-wheat products made with lard or more sugar?  NO THANKS.  If Starbucks wants to compete with Panera, they've got a lot of catching up to do, on the healthy offerings.
Jun 5, 2012 12:13PM
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Starbucks salads and sandwiches are made for them by a third party. PANERA does everything in house. Starbucks would not make a patch on the butt of PANERA.
Jun 5, 2012 11:51AM
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Starbuck coffee is the worst coffee in the world and OVER price too!  Stay out of the real food business too!
Jun 5, 2012 9:22AM
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After having worked for Starbucks for nine years and seeing all of the changes (good and bad) along the way, I've never seen them put another corporation out of business.  If someone loses business to Starbucks it is because of their product or service.  I come from a small area (maybe 100,000 ppl. in a 15 mile radius) and there are at least 6 small coffee shops besides the 2 Starbucks in the area.  Everyone initially freaked out because Starbucks was going to run the other  shops out of business, but almost ten years later, each shop co-exists peacefully.  I do agree that Starbucks should keep it simple and bring it back to basics like their fearless leader Howard had once said he was going to do, those poor baristas already have so much to do for their pitiful little paycheck.  Most baristas want to make COFFEE, not sandwiches- remember, they applied at Starbucks, not Panera or any other food joint.  This includes those dumb breakfast sandwiches Starbucks makes... grrr nothing like stopping the line on a busy Friday morning in Starbucks by having to make a sandwich for everyother customer.  If Starbucks was smart they would cash in on creating training programs for other companies instead of trying to buy them all for themselves, of anything customer service (or at least the training of) is their strength.   Let's put the COFFEE back into Starbucks - long live Panera!
Jun 5, 2012 3:49AM
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All veterans should boycott Starbucks. They are anti-military
Jun 5, 2012 10:37AM
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went in Starbucks ONCE..got an European Expresso..tasted like dirty socks that had mildewed. and were used to filter the coffee...I told them so, and they told me I didn't know what it SHOULD taste like...I used to live in France for many years...believe me I KNOW WHAT IT SHOULD TASTE LIKE...COFFEE...PS..they wouldn't even give me a saucer for the cup of "coffee." Real class.
Jun 5, 2012 9:18AM
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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.

Jun 5, 2012 11:06AM
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Panera's has bread and bagels that I like to buy. I don't remember if La Boulange has that.  It would be dangerous for Starbucks to venture into this. I see nothing but bad things for them if they compete head on.  See what is going on with Wendy's, Burger King and McDonald.  I don't even want to go in there because there is too much on their menus. 
Jun 5, 2012 7:49AM
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"Investors didn't seem "to" thrilled with the purchase..."    They must be employing teenagers to write articles.   It's "too" not "to" - idiots.
Jun 5, 2012 7:50AM
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OMG - "Starbucks is going after Panera" - panic in the bread commodities - stocks down 56 points on Tuesday..... WAFJ ......  Nothing more than typical American corporate monopolistic racketeering to limit choices and to rape, pilfer, pillage and plunder the people even further.   
Jun 5, 2012 8:51AM
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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?

Jun 4, 2012 10:00PM
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Not sure I like this idea.  Starbucks is getting spread a little thin.  Seems like they did this a few years back and ended up having to slow it down.  The only question I ask is if you do it right why make so many changes.  Change isn't always good.  Yeah, I'm a Starbucks coffee snob.  So what.......

One question for Starbucks.  Do you want to be a coffee shop that has great coffee OR would you rather be cafe that has coffee?  Well, the question makes sense to me........

Look at it this way.  People will have difficulty combining the two; good food and good coffee.  The taste buds just won't be able to handle it.
Jun 5, 2012 2:38PM
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If and when Starbucks is successful in getting Panera it will be the last time I will ever go in the doors of Panera!
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