The announcement early Thursday that JAB Holdings would combine the forces of three of its fast-casual chains—Panera Bread, Einstein Bros. Bagels and Caribou Coffee—to form what the company called the “new powerhouse platform” of Panera Brands raised a host of questions.
What will this mean for these chains? Why is this happening? Why now? And, perhaps the most salient query of all: Is this the pathway to set Panera up for its long-rumored initial public offering?
Panera CEO Niren Chaudhary, who is also the new CEO of Panera Brands, was mum on the elephantine IPO query.
“We always are thinking and exploring options,” Chaudhary told Restaurant Business. “But there are no decisions made and nothing to comment on at this time.”
It’s hard to ignore the fact, though, that JAB Holdings has been making IPO moves recently. It took its Krispy Kreme chain public earlier this year and took its JDE/Peet’s brand in Amsterdam public last year. Sources have speculated that the recent uncoupling of Au Bon Pain from Panera was another possible IPO-ready move.
But Chaudhary did provide more insight on some of the other questions raised by the formation of Panera Brands.
Why now?
The pandemic “changed consumer expectations irreversibly,” he noted. Consumers want high-quality ingredients in a craveable, convenient format.
All three chains are back to 2019 sales levels or higher, Chaudhary said, and are ready to grow.
“For Panera, we have recovered completely and are growing rapidly over the last several periods. There’s a strong resurgence,” he said. “All three brands have momentum building.”
So, the new group will make the most of Panera’s strengths to help grow Caribou and Einstein Bros.
Some of Panera’s advantages include an omnichannel network, catering capabilities, technological infrastructure, supply chain, food and beverage innovation, and access to high-quality franchisees, he said.
“We believe by coming together, we can leverage these assets to accelerate and turbo charge the growth of Caribou and Einstein Bros,” he said. “They are under-leveraged because of their scale and not having access to these resources.”
So, what does Panera get out of the deal?
Panera will be able to “drive greater daypart relevance,” Chaudhary said, with the lunch-focused chain borrowing some best practices from the breakfast and coffee concepts.
“We want to build a stronger breakfast business,” he said. “We’re also building a strong beverage brand and believe we can lean a lot from Caribou Coffee.”
Does that mean consumers should expect to see co-branded Panera-Einstein-Caribou restaurants? Definitely not, he said.
“We are very committed to keeping the independence of the brand propositions,” Chaudhary said. “Cross-leveraging is very often dilutive to brands.”
All three concepts have recently unveiled small-footprint designs focused on digital sales—which will be a prime focus of new unit growth for Panera Brands, he said.
Also being considered are ghost kitchens, that might make use of all three chains.
“Those things are in play, taking the brand in asset-light ways closer to consumers,” he said. “There could be synergies in the real estate side or in partnerships you could easily leverage.”
The chains could also join forces on consumer packaged goods offerings, he added.
He added that customers will likely see few, if any, changes.
“They will experience a stronger execution of the brand that they love,” he said.
As for the financial structure of the new Panera Brands group, all three fast casuals will keep independent balance sheets, he said. And there is no expected consolidation of back-office responsibilities.
“The nature of our mindset is you have to almost have like firewalls between these companies,” he said. “However, we want to have bridges for know-how building. Frequently, the teams are coming together for best-practice sharing.”
Panera’s coffee subscription program, for example, was modeled after a similar program in Europe run by JAB-owned Pret a Manger, he said.
“We are envisioning we will have know-how and best-practices sharing days on topics of mutual interest,” Chaudhary said.
Panera Brands is not revealing planned unit growth strategy for the coming years for its three brands. Today, Panera has more than 2,100 bakery-cafes. Caribous has 713 units and Einstein has just over 1,000 locations.
But Chaudhary said the new group is united by the singular mission of “stronger together, growing faster.”